Update on Coronavirus Job Retention Scheme – Baldwins Accountants

April 1, 2020

Further to insight issued by Baldwins Accountants on March 27, Dave Hedges provides an update on the introduction of the Job Retention Scheme (JRS). Following additional guidance published by HMRC, he provides some clarification on the types of workers the JRS can apply to and some various practicalities, in response to queries employers have raised

Apprentices and national minimum wage

Employers are able to furlough apprentices, and they can continue their training whilst on furlough. Our understanding is that this is a reference to their ongoing formal training programme.

The apprenticeship national minimum wage/living wage must still be paid to apprentices for any time they spend training. So, if furloughed and claiming 80% of the apprentice’s wage through the JRS, the employer must top-up their wage to the appropriate minimum wage.

Tips, overtime & benefits

Employers can claim for any regular payments they are obliged to contractually make to their employees such as wages and compulsory commission. This is a helpful addition and will cover employees on a low basic wage where their contract provides they will receive a commission on, for example, a sale.

Past overtime is also included, however it is not entirely clear how this will in practice be included in the calculation. This should become clearer when the portal is released.

Discretionary bonuses, non-contractual commission, tips and non-cash payments cannot be included.

Non-monetary benefits, including taxable benefits in kind, provided to employees, including those via salary sacrifice, cannot be included in the JRS claim. Where an employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.

Salary sacrifice arrangements

It has now been confirmed that it is salary after any salary sacrifice arrangements which is to be used in the JRS claim and not the pre salary sacrifice reference salary. Benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should not be included in the reference salary.

HMRC have confirmed that COVID-19 may be treated as a ‘life event’ to allow adjustments to contractual arrangements going forward. Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a so-called life event.

Cars – a welcome clarification

Whilst not part of the JRS, there has been some discussion over when a company car is deemed to be ‘available’ for private use during this coronavirus lockdown period. The car benefits legislation provides that, where a car is kept on an employee’s driveway, even if it is not used, it is still considered available for private use, and that a car benefit is therefore in point. We understand that HMRC have advised that, where the car keys are handed back to the employer, then this will deem the car unavailable to the employee for benefit-in-kind purposes. This is a helpful short-term easement.

Employees made redundant or who resigned after February 28, 2020

Employees who were made redundant or resigned after 28 February 2020 can, with agreement from their employer, be reinstated and furloughed if they were on the payroll at February 28, 2020.

Employees furloughed part way through pay period

Claims must be pro-rated for employees who are furloughed part way through a pay period.

Statutory parental leave

If your employee is on maternity leave, adoption leave, paternity leave or shared parental leave the normal rules for maternity and other forms of parental leave and pay apply.

You can claim through the scheme for enhanced (earnings related) contractual pay for employees who qualify for either:

Maternity pay
Adoption pay
Paternity pay
Shared parental pay

Employees with caring responsibilities

It is now clear that employees who are not able to work due to having caring responsibilities resulting from the coronavirus situation, are able to be furloughed.


Where a business changes owners, the Transfer of Undertakings (Protection of Employment) regulations (TUPE) protects its employees.

Our current information is indicating that where employees were TUPE’d before February 28, 2020, they are able to be furloughed by the new employer, assuming they are on the new employer’s PAYE scheme as at February 28, 2020.

Further, it appears that employees TUPE’d on or after February 28, 2020 will also be eligible to be furloughed on the understanding they were on the prior employer’s PAYE scheme as at that date.

We are awaiting specific guidance and confirmation from HMRC on these points and in the meantime extreme caution must be exercised in this area.

Company directors

As office holders, company directors are able to be furloughed based only on PAYE earnings. Amounts normally paid as dividends cannot be included.

This is with the proviso that during their furlough period, they may only perform such statutory obligations that enable the business to continue running but must not carry out duties that would generate revenue. We would expect that duties such as running the payroll where the payroll manager has been furloughed would not prevent the director from being furloughed.

This also applies to salaried individuals who are directors of their own personal service company (PSC).

Salaried members of LLPS

Members of Limited Liability Partnerships who are designated as employees for tax purposes (‘salaried members’) are eligible to be furloughed and receive support through this scheme.

To furlough a member, the terms of the LLP agreement may need to be varied by a formal decision of the LLP, for example to reflect the fact that the member will perform no work in the LLP for the period of furlough, and the effect of this on their remuneration from the LLP.

For an LLP member who is treated as being employed by the LLP the reference salary for JRS purposes will be the member’s profit allocation, excluding any amounts which are determined by the member’s performance, or the overall performance of the LLP.

The terms of the LLP agreement will therefore need to be varied to reflect the change in their remuneration and that no duties are to be performed during the furlough period.

Fixed term contracts

Employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended during the furlough period. However, where a contract is not renewed or extended, you can no longer claim under the JRS for them.

Contingent, Limb (B), agency workers etc.

Workers who receive earnings via PAYE are able to be furloughed, whether they are paid via an agency, umbrella company, etc.

Where Limb (b) Workers are paid through PAYE, they can be furloughed and receive support through this scheme. Business must be encouraged take specific advice from an employment lawyer on the precise nature of the workers they engage. As tax specialists and business advisers we are not authorised to provide this advice.
Workers who are paid gross may instead be eligible for the Self-Employed Income Support Scheme (SEISS).

Contingent workers in the public sector

The Cabinet Office has issued guidance on how payments to suppliers of contingent workers impacted by COVID-19 should be dealt with where the party receiving the contingent worker’s services is a Central Government Department, an Executive Agency of a Central Government Department or a Non-Departmental Public Body. We can provide further support in this area as required.

Direct earnings attachment (DEA)

Any overpayment of benefits can be recovered by the Department of Work and Pensions (DWP) by them issuing DEAs to employers for deductions to be made from employees’ salaries.

Due to the coronavirus situation, DWP will be issuing letters to employers stating that recoveries via DEAs are to be temporarily stopped. No deductions should be taken from employees’ pay for April, May or June 2020.
We are here to help

For further information and guidance, please visit: www.baldwinsaccountants.co.uk

Scroll to next article
Go to

Family law in the time of COVID-19