On 4th April 2020, many of the questions raised by payroll professionals around the Coronavirus Job Retention Scheme were addressed.

HMRC published further details relating to the COVID-19 Job Retention Scheme which impact both the employee guidance and guidance for employers. Many of the queries raised related to which elements of pay can be reclaimed back from HMRC and these have now been answered with the release of new guidance.

Key Updates for Employers:

It has been clarified that an employer may reclaim 80% of regular payments that an employer is obliged to pay to their employees. This includes wages, any overtime already completed, fees and compulsory commission payments. The update confirms that discretionary bonus payments (including tips), commission and non-cash payments should not be included.

Taxable Benefits in Kind should not be included in the amount that employers claim back. Benefits provided through salary sacrifice schemes, inclusive of pension contributions, which lower the taxable pay of an employee should not be included in the reference salary. If employers provide non-cash benefits to furloughed employees, this must be in addition to any wages paid under the Job Retention Scheme.

Student loans and Apprenticeship Levy should continue to be paid in the normal fashion as the grant from the government will not cover these costs.

Salaried company directors can be furloughed and can continue to perform statutory duties only. This differs from the rules for other furloughed employees who cannot carry out any work at all for the employer who has placed them on furlough. These rules apply to individuals who are directors of their own personal service company (PSC), and to company directors.

Furloughed workers aren’t entitled to the National Living Wage (NLW) / National Minimum Wage (NMW) and Apprentices Minimum Wage (AMW), as they aren’t working, and if 80% of their pay brings them below this rate, it does not matter.

The increase to rates from 1 April 2020 must be observed for payment for any hours spent in training. The employer will need to pay the additional amounts not covered by the grant, to ensure NLW/ NMW /AMW are paid for any training hours. The same applies to apprentices for any time they spend training.

HMRC has confirmed that COVID-19 counts as a life event and is reason enough to allow individuals to make changes to salary sacrifice arrangements, as ordinarily, employees cannot switch freely out of a salary sacrifice scheme unless there is a significant life event. The contract of employment needs to be updated accordingly.

Exploring Specific Cases:


Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed.

Apprentices must be paid at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means employers must cover any shortfall between the amount claimed for their wages through this scheme and their appropriate minimum wage.


Individuals can furlough employees such as nannies provided they pay them through PAYE and they were on their payroll on, or before, 28 February 2020.


Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme. However, HMRC would expect an administrator to only access the scheme if there is a reasonable likelihood of rehiring the workers.

Shielding Employees

Employers can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home. Employers would otherwise have to make these employees redundant.

Employees with caring responsibilities

Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children can be furloughed.

Eligible individuals who are not employees

As well as employees, the grant can be claimed for any of the following groups, if they are paid via PAYE:

  • office holders (including company directors)
  • salaried members of Limited Liability Partnerships (LLPs)
  • agency workers (including those employed by umbrella companies)
  • limb (b) workers

Office Holders

Office holders can be furloughed and receive support through this scheme. The furlough, and any ongoing payment during furlough, will need to be agreed between the office holder and the party who operates PAYE on the income they receive for holding their office. Where the office holder is a company director or member of a Limited Liability Partnership (LLP), the furlough arrangements should be adopted formally as a decision of the company or LLP.

Salaried Members of Limited Liability Partnerships (LLPs)

Members of LLPs who are designated as employees for tax purposes (‘salaried members’) under the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 are eligible to be furloughed and receive support through this scheme.

To furlough a member, the terms of the LLP agreement (or any such agreement between the LLP and the member) 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 (in accordance with s863A of ITTOIA 2005), the reference salary for this scheme is the LLP member’s profit allocation, excluding any amounts which are determined by the LLP member’s performance, or the overall performance of the LLP.

Agency Workers (including those employed by umbrella companies)

Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies.

Furlough should be agreed between the agency, as the deemed employer, and the worker, though it would be advised to discuss the need to furlough with any end clients involved. As with employees, agency workers should perform no work for, through or on behalf of the agency that has furloughed them while they are furloughed, including for the agency’s clients.

Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.

Limb (b) Workers

Where Limb (b) Workers are paid through PAYE, they can be furloughed and receive support through this scheme.

Those who pay tax on their trading profits through Income Tax Self-Assessment, may instead be eligible for the Self-Employed Income Support Scheme (SEISS), announced by the Chancellor on 26 March 2020.

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.

If your employee does volunteer work

A furloughed employee can take part in volunteer work, if it does not provide services to or generate revenue for, or on behalf of your organisation. Your organisation can agree to find furloughed employees new work or volunteering opportunities whilst on furlough if this is in line with public health guidance.

Employer National Insurance and Pension Contributions

Employers still need to pay employer National Insurance and pension contributions on behalf of their furloughed employees, and can claim for these too.

Employers cannot claim for:

  • additional National Insurance or pension contributions made because they chose to top up their employee’s salary
  • any pension contributions they make that are above the mandatory employer contribution

Past Overtime, Fees, Commission, Bonuses and Non-Cash Payments

Employers can claim for any regular payments they are obliged to pay their employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.

For more information on coronavirus support measures for employers and employees, visit the activpayroll latest news page.

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