Does your business have employees?
If your answer is yes, you may benefit from the Coronavirus Job Retention Scheme (CJRS).
Closed to new entrants from end of June
The CJRS scheme closed to new entrants from 30 June. Employers will only be able to furlough employees that they have furloughed for a full three-week period prior to 30 June, which means that an employee’s first furlough period must have started by 10 June at the latest. Employers have until 31 July to make any claims in respect of the period to 30 June.
Before 1 July, if an employee was furloughed, they could not work at all. The introduction of flexible furloughing has assisted businesses begin to re-open.
From 1 July 2020, employers using the scheme have the flexibility to be able to bring furloughed employees back to work part time. This allows employees to work part-time and remain furloughed for the remainder of their usual hours worked.
Employers will be responsible for paying employee’s wages whilst working. The government will continue to pay 80% of wages for any of their normal hours they do not work until the end of August.
The agreed arrangement between a business and their employee must cover at least one week and be confirmed to the employee in writing. Employers will need to report and claim for a minimum period of a week and will be required to submit data on the usual hours an employee would be expected to work in a claim period and the actual hours worked.
Part time work is not a requirement. If the employer does not have work for the employee, they can remain on furlough and the employer can continue to claim the grant for their full hours under the existing rules.
Employer Contributions – July to October
The Government is slowly tapering their contribution.
In June and July, the grant will remain the same. The government will pay 80% of wages, up to £2,500 per month, and reimburse employers NIC and employers pension. Employers will only have to pay employees for the hours they work, using the new flexible part time working.
From 1 August 2020, the government will continue to pay 80% of wages, up to £2,500 per month but employers will be expected to pay employer National Insurance (ER NICs) and pension contributions.
From 1 September, the support will reduce further. The government will pay 70% of wages, up to £2,187.50 per month for the hours the employee does not work. Employers will have to pay ER NICs, pension contributions and 10% of the wages to make up 80% of the total, up to £2,500.
From 1 October 2020, the Government will pay 60% of wages, up to £1,875 per month, for the hours the employee does not work. Employers will have to pay the remainder, as before, to make up 80% of wages, up to £2,500. This is the final month of the scheme.
Definition of a furloughed worker?
A furloughed worker is an employee who is required to be temporary laid off work. In this case that means anyone asked to stop working during the Coronavirus pandemic but who are furloughed and kept on the payroll, rather than losing their job.
Directors who are paid a salary via PAYE can also be furloughed and be included in the scheme.
All UK businesses are eligible.
Key Considerations for furloughed employees
Please note that the below information was written when the guidance was announced. The scheme is now closed to new entrants however the below information has been retained for reference.
- Review your contracts of employment. If they contain any clauses for short term lay-off, then you may go ahead with the furlough process without explicit agreement from employees. However, it is still best practice to discuss the situation with your employees, and get their agreement to the reduction in wages.
- If the employee’s contract does not have a ‘lay-off’ provision, then you should speak with those staff who would be at risk of redundancy and explain the situation and the options available. These options would usually either be unpaid leave, redundancy, or agreeing to be furloughed. You should get their written agreement to be furloughed if this is their preference.
- Review your current staffing position and consider which staff would be at risk of redundancy due to a reduction in work as a result of the Coronavirus. These would be the workers you should consider designating as furloughed.
- Employers must designate affected employees as ‘furloughed workers’ and notify them of this change.
- Employers should pay the furloughed employees on their normal pay date and then be reimbursed from HMRC.
- You will need to submit information to HM Revenue and Customs (HMRC) regarding any furloughed employees via a new online portal. You can access this portal here
Which of my employees are eligible to be furloughed?
For full time and part time salaried employees, you should claim on their actual salary before tax, based on the last RTI submission prior to 19 March 2020.
For employees on flexible or zero-hour contracts:
Employed by you for over twelve months
• Use same month’s earnings from the previous year, or;
• Average monthly earnings from the 2019-20 tax year
Employed by you for less than twelve months
• Use average 2019-20 tax year monthly earning, pro-rata for the period employed by you.
What will I receive?
The grant from HMRC will cover the 80% wages of the furloughed employee (up to £2,500 per month) plus the associated Employers National Insurance contributions and minimum automatic enrolment pension contribution.
An example: Full time employee earning £2,400 each month (based on 2020/21 allowances) £
Furloughed gross wage (80%) 2,000.00
Employers national insurance 176.73
Employers pension contribution (3%) 60.00
Total received from HMRC 2,236.73
When will I be reimbursed?
Grants are to be backdated to 1 March 2020 for all eligible employees, including those that were made redundant after this date as a result of Coronavirus, providing that they have been reinstated.
The scheme was originally open for three months from 1 March to the end of May but has now been extended until October 2020.
The online portal is now live. The portal can be accessed here.
Coronavirus Job Retention Scheme – FAQs
What if we have already laid staff off, or made them redundant?
The Chancellor has confirmed that the scheme is backdated to 1 March 2020, therefore any lay-offs, or redundancy measures taken since that date could be reversed and covered by the scheme.
What if we are in the middle of a redundancy exercise?
Our advice would be to pause the redundancy exercise and instead furlough the employees that are currently at the risk of redundancy.
Is the £2,500 the gross or net amount that can be paid?
The £2,500 is the gross amount that can be paid. The furloughed employees wage is still liable to deductions of tax, national insurance and pension contributions. This amount lowers each month in September and October.
What about auto-enrolment pensions?
The furloughed employees salary is still liable to pension contributions. The grant received from HMRC will include the 3% employers contribution until 31 July, if you pay more into the pension on behalf of your employees, you will be liable for the difference. From 1 August, you can no longer claim any pension contributions back through the scheme.
Can employees who have been ‘furloughed’ come in to work at a later date and then be ‘furloughed’ again?
Employees can be furloughed for a minimum of three weeks. You could then rotate staff should you feel this would be of benefit to your business. From 1 July, flexible furloughing allows for employees to work the hours needed by the business.
What about any employees that I have that are currently on maternity, paternity or shared parental leave?
Any employee who is on or due to begin their statutory leave, will continue to receive the statutory payment. Any enhanced contractual leave you pay in addition to the statutory payment can be included in the wage costs that you can claim through the scheme.
What will I need to make a claim?
In order to complete the claim, the following information will be required and we would recommend that this is prepared prior to accessing the portal:
- Your UK bank account number and sort code
- Your employer PAYE scheme reference number
- Your Self-Assessment UTR (Unique Tax Reference)
- The number of employees being furloughed
- Each employee’s name, employee number and National Insurance number
- The start date and end date of the claim (you can only submit a claim once every three weeks)
- The full amount you’re claiming for
- The usual hours worked for the employee and how many hours are being claimed for as furloughed
- Your contact name and phone number for HMRC to call you with any questions