The government's Coronavirus Job Retention Scheme (CJRS) went live on 20 April and as a result of HMRC’s promise to pay within six days of claims being submitted, many employers will now be in receipt of sums to cover the wages of those employees who have been furloughed. But while the CJRS will assist many workers, there remains a significant number who are excluded from the scheme and are left with no other source of income. In this article we consider those who fall through the gaps.

Purpose of the CJRS

The purpose of the Scheme is to provide (non-repayable) grants to employers to ensure that they can retain and continue to pay staff and so avoid the need to make redundancies, despite the effects of the Covid-19 pandemic. We have previously reported (LELR 666) the details of how the scheme operates.  

To recap, an employer can claim the lower of 80 per cent of a furloughed employee’s gross pay or £2,500 per month, plus employer NICs and minimum employer pension contributions, provided the employee is on the employer’s payroll by the eligibility date of 19 March 2020.  

New Starters

Employers can claim under the Scheme for employees who were employed by them on 19 March and for whom an RTI (Real Time Information – HMRC’s PAYE system) submission had also been made to HMRC by that date. The Treasury Direction states that in order for the employer to claim the grant they must show:

  • That the employee has been paid earnings by the employer in the 2019/2020 tax year; and
  • The employee is on the employer’s PAYE payroll and that the employer has included the employee in its notification to HMRC through RTI on or before 19 March 2020 (the eligibility date); and
  • The employee’s employment was not terminated before that date.


The additional requirement on employers to notify HMRC through RTI means that new starters are often still excluded from the scheme. Take, for example, the employee who starts employment on 9 March but who is paid monthly at the end of the month. What if, as is common with most employers, the new employer doesn’t complete their RTI submission until one or two days before payroll? The result is that the employee is unlikely in the normal course of events to have been notified to HMRC through RTI by the 19 March deadline. One way for this to be resolved would be for the CJRS’ eligibility criteria to be amended to include those who had a contract with the employer on 19 March albeit that they were notified to HMRC through RTI on a subsequent payroll date. 

What about those who have been made redundant?

Where employees were made redundant or stopped working for their employer after 20 February, then the employer is permitted to re-employ them even after 19 March, and still furlough them and claim 80 per cent of their wages - up to £2,500 per month.

There is, however, no obligation for employers to re-employ those employees made redundant or who have stopped working for them. The worst placed are those who were made redundant by employers who became insolvent since there is no prospect of re-employment and no chance therefore of furlough. For those employees unable to find alternative employment, the only option is to apply for Universal Credit.

Zero hours and agency workers

The decision as to who is furloughed is ultimately one for the employer to make (albeit this should be in consultation with employees and their representatives), and while furlough is available to those on zero hours contracts (ZHCs) and to agency workers, they may in practice be less likely to be furloughed than others.

The reasons for those on ZHCs to be unlikely to be furloughed are the requirements for the employee to be on the employer’s PAYE payroll and notified to HMRC through RTI.  In many cases employers engage those on ZHCs on terms that require them to be responsible for paying tax so they will not be on the PAYE payroll and will not have been notified to HMRC through RTI. Even those on ZHCs who have been on an employer’s PAYE payroll and notified to HMRC through RTI on or before 19 March 2020, may still not be furloughed because the scheme requires employers to act to initiate the process. The easiest path for the employer in most cases, as pointed out by Professors Michael Ford and Alan Bogg in their UK employment law blog Not Legislating in a Crisis? The Coronavirus Job Retention Scheme, Part 2, is (given there is no contractual obligation to provide work) to simply not offer the ZHC worker any work. Those on ZHCs will know their tax arrangements but should also check their contract terms. 

Agency workers who have a contract with the agency will generally be on the agency’s payroll. However, where an assignment with the hirer comes to an end, the hirer is under no obligation to furlough the agency worker even if the hirer furloughs its other employees. This is because the agency worker does not have a contract with the hirer nor are they on the hirer’s PAYE payroll. The guidance for employers says that agency workers should be furloughed by the agency or an umbrella company if they are engaged through one. However, even though the agency worker has a contract with the agency and the agency worker is on their PAYE Payroll and notified to HMRC through RTI, the agency is under no obligation to terminate the contract where there is no work for the agency worker to do. The only option for the agency worker in that case is to check their contract to see if there is a clause which provides for the agency worker to be paid between assignments. 

Low paid employees who do not earn enough to pay tax and national insurance will not be included on the PAYE payroll and so are also likely to be excluded from the scheme.

Those caught out by the reference salary

An employer can only recover a grant for those employees if:

  • the employee is paid more than £2,500 per month; or
  • the employee is paid 80 per cent of their reference salary as defined

In broad terms, the reference salary for a salaried employee is the gross salary in the latest pay period ending on or before 19 March 2020. For employees who are on variable pay (e.g. whose pay varies according to the hours they work) and who have been employed for 12 months or more, this is the higher of the same month’s earnings in the previous year (e.g. March 2019) and the average monthly earnings for the tax year 2019/2020.

These provisions mean that those who have been encouraged by employers to set up as Personal Service Companies (PSC) and who are not employees of their PSC and so do not pay themselves through PAYE cannot be furloughed under the CJRS. Whether they can benefit from the Self-employed Income Support Scheme (SEISS) is considered in the next article on SEISS.

Some welcome developments

As the government’s strategy begins to look at ways of returning to work while protecting the safety of workers, the Treasury is reported to be in discussions about introducing a more flexible furlough scheme. One option being considered is to allow workers to return to work part time while still using the furlough system for days when staff are not required to work.

Zero hours workers and agency workers have for a long time borne the brunt of flexible employer practices, which enable employers to call upon these workers in times of high demand and cut them loose when there is a drop in demand or limited cash flow. If the government’s rhetoric around support for the vulnerable is to mean anything, it is time for a more flexible furlough scheme that covers those who have for so long been at the sharp end of flexible working practices and the whim of employers.

To read the Treasury Direction in full, go to:

To read the guidance for employers in full go to:

Articles shared by Thompsons relating to coronavirus (COVID-19) are correct at the time of publication. You should check the government's guidelines for the latest information and advice at