HM Revenue & Customs (HMRC) has confirmed that employees serving notice cannot be claimed for from the Coronavirus Job Retention…
To help you get to grips with the extended Coronavirus Job Retention Scheme (CJRS) please use our helpful FAQ.
What does the CJRS offer?
The Coronavirus Job Retention Scheme (CJRS) is a temporary scheme open to all UK employers until 31 March 2021 that is designed to support employers whose operations have been severely affected by the pandemic.
Employers can use HM Revenue & Customs’ (HMRC) dedicated portal to claim for 80 per cent of furloughed employees’ usual monthly wage costs, up to £2,500 a month, for any hours not worked.
However, they must pay for the associated employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage, as well any wages for hours that are worked.
The Government has reserved the right to review the scheme in January 2021, which may lead to additional contribution requirements.
Is my business eligible?
Any UK organisation with employees can apply for the scheme including:
- recruitment agencies (agency workers paid through PAYE).
Publicly funded organisations are not expected to use the scheme, but partially publicly funded organisations may be eligible where their private revenues have been disrupted.
Employers do not need to have used the CJRS previously. However, you only have until this Friday 13 November to agree to retrospectively furlough or flexibly furlough an employee from 1 November.
Employers across the UK can claim, whether their business is open or closed.
Which employees are eligible?
The scheme is open to all employees for whom a Real Time Information (RTI) submission had been made on or before 30 October 2020.
Neither the employer nor the employee needs to have used the CJRS previously to use the extended scheme.
The scheme will otherwise operate as it has done previously and will be open to employees on any type of contract. You will also be able to top-up employee wages above the value of CJRS grant if you wish to do so.
You will need to agree full furlough or flexible furlough arrangements with employees, in accordance with employment law and their contracts of employment.
There is no maximum number of employees you can claim for from 1 November 2020.
How does flexible furlough work?
Employees can work for any amount of time, and any work pattern and claim the grant for the furloughed hours, with reference to hours the employee would usually have worked in that period.
This means furloughed employees will be able to work reduced hours, paid by their employer in full, while the employer can claim a CJRS grant in respect of 80 per cent of the pay for usual hours not worked.
Although flexible furlough agreements can last any amount of time, unless otherwise specified the period claimed for must be for a minimum claim period of seven consecutive calendar days.
When will the scheme end?
When launched in March the scheme was initially only due to run for a month or so, but the Government then extended the scheme until 31 October 2020.
In light of the month-long lockdown in November, the scheme was extended until 2 December 2020 but has now been extended further until 31 March 2021.
When the scheme closes next year, you must decide to either:
- bring employees back to work on their normal hours
- reduce employees’ hours
- terminate employees’ employment.
When and how can I apply?
The extended CJRS operates as the previous scheme did, in several respects. Firstly, employers must report and claim for a minimum period of seven consecutive calendar days.
Secondly, employers will need to report actual hours worked and the usual hours an employee would be expected to work in a claim period.
Finally, for hours worked, employees will be paid by their employer subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts.
Under the rules, the claim period must also start and end within the same calendar month.
Where the pay period includes days in more than one month, separate claims will need to be submitted covering the days that fall into each month. These claims should be calculated separately, based on the specific rules and contributions for that period.
A claim can be made in anticipation of an imminent payroll run, at the point an employer runs their payroll or after they have run their payroll.
There is no gap in eligibility of support between the previously announced end-date of CJRS on 31 October 2020 and this extension starting 1 November 2020.
However, all claims for periods from 1 July 2020 to 31 October 2020 must be submitted no later than 30 November 2020.
You will be able to claim from 8am on Wednesday 11 November 2020 for the extended furlough. Please be aware that claims relating to November 2020 must be made by 14 December 2020.
After this, claims relating to each subsequent month should be submitted by day 14 of the following month (unless this falls on a weekend and then it is the next working day).
To apply you will need a Government Gateway user ID and password, which will have been given to you when you registered for PAYE online.
If you do not finish a claim in one session, you can save a draft, but it must be completed within seven days of starting it.
Businesses looking to make a claim can do so now via HMRC’s portal, by clicking here.
What do I need to make a claim?
To make a claim, you will need:
- to be registered for PAYE online
- your UK, Channel Island or Isle of Man bank account number and sort code (only provide bank account details where a BACS payment can be accepted)
- the billing address on your bank account (this is the address on your bank statements)
- your employer PAYE scheme reference number
- the number of employees being furloughed
- each employee’s National Insurance number
- each employee’s payroll or employee number (optional)
- the start date and end date of the claim
- the full amounts that you’re claiming for including:
- employee wages
- employer National Insurance contributions (for claims up to 31 July 2020)
- employer minimum pension contributions (for claims up to 31 July 2020)
- your phone number
- contact name.
You also need to provide either:
- your name (or the employer’s name if you’re an agent)
- your Corporation Tax unique taxpayer reference
- your Self-Assessment unique taxpayer reference
- your company registration number.
If you’re claiming for employees that are flexibly furloughed, you’ll also need:
- the number of usual hours your employee would usually work in the claim period
- the number of hours your employee has or will work in the claim period
- you will also need to keep a record of the number of furloughed hours your employee has been furloughed for in the claim period.
Will HMRC help me calculate my contributions to the scheme?
Employers are responsible for calculating the correct amounts to claim from the scheme, with HMRC expected to take a hard line on errors that are not corrected quickly.
HMRC’s guidance walks employers through the various calculations needed to work out the amounts they need to claim in respect of furloughed employees.
If you’ve already claimed for an employee who was on furlough during October, and they are paid a fixed salary, you can follow the same usual wage calculation for claim periods after 31 October 2020.
The amount you should use when calculating 80 per cent of your employees’ wages for hours not worked, is made up of the regular payments you are obliged to make, including:
- regular wages you paid to employees
- non-discretionary payments for hours worked, including overtime
- non-discretionary fees
- non-discretionary commission payments
- piece-rate payments.
You cannot include the following when calculating wages:
- payments made at the discretion of the employer or a client – where the employer or client was under no contractual obligation to pay, including:
- any tips, including those distributed through troncs
- discretionary bonuses
- discretionary commission payments
- non-cash payments
- non-monetary benefits like benefits in kind (such as a company car) and benefits received under salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay.
The entirety of the grant received to cover an employee’s subsidised furlough pay must be paid as money and should not be netted off to pay for the provision of benefits or a salary sacrifice scheme.
Where the employer provides benefits to furloughed employees, these benefits should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.
Employees cannot switch freely out of most salary sacrifice schemes unless there is a life event. However, HMRC has confirmed that coronavirus counts as a life event that could warrant changes to salary sacrifice arrangements if the relevant employment contract is updated accordingly.
To help employers deal with the potentially wide range of permutations, HMRC has published example calculations in the guidance dealing with different situations. To read the latest guidance, please click here or to use the Government’s own calculator click here.
How soon will I receive the grant payment?
Grants payments are anticipated within six working days of a new claim.
What happens if I overclaim for the CJRS?
If you receive an overpayment and you are making further claims, it is possible to offset the overpayment against the amount of your next claim (your new claim will be reduced and you’ll need to keep a record of the adjustment for six years).
If you do not intend to make another claim you must obtain a payment reference number and pay HMRC back within 30 days.
If you do not do this, you may have to pay a penalty and it will prevent any potential tax liability in respect of the overpayment of CJRS.
What can I do if I have underclaimed?
If you made an error in your claim that has resulted in you receiving a smaller grant, you must still pay your employees the correct amount and should contact HMRC on or before 30 November to amend your claim.
For claims relating to periods after 1 November 2020, you will only be able to increase the amount of your claim if you amend the claim within 28 calendar days after the month the claim relates to (unless this falls on a weekend and then it is the next working day).
Can I re-employ staff that were made redundant?
Employees that were employed and on the payroll on 23 September 2020 who were made redundant or stopped working for their employer afterwards can be re-employed and claimed for.
You must have made a PAYE RTI submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees.
Similarly, an employee who was on a fixed-term contract, on payroll on 23 September, and that contract expired after 23 September can be re-employed and claimed for, provided that the other eligibility criteria are met.
Can I make an employee redundant or dismiss them while on furlough?
The Government is considering a change to the rules of the scheme from 1 December 2020 to prevent claims in respect of employees serving contractual or statutory notice periods. The outcome of this review will be set out in further guidance to be published before the end of November.
Will the Government share my data with anyone?
From December onwards, HMRC will publish the names and registration numbers of limited companies and Limited Liability Partnerships (LLPs) that claim from the CJRS. This measure does not apply to claims relating to November or to other classes of employer.
How is the scheme applied to someone whose pay varies monthly?
If the employee has been employed for a full 12 months prior to the claim, you can claim for the higher of either:
- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
As an employer, it is your responsibility to calculate how much of an employee’s salary you can claim for, including the amount of Employer National Insurance contributions and minimum automatic enrolment employer pension contributions.
Are employees returning from parental leave eligible?
Employees returning from statutory maternity and paternity leave in the next few months will remain eligible for furlough through the Coronavirus Job Retention Scheme (CJRS) as long as they meet the existing eligibility criteria.
However, employees who wish to return early from maternity leave to be furloughed with the agreement of their employer must give eight weeks’ notice.
Does the scheme apply to directors?
Yes, directors of a company can be furloughed. During this period directors should be careful to avoid anything that could be mistaken for work, including posting promotional material on their social media feeds on days where they are furloughed.
Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would be judged reasonably necessary.
This also applies to salaried individuals who are directors of their own Personal Service Company (PSC).
An employee has indicated that they need to care for another and has asked to be furloughed, can they claim?
Employees can be furloughed where they are unable to work because they are shielding in line with public health guidance (or need to stay at home with someone who is shielding) or have caring responsibilities resulting from coronavirus, including employees that need to look after children
Can furlough be used as a substitute for sick pay?
The CJRS is not intended for short-term sickness absences. If, however, you want to furlough employees for business reasons and they are currently off sick, you are eligible to do so, as with other employees.
Furloughed employees who become ill, due to coronavirus or any other cause, must be paid at least Statutory Sick Pay (SSP).
It is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate.
How should I inform employees that they are being furloughed?
You should discuss furlough with staff and make any changes to the employment contract by agreement. Remember the employment, equality and discrimination laws will apply in the usual way.
To be eligible for the grant, you must also have confirmed with the employee or reached a collective agreement with a trade union in writing that they have been furloughed or flexibly furloughed. The employee does not have to provide a written response.
You must keep a written record of the agreement for five years, as well as keeping records of how many hours employees work and the number of hours they are furloughed (for at least six years).
Can apprentices continue to train and be furloughed?
The CJRS allows staff members to undertake volunteer work outside of the business and take part in training courses. Apprentices can be furloughed like any other member of staff.
How is performance pay, such as tips and bonuses, calculated under the scheme?
The CJRS does not cover performance-related pay, but you can voluntarily top up pay to reflect this.
Can agency staff and those on zero-hours contracts be furloughed?
Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts to be eligible for the Coronavirus Job Retention Scheme, including where they are employed by umbrella companies.
Furlough should be agreed between the agency or umbrella company, as the deemed employer, and the worker.
How does the CJRS apply to maternity pay and shared parental leave?
Those who are contractually obliged to enhanced maternity, adoption or shared parental pay are eligible for the scheme, but not those on statutory maternity pay. They will be paid in the same way and cannot be additionally furloughed.
An employee has refused to be furloughed, what can I do?
In the majority of cases, it will be in the employees’ interest to accept an offer of furlough as it means that their role would otherwise be made redundant.
Employers have a variety of options open to them including reducing their working hours, reducing their pay, short-time working and layoffs and in some cases redundancy.
Remember that existing employment rules continue to apply so you must consider whether your actions could lead to a claim for unfair dismissal or discrimination.
How does the CJRS affect holiday pay?
Employees can take holiday whilst on furlough and they should be paid as normal. The Working Time Regulations (WTR) obligates employers to pay time taken as annual leave at the normal rate of pay or, where their rate of pay varies, calculated based on the average pay they received in the preceding 52 weeks.
The CJRS guidance confirms you can make a grant for an annual leave furlough day in the same way as any normal working day.
This would still be paid at 80 per cent of normal rates (capped at £2,500 per month) as you are in effect ‘topping up’ for those annual leave days by paying the difference between that and their normal pay.
Although furloughed employees are not working, they continue to accrue annual leave, as per the terms of their employment contract.
How are bank holidays accounted for?
Where staff are furloughed over a bank holiday period, and they usually take bank holidays as part of their holiday allowance, employers must pay them on top of their furlough for this. If staff usually work bank holidays this does not apply.
Is the CJRS taxable?
Grants from the various Government schemes to provide support during the coronavirus outbreak are taxable in the same way as other income.
You must also deduct and pay to HMRC Income Tax and employee National Insurance contributions on the full amount that you pay employees, including any scheme grant.
Here to Help
If you require assistance with the extended CJRS we are here to help. To find out how our experienced team can help you submit a claim and comply with the rules of this support measure, please contact us.