Coronavirus Job Retention Scheme
Last updated 5 November 2020
The Government has extended the Coronavirus Job Retention Scheme (CJRS) until March 2021, re-introducing 80% of wages covered by the scheme until at least January 2021.
The Job Support Scheme, which was due to be introduced on 1 November 2020 has been postponed, and the Job Retention Bonus (for employers who retain furloughed employees) will be reintroduced later in 2021.
The Coronavirus Job Retention Scheme which started in March and was due to end on 31 October, has been extended until 31 March 2021. The UK government will again pay 80% of wages for the hours furloughed employees do not work, up to a cap of £2,500. The government will review the percentage of wages covered by the scheme in January 2021.
The updated guidance since the announcement on 5 November 2020 is available here.
The government have also confirmed that anyone that was employed and on the payroll on 23 September 2020, and have since been made redundant, can be re-employed and claimed for under the furlough scheme.
From August 2020, the level of Government grant provided through the Job Retention Scheme had slowly tapered to reflect that people were returning to work, with the announcement of the most recent lockdown, the Government has reinstated their contribution levels back to those applying in August 2020.
It is important to note that the cap is proportional to the hours not worked. For hours worked by furloughed employees, the employees are paid by their employers who are responsible for paying the tax and NICs due on those amounts.
Employers must agree with their employee any new flexible furloughing arrangement and confirm that agreement in writing. Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period even when they are not paid on an hourly rate.
Further guidance on flexible furloughing and how employers should calculate claims is available via the HMRC portal here.
Importantly there are now deadlines of when claims have to be made by and the claim periods cannot overlap calendar months. There are some signs too of increasing attention towards the eligibility of claims although generally, HMRC remains supportive to employers. It is critical employers follow the guidance as best they can and ensure they are eligible to claim.
Below we have summarised the guidance to answer the key questions that surrounded the original announcement.
1. Can furloughed members of staff work for their employer during the period of furlough? Can furloughed staff come back part-time?
Up until 30 June 2020, furloughed members of staff were not permitted to work for the employer during the period of furlough. If an employee was working, but on reduced hours, or for reduced pay, they were not eligible for the scheme and their employer had to continue paying the employee through the payroll and pay their salary.
Since July 2020, new flexibility was introduced to the scheme with furloughed workers able to return to work part-time. Businesses were then able to decide the hours and shift patterns their employees worked on their return and were responsible for paying their wages while in work.
During the November 2020 to March 2021 extension, you will also have flexibility to ask employees to work on a part-time basis and furlough them for the rest of their usual working hours or furlough them full-time. Employers will have to cover their wages for any hours they work as well as all employer National Insurance and employer pension contributions.
2. Are there any restrictions on which employees the scheme is available for?
Yes, for the period pre 30 October 2020, the scheme was only available for employees on the payroll on or before 19 March 2020 but can be on any type of contract including:
- Full-time employees
- Part-time employees
- Employees on agency contracts
- Employees on flexible or zero-hour contracts
To enable the introduction of part-time furloughing, and support those already furloughed back to work, claims from July onwards were restricted to employers currently using the scheme and previously furloughed employees.
To be eligible under the CJRS extension for November 2020 to March 2021, employees need to have been notified to HMRC via a PAYE Real Time Information Submission on or before 30 October 2020. Therefore employers may now be able to claim for employees that have not been claimed for before. This reflects that many employers have recruited since the last eligible date in March. Neither the employer nor the employee needs to have previously claimed or have been claimed for under CJRS to make a claim under the extended CJRS (if other eligibility criteria are met).
Employees that were employed and on the payroll on 23 September 2020 (the day before the Job Support Scheme announcement) who were made redundant or stopped working afterwards can be re-employed and claimed for. The employer must have made an RTI submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees.
3. Does an employer have to top up an employee’s salary?
No, at a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 gross per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
From July 2020, employees were able to return to work flexibly whilst still on furlough leave. Employers are responsible for paying their wages and associated ER NICs and pension costs for the hours worked.
From August 2020, employers were asked to pay a percentage towards the salaries of their furloughed staff for the hours the employee didn’t work.
- August – the Government paid 80% of wages up to a cap of £2,500 but employers paid ER NICs and pension contributions.
- September – the Government paid 70% of wages up to a cap of £2,187.50. Employers paid ER NICs and pension contributions and 10% of wages to make up to 80%.
- October – the Government paid 60% of wages up to a cap of £1,875. Employers paid ER NICs and pension contributions and 20% of wages to make up to 80%.
- November, December, January 2021 – the Government will pay 80% of wages up to a cap of £2,500 for hours not worked. In line with the Scheme rules in August, employers will be expected to pay employer National Insurance contributions and pension contributions for the hours the employee doesn’t work.
- February, March 2021 – the Government will review the 80% cap in January 2021.
The cap will be proportional to the hours not worked.
4. How is the amount calculated for employees whose pay varies?
Up until 31 October 2020, if the employee has been employed for a full twelve months prior to the claim, the employer 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, the employer can claim for an average of their monthly earnings since they started work.
Fees, commission and bonuses should not be included.
In relation to the CJRS extension for November 2020 to March 2021, the existing CJRS calculation of 80% of usual wages and of usual hours will apply to all employees who were eligible under CJRS even if a claim was not made in respect of that employee under CJRS to 31 October 2020.
Where an employee was not previously eligible for CJRS, 80% of wages must be calculated for employees:
- on a fixed salary – 80% of the wages payable in the last pay period ending on or before 30 October 2020
- whose pay varies – 80% of the average payable between (these dates are inclusive) the start date of their employment or 6 April 2020 (whichever is later) and the day before their CJRS extension furlough periods begins
5. Does the cap of £2,500 apply pro-rata to part-time employees?
No, the employee’s actual wage is what is important here and their salary before tax should be used to calculate the 80%.
6. What if an employee has more than one job?
If an employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
7. Does the employer continue to be liable for Employer National Insurance and pension contributions?
Under the new extended scheme, and indeed since August 2020, all employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees. These costs cannot be recovered as part of the claim.
If an employer chooses to top-up their employees’ salary in addition to the grant, employers National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings.
The employers are responsible for paying ER NICs and pension contributions associated with any hours worked by furloughed employees following the introduction of flexibility into the scheme in July 2020.
The employer is required to pay ER NICs and pension contributions for furloughed employees from August 2020.
There are some useful examples of the costs to employers on the ICAEW website.
8. What about PAYE and Employee National Insurance?
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
9. Do employment benefits continue during the period of furlough?
Yes, the rules for the grant will not displace the existing employment contract so the entitlement to holiday and sick pay will continue in line with employees’ contracts.
10. How will the payment from the scheme be treated in the hands of the employer?
The scheme pays a grant (not a loan) to the employer. Payments received by a business under the scheme must be included as income in the business’ calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.
Businesses can then deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
11. How do I make a claim for a grant through the scheme?
The grant will be paid to the employer through an online system which has been built for this purpose. The HMRC portal to administer the scheme can be accessed here.
During the CJRS extension period of November 2020 to March 2021, claims will operate as the previous Scheme did, with businesses being able to claim either shortly before, during or after running payroll. Claims can be made from 8am Wednesday 11 November. Claims made for November must be submitted to HMRC by no-later than 14 December 2020. Claims relating to each subsequent month should be submitted by day 14 of the following month, to ensure prompt claims following the end of the month which is the subject of the claim.
The employer will pay the employee through payroll, and report payments to HMRC using the Real Time Information (RTI) system as usual.
Once HMRC has received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
12. What about self-employed people, shareholder directors or salaried LLP members?
The scheme does not apply to self-employed people, separate measures were announced to support this group of people, please see our article here for more guidance.
HMRC has subsequently issued further guidance about the eligibility of this scheme to office holders (including company directors) and salaried members of LLPs.
Provided they are paid via PAYE, the grant can be claimed for these individuals. Please see our article here for more guidance.
Furloughing is a new legal concept for English law, so Directors and Managers should take care to use letters and supporting documents written and provided by employment lawyers. If you should need an introduction to suitable lawyers then please speak with your usual Kreston Reeves contact.
For further information, please speak with your usual Kreston Reeves contact or contact me here.
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