Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme (CJRS), widely referred to as the furlough scheme, was a temporary UK government intervention launched on 20 March 2020 by Chancellor Rishi Sunak to avert widespread layoffs amid the COVID-19 pandemic's disruptions to business operations.[1] Under the scheme, eligible employers could claim grants covering up to 80% of furloughed employees' regular wages, capped at £2,500 per month initially, with employers required to pay any shortfall and maintain employee contracts without dismissing them.[2] The program operated from April 2020 until its phased wind-down concluded in September 2021, during which it supported 11.7 million jobs across 1.3 million employers at a total cost exceeding £70 billion to the public purse.[1][3] The CJRS evolved through several phases, starting with full government funding for 80% of wages and tapering to require employer contributions of up to 20% by summer 2021, alongside caps on pension and National Insurance contributions, to encourage a gradual return to normal operations.[4] Flexible furlough options introduced in July 2020 allowed partial working with proportional grants, broadening applicability to sectors like hospitality and retail hardest hit by lockdowns.[5] Official evaluations credit the scheme with stabilizing the labor market by preventing an estimated 1.5 million additional redundancies in its early months, thereby averting a sharper unemployment spike comparable to those in prior recessions, though its design prioritized short-term job preservation over long-term economic restructuring.[1] While praised for its rapid rollout and scale in shielding workers from immediate income loss—furloughed employees reported sustained mental wellbeing relative to the newly unemployed—the scheme faced scrutiny over its fiscal burden, estimated error and fraud rates approaching 5-10% of outlays, and potential for subsidizing unviable "zombie" firms, which may have delayed necessary market adjustments and contributed to persistent post-pandemic labor market inactivity.[6][1] Government assessments affirmed positive value for money in job retention terms but highlighted risks of dependency and uneven sectoral recovery, with over 1 million jobs still supported in the scheme's final month.[1][7] Critics, including analyses from think tanks, argued that extending such interventions risked moral hazard and inefficient resource allocation, though empirical data showed no disproportionate long-term scarring for participants compared to alternatives like redundancy.[8][9]Origins and Implementation
Announcement and Launch
On 20 March 2020, Chancellor of the Exchequer Rishi Sunak announced the launch of the Coronavirus Job Retention Scheme (CJRS) during a statement to Parliament, as an emergency response to the economic disruptions from the COVID-19 pandemic. The scheme enabled employers to place workers on temporary leave, or furlough, when unable to operate due to government-mandated shutdowns or sharp declines in demand, with grants covering 80% of furloughed employees' regular wages up to a cap of £2,500 per month. Payments were backdated to 1 March 2020 and initially available for a minimum of three months, with the option for extension based on evolving circumstances.[10] This rapid policy introduction preceded the United Kingdom's first national lockdown, declared by Prime Minister Boris Johnson on 23 March 2020, which enforced widespread business closures, school shutdowns, and stay-at-home orders to curb virus transmission. Sunak framed the CJRS as essential for safeguarding livelihoods and preventing widespread redundancies, arguing that direct wage support for retained employees would better preserve labor market attachments and firm viability than relying solely on unemployment benefits or business insolvency proceedings. The measure formed part of a broader package of fiscal interventions, including loans and tax relief, under the Conservative government led by Johnson, aimed at stabilizing the economy amid enforced inactivity.[10][11] The scheme's design prioritized simplicity and universality, applying to employers of any size across the UK, to facilitate quick uptake and minimize administrative barriers during the crisis. Official guidance followed shortly after, with further details on operations released on 27 March 2020, and the claims portal opening to employers on 20 April 2020, allowing reimbursements for eligible periods. By maintaining employment contracts intact, the CJRS sought to mitigate the risk of mass unemployment spikes and corporate failures that could prolong economic recovery, drawing on the principle that subsidizing idle labor temporarily was preferable to permanent job destruction in a demand-shock scenario induced by public health restrictions.[2][12]Eligibility and Application Process
Employers eligible for the Coronavirus Job Retention Scheme (CJRS) included any entity with a UK, Isle of Man, or Channel Island bank account and a UK PAYE scheme registered with HMRC, regardless of size, sector, or prior grant claims.[13] To participate, employers were required to designate specific employees as furloughed, obtain their agreement (or that of their representatives for collective agreements), and confirm in writing that the employees would perform no work for the employer during the furlough period.[14] [15] The scheme applied broadly across employment contracts, encompassing full-time, part-time, agency, flexible, and zero-hour arrangements, though it was intended for businesses facing operational disruptions from the COVID-19 pandemic, excluding those in essential services where work continuity was mandated.[16] Employee eligibility centered on payroll status at key cutoff dates, initially requiring individuals to have been on an employer's PAYE payroll on or before 19 March 2020, as notified to HMRC via Real Time Information (RTI) submissions.[17] [18] This date was extended from an earlier proposed 28 February 2020 to accommodate hiring surges in early pandemic response, enabling claims for employees paid through PAYE even if they had not yet received salary.[18] For scheme extensions, eligibility criteria were relaxed; for instance, from November 2020, employees needed only to be on payroll by 30 October 2020, broadening access without altering core requirements like the no-work rule.[19] Directors and variable-hour workers qualified if meeting these thresholds, provided employers retained records to verify genuine furlough designation tied to pandemic impacts.[15] The application process emphasized administrative simplicity to facilitate rapid deployment, with claims submitted online via HMRC's dedicated portal using Government Gateway credentials.[20] [21] Employers provided details including PAYE reference numbers, employee counts and wages, bank account information, and confirmation of furlough agreements, with HMRC cross-verifying against RTI data for eligibility.[20] Initial claims opened on 20 April 2020 for periods retroactive to 1 March 2020, with grants typically processed and paid within six working days, prioritizing speed over exhaustive pre-checks.[22] As the scheme extended, HMRC introduced enhanced compliance reviews and post-payment audits to curb misuse, though the core portal-based submission remained streamlined, requiring claims at least 14 days after the end of the claim period but no later than deadlines like four years from the accounting period end.[23]Scheme Operations
Furlough Mechanics
Under the Coronavirus Job Retention Scheme (CJRS), furloughed employees retained their employment status and associated statutory rights, including eligibility for statutory sick pay (SSP) if they fell ill during the furlough period, provided the absence was not short-term or related to routine sickness.[13] Employers were required to designate employees for furlough in writing, confirming the arrangement and maintaining records of this agreement for at least five years to demonstrate compliance.[13] This structure preserved the employment relationship without requiring termination, distinguishing furlough from redundancy or unpaid leave, while prohibiting any productive work for the employer or associated entities during designated furlough periods.[20] Furloughed workers were explicitly barred from undertaking any duties, tasks, or services for their employer, ensuring the scheme supported job preservation amid enforced idleness rather than subsidized productivity.[13] Limited exceptions permitted training activities to maintain skills, volunteering, or employment with unrelated third parties if not contractually restricted, but these did not extend to benefiting the furloughing employer.[13] The furlough had to stem directly from COVID-19-related disruptions to the employer's operations, such as lockdowns or reduced demand, rather than voluntary staffing decisions, employee holidays, or pre-existing non-coronavirus absences.[20] From 1 July 2020, the scheme introduced "flexible furlough," allowing employers to bring staff back on a part-time basis while claiming support only for non-working hours, with no minimum furlough duration beyond the initial three-week blocks for early entrants.[13] This required precise tracking of usual versus actual hours, enabling variable patterns tailored to business recovery while upholding the no-work rule for claimed periods.[20] Employers faced administrative obligations including detailed record-keeping of furlough designations, hours (especially under flexible arrangements), and supporting calculations, retained for six years to facilitate HMRC audits.[20] Initially, the government reimbursed employer National Insurance contributions and minimum pension contributions on furlough pay, alleviating some compliance costs, though employers remained responsible for deducting and remitting employee-side taxes and contributions.[20] These requirements ensured accountability, with non-compliance risking claim denials or penalties.[13]Payment Structure and Extensions
The Coronavirus Job Retention Scheme initially provided employers with grants covering 80% of an employee's reference wages for furloughed hours, capped at £2,500 per month, plus associated employer National Insurance contributions (NICs) and minimum automatic enrolment pension contributions on the furloughed amount, for the period from 20 March to 30 June 2020.[20][24] This structure ensured employees received at least 80% of their pre-furlough pay (up to the cap), with no grant payable for any hours worked, tying reimbursements strictly to non-productive time. Grants were calculated pro-rata for partial months or flexibly furloughed workers once flexibility was introduced, and lower earners benefited from the percentage-based formula without a minimum payment threshold beyond statutory entitlements. In late May 2020, the scheme was extended beyond June, with tapering adjustments to shift costs toward employers starting 1 July 2020. For July 2020, the government grant reduced to 70% of reference wages (capped at £2,000 per month), requiring employers to contribute the remaining 10% of wages plus NICs and pension contributions to maintain employee pay at 80%. This tapered further in August and September 2020 to a government grant of 60% (capped at £1,875 per month), with employers covering 20% of wages plus NICs and pensions. October 2020 reverted to full government coverage of 80% (up to £2,500), though employers remained responsible for NICs and pensions. Flexible furlough options, allowing partial work with grants only for unworked hours, were also implemented from July 2020.[24] A further extension was announced on 10 November 2020, maintaining 80% government grants (capped at £2,500) through to 31 March 2021, with employers continuing to pay NICs and pensions from November onward. This was prolonged in March 2021 to 30 September 2021, introducing additional tapering from May: government grants at 70% (capped at £2,187.50) for May and June 2021, requiring employer top-ups of 10% of wages plus NICs and pensions; then 60% (capped at £1,875) for July to September 2021, with employer contributions of 20% of wages plus NICs and pensions. These adjustments aimed to balance ongoing support against fiscal sustainability as economic recovery progressed, with all grants remaining exclusive to furloughed (non-worked) hours.[4][24] The following table summarizes the key payment phases:| Period | Government Grant (% of wages / cap) | Employer Contribution (beyond top-up to 80%) | Notes |
|---|---|---|---|
| Mar–Jun 2020 | 80% / £2,500 | None | Includes gov coverage of NICs and pensions |
| Jul 2020 | 70% / £2,000 | 10% wages + NICs + pensions | Flexible furlough introduced |
| Aug–Sep 2020 | 60% / £1,875 | 20% wages + NICs + pensions | - |
| Oct 2020 | 80% / £2,500 | NICs + pensions | - |
| Nov 2020–Apr 2021 | 80% / £2,500 | NICs + pensions | Extension announced Nov 2020 |
| May–Jun 2021 | 70% / £2,187.50 | 10% wages + NICs + pensions | - |
| Jul–Sep 2021 | 60% / £1,875 | 20% wages + NICs + pensions | Scheme closure 30 Sep 2021 |