Last updated 29/05/2020
Andrew Brookes – Employment Tax Specialist
DD: +44 (0)1252 541244
The following guidance is based on that published by the government on 26th March 2020, 4th, 15th and 17th April and 12th and 29th May. See also our FAQs.
CJRS update following the Government update 29/05/2020
On 29 May the Chancellor confirmed some details of his plans to a) extend the furlough scheme to 31 October 2020, b) introduce the possibility of ‘part time’ furlough to help employers bring back their staff gradually, and c) taper the amounts that can be reclaimed, asking employers to make a contribution.
Please see further details of these arrangements here:
These updates are crucial for the gradual re-introduction of staff / teams and will play a significant part in the lockdown exit strategy planning for businesses. (this is a link to the Exit Strategy article)
Information on this page and our FAQs page continue to be relevant, but are being updated to reflect the new arrangements.
The Government paying up to 80% of wages for staff
This will be of great relief to both employers, wanting to retain staff while they are unable to use them, and especially for employees worried about how they pay their bills if they are not getting paid.
How this will work
This measure is in respect of “furloughed” workers – i.e. those told there is no paid work for them to do for the time being. In these circumstances:
- The Government will provide funds to pay 80% of the wage, up to a maximum of £2,500 per month.
- This is a grant to employers and unlike loans, grants do not have to be repaid later.
This is only available where employees have no work and is not a measure to subsidise the pay for those still working. There are some considerations required to ensure employers implement this properly:
- Most significantly ensuring that employment contracts are not broken.
- In simple terms this means that an agreement is required between employer and employee that their employment is being furloughed.
The employer will be granted 80% of their normal pay per month, capped at £2,500. The employer must pass all of this on to the employee and is entitled – but not obligated – to top up the payment if they are able to fund the difference themselves.
Further Job Retention Scheme Guidance
1 – The scheme is for “employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy. However, all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus”.
2 – Public sector organisations, private sector organisations that continue to receive public funds for wage costs and private sector businesses supplying goods and services for COVID-19 are usually excluded from the scheme. There may be exceptions, but businesses potentially within these restrictions should consider their eligibility carefully before seeking to furlough employees.
3 – Any entity with a UK payroll can apply and foreign nationals can be included in the scheme.
4 – HMRC have produced an online portal for applications, and this is (expected to be available from 20 April 2020) or (now available).
5 – Businesses, and agents that are authorised to act on behalf of clients for PAYE matters, will be able to submit claims. However, file only agents, including Payroll Bureaus, will not be able access the service due to data protection reasons.
6 – Employees can be furloughed multiple times, subject to minimum 3-week period on each occasion.
7 – When on furlough, an employee cannot undertake work for, or on behalf, of the organisation, including providing services or generating revenue. Employers are free to consider allocating any critical business tasks to staff that are not furloughed.
8 – Furloughed workers are permitted to work for another employer subject to restrictions either in their contract or inserted into furlough agreement.
9 – Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. You must have created and started a PAYE payroll scheme on or before 19 March 2020 and have a UK bank account. You must also enrol – if you have not already – for PAYE online.
10 – If you are a current Menzies payroll client, latest indications are that providing Menzies have full access, rather than “file only” access, Menzies will be able to submit claims on your behalf under the CJRS. However, it would be sensible for you to have a Government Gateway login and know you login and password in case there are any unexpected issues that prevent us from doing this, or you choose to submit the claim yourself to speed up the application process and to keep costs to a minimum.
11 – Furloughed employees must have been on company PAYE payroll and appeared on an RTI submission by 19 March 2020. Employees that do not appear on an RTI return until after this date are usually outside the scope of the scheme for their new employer. However, please see other FAQs covering TUPE transfers, merging of payrolls and other options for employees outside the scope of the scheme for their new employer. Subject to the agreement of the former employer, employees who were made redundant or who stopped working for the employer on or after 28 February can be rehired and placed on furlough.
12 – Employees of individuals are eligible e.g. nannies.
13 – Fixed term workers can be furloughed and their contracts can be renewed or extended during furlough. If their contract ends without renewal however you can no longer claim.
14 – Employees on unpaid leave cannot be included in the scheme, unless they were placed on unpaid leave after 28 February.
15 – Employees on sick leave or self-isolating for the required period after showing symptoms should get Statutory Sick Pay or company sick pay. However, employees on sick leave can be furloughed for business reasons if both employer and employee agree. In this case they switch from sickness to furlough with a claim available, subject to the minimum furlough period.
16 – Employees who are shielding in line with public health guidance can be placed on furlough.
17 – Employees who are unable to work because they have caring responsibilities resulting from COVID-19 can be furloughed e.g. those that need to look after children.
18 – Subject to restrictions in either the employment contract or furlough agreement, a furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for the organisation; but if they are required to train they must be paid at least NLW/NMW for that time.
19 – The employer can ‘agree to find furloughed employees new work or volunteering opportunities whilst on furlough if this is in line with public health guidance.’
20 – Apprentices can be furloughed and can continue to train, for which they should receive the appropriate minimum wage. Further guidance is provided.
21 – Those on maternity / adoption / paternity / shared parental leave the normal rules for statutory payments apply but any enhanced, contractual payments can be claimed through the scheme.
22 – For salaried employees, the actual salary before tax they are on, as per their last pay period prior to 19 March 2020 will be used.
23 – The reference salary must not include the cost of non-monetary benefits including taxable benefits in kind, including those provided through salary sacrifice. Where benefits are provided, they should be in addition to wages paid under the scheme.
However, HMRC agreed that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements. This means that that contractual changes can be agreed to forego the benefits and increase the reference salary.
24 – Regular past overtime can be included in claims along with wages, fees and compulsory commission payments.
25 – Discretionary bonuses, tips, commissions and non-cash payments should be excluded. Apprenticeship Levy and Student Loans must continue to be paid and are not covered by the Scheme.
26 – For those on variable pay and employed for 12+ months prior to claim, the higher of a) same months earnings for the previous year or b) average monthly earnings in the 2019/20 tax year will form the basis of furlough claims.
27 – For those on variable pay and employed for <12 months prior to claim, the average of their monthly earnings since they started work will apply. If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
28 – Furlough wages will be subject to usual income tax and other deductions.
29 – Employer NIC and AE contribution on any additional top-up salary will not be funded. Nor will any voluntary AE contributions above the 3% minimum on income above the lower limit of qualifying earnings (£512pm rising to £520pm on 5 April).
30 – Minimum furlough length is 3 weeks. An employer can only submit up to one claim every 3 weeks. Although periods between claims of longer than 3 weeks is permitted. Each must be a complete claim for all qualifying payments. There is no scope to amend returns or to “catch-up” for excluded employees on a later claim.
31 – The initial guidance suggested that claims just required the number of employees being furloughed, the amount being claimed, the employer identification details and the bank account details, with the threat of a future HMRC audit. This has been completely reversed and claims must now also provide full details of the employees furloughed and the amounts claimed for each employee. For employers with less than 100 employees this information must be keyed into the portal, whereas larger employers are able to upload a file with this information providing it is in an acceptable format.
32 – Grants will be paid via BACS to a UK bank account.
33 – All the salary element of the grant must be paid to employees as gross salary.
34 – If the scheme ends but employees are unable to return to their duties, redundancy may be necessary.
35 – Employees will continue to pay AE contributions unless they have opted out or cease saving.
36 – The grant can be claimed for office holders (including Directors), salaried members of LLPs, agency workers (including those employed by umbrella companies and limb (b) workers, if they are paid via PAYE. Check for specific considerations for those paid via PAYE but not necessarily employees in employment law.
37 – Detailed guidance has been issued for contingent workers in the public sector – i.e. where the party receiving the services is a Central Government Department (CGD), an Executive Agency of a CGD or a Non-Departmental Public Body.