The Coronavirus Job Retention Scheme (CJRS) is the UK government's flagship support measure for organisations during the COVID-19 pandemic. It offers grants to cover up to 80% of the salaries of furloughed staff.
Proposed changes to the CJRS
On 29 May, Rishi Sunak outlined how the government plans to reshape the CJRS from 1 July to encourage those furloughed back into work. These proposed changes include:
- Allowing furloughed employees to come back to work on a flexible part-time basis.
- Employers covering the costs of the working hours of part-furloughed staff.
To make a claim under CJRS V2 employers must have submitted a claim under the existing version of the scheme before 1 July and only employees who have been included in claim in the first iteration of the scheme can be eligible for furlough under CJRS V2. This means that employees must have started their furlough by 10 June. As of 1 July, there will also be a maximum number of employees that can be claimed for - the maximum number on any single claim under CRJS V1.
What you need to know
Who can claim: Any employer with a UK PAYE scheme and a UK bank account.
How much can be claimed: A grant of 80% of furloughed employees' pay up to a maximum of £2,500 per month, plus employers national insurance and auto-enrolled pension contributions.
For employees on a regular salary, the grant is based on the employee’s gross salary in the last pay period before 19 March 2020 (salary as at 28 February 2020 can also be used). If the employee has not been paid for a full pay period up to 19 March 2020 the earnings should be pro-rated to establish the base. For employees on variable pay who have been employed for more than 12 months the base pay is the higher of the same month’s earnings from the previous year and the average monthly earnings for the tax year 2019/20. If the employee has been employed for less than 12 months the base pay is the average monthly earnings since they started work. Discretionary payments, where there is no contractual obligation, cannot be included when calculating the grant.
How long does the scheme run: From 1 March 2020 until 31 October 2020 - the scheme will change after 31 July.
From August, employers currently using the scheme will have more flexibility to bring their furloughed employees back to work part time while still receiving support from the scheme.
This revised scheme will run for three months from August through to the end of October. Employers will be asked to pay a percentage towards the salaries of their furloughed staff. The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month. More specific details and information around its implementation will be made available by the end of May.
Which employees can be claimed for: Employees who were on payroll (ie on an RTI report) as of 19 March 2020, and have been put on furlough. This can include: domestic employees such as nannies, company directors, agency workers, employees on fixed term or zero hours contracts, foreign nationals (on any type of visa), contingent employees in the public sector and members of limited liability partnerships.
HMRC accepts that assigned or seconded employees who are included by an employer within a normal, appendix 6, or dedicated expatriate PAYE scheme, are employees of the UK entity for the purposes of the CJRS. So long as the UK entity is the employer it doesn’t matter who physically pays the employee. HMRC’s view is that businesses should only access the scheme in order to maintain their current workforce and if the UK employer can continue to recharge costs to an overseas entity it is not eligible to claim for those employees.
What does furlough mean: Employees on furlough cannot do any work for the organisation. The further Treasury Direction under Sections 71 and 76 of the Coronavirus Act 2020 published on 22 May emphasises that the training activities a furloughed employee can undertake while on furlough must not provide a service to the employer, nor can they contribute to the business activities or generate income or profit for the employer. They must however be relevant to the employee's employment. Employees can continue, or start, to work or to volunteer for unconnected organisations.
How much do I have to pay the employee: The employee must be paid in accordance with their employment contract (which may be amended by agreement) and they retain their usual rights at work. The employee much be paid at least as much as the gross pay element of the grant received from HMRC but the grant is based on pay in the base period and so will not necessarily match the employee’s gross pay. Minimum wage rules do not apply when an employee is on furlough, other than in respect of hours when they are undertaking training.
When will grants be paid: Within six working days of a claim being submitted.
Is there a deadline for claims: There is currently no deadline for claims but it is advisable to make claims promptly as the scheme is expected to change from 1 August. ICAEW does not know which employees will be eligible, but it may be available only for employees that have already been furloughed.
How long do staff have to be furloughed: Three weeks minimum, although this can be extended.
Start date: 1 March 2020
End date: 31 October 2020 - the scheme will change after 31 July.
Employees need to be on payroll (ie on an RTI report) as of: 19 March 2020
Claims portal opened: 20 April 2020
How to apply
What data do you need?
- UK bank account number and sort code (only provide bank account details where a BACS payment can be accepted).
- Billing address for your bank account.
- Employer PAYE scheme reference number.
- The number of employees being furloughed.
- Each employee’s national insurance number (see Requirement for a national insurance number if you have employees with no national insurance number).
- Each employee’s payroll or employee number (optional).
- The start date and end date of the claim.
- The full amount you’re claiming for including employer national insurance contributions and employer minimum pension contributions.
- Contact name and phone number for any queries.
- Your name (or the employer’s name if you’re an agent).
- Your corporation tax unique taxpayer reference, self assessment unique taxpayer reference or company registration number (see Requirement for an SA UTR, CT UTR or CRN if you do not have any of these references)
- Check if you can claim.
- HMRC guidance
- Check which employees you can claim for.
- HMRC guidance
- Prepare your calculations.
- HMRC calculator
- HMRC guidance
- HMRC examples
- Set up your data in a spreadsheet.
- Set up your PAYE online services account or, if you are an agent, ensure that you are authorised for the client.
- Start application.
- Upload or enter data (100+ employees upload spreadsheet, fewer than 100 manual entry).
- Submit application.
Employment law matters
Employment law matters will arise for employers considering furloughing their employees and employers should seek guidance or advice as appropriate. For instance:
- Employers will need to consider how to select employees for furlough leave (for instance, seeking volunteers in the first instance).
- Equality and discrimination laws apply in this context so, for instance, employees should not be selected for furlough leave on discriminatory criteria (for example, age) except for where discrimination is justified under employment law.
- Collective consultation requirements may need consideration (broadly, where 20 or more employees are to be put on furlough leave and would be dismissed if they do not agree to resulting changes in terms of employment).
- In most cases, furloughing will require the agreement of the employees (for example, because it involves a reduction in pay) and amendment of contracts of employment.
- To be eligible for the subsidy employers should write to their employees confirming that they have been furloughed and keep a record of this communication.
On 22 May, the Chancellor made a further Treasury Direction under Sections 71 and 76 of the Coronavirus Act 2020 to reflect the extensions of the CJRS needed to make sure the government's support scheme worked as intended.
Among the changes, this makes it clear that the written agreement for the employee to cease all work must be retained by the employer until at least 30 June 2025.
ICAEW recommends that employers should be able to demonstrate they have used a fair and reasonable process to decide which employees to furlough, documented by a suitable audit trail.
Further support from the CIPD
The Chartered Institute of Personnel and Development, has published an extensive set of answers to frequently asked questions around furlough leave from its HR experts. The FAQs cover selecting employees for furlough, furloughing special categories of employee, applying for furlough, managing employees on furlough, pay during furlough, annual leave during furlough, sickness during furlough and what happens after furlough.
Furlough letter templates
The Advisory, Conciliation and Arbitration Service (acas) have produced a set of templates for an agreement to furlough an employee because there's no work, to extend furlough and to end furlough. These are free to download and use.
The ICAEW Library can also provide members and students with furlough letter templates for employers covering a wide range of situations:
- Furloughing employees
- Extending the furlough period
- Ending the furlough period and return from furlough
- Denying a furlough request.
Get in touch with the library at email@example.com to request these template letters.
Who isn't covered by CJRS
The scheme isn't open to those businesses that:
- Use annual payrolls where 2019/20 RTI report made after 19 March 2020.
- Have no UK bank account, for example those whose payroll is handled through a UK representative's UK bank account.
The scheme doesn't cover employees who:
- Started a job by 19 March 2020, but had no payment of earnings by that date.
- Are directors who take most income as dividends (any salary they take is covered).
- Are put on reduced hours instead of being furloughed. This may change when the second phase of the CJRS begins in August 2020, although currently, ie as at 22 May 2020, this is unconfirmed.
HMRC is still working on developing the functionality to allow claims to be amended. In the meantime it has asked that employers do not correct errors by adjusting subsequent claims.
The CJRS portal is rejecting claims from some annual payrolls. Read more
HMRC has confirmed the step-by-step process to enable agents to submit claims on behalf of their clients. Read more.
Definition of a claim period
A claim period is whatever the employer wants to make - so it can be a week or a month, for example. Read more.
By making a claim, the employer agrees that the grant they receive can only be used to pay the employee’s salary and the employer NICs and pension contributions and that they will immediately return to HMRC any grants not used for these purposes. HMRC interprets this to mean that it is not possible to defer payment of employers PAYE which has been reimbursed by a CJRS grant.
Help and support
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HMRC support on CJRS
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