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COVID-19 – Job Retention Scheme Details (05/11/2020)

UPDATED 05 November 2020:

Andrew Brookes - Menzies Accountant

Andrew Brookes – Employment Tax Specialist
DD: +44 (0)1252 541244

In line with the second national lockdown announced by the Prime Minister, the Furlough Scheme is being extended until the end of March 2021.  Its replacement, the Job Support Scheme, has been postponed until the extended furlough scheme is closed.

CJRS EXTENSION FROM 1 NOVEMBER 2020

The extended furlough scheme will operate in the same way as the original scheme did during August 2020, i.e.:

  1. Employers can claim, and must pay their employees at least, 80% of their normal pay up to £2,500 per month.
  2. Employers will have to meet employer NIC and pension contributions.
  3. Both flexible furlough and full time furlough will be available.
  4. You are still able to ‘top up’ the 80%.

The government will review the scheme in January and may ask employers to contribute more for the remainder of the scheme.

ELIGIBLE EMPLOYEES

Importantly, the criteria for eligible employees has changed such that you can include employees who were on payroll and appeared on an RTI submission on or before 30 October 2020.  This opens it up to employees who didn’t qualify for the previous scheme, including recent starters and employees who carried on working.

CALCULATIONS AND CLAIMS

So far the Government has said that calculations of ‘usual hours’ will broadly follow the same methodology as under the previous CJRS scheme and that employers will need to report and claim for a minimum period of 7 consecutive calendar days. 

They will confirm shortly how and when claims can be made in respect of wage costs for November 2020, but there will be no gap in eligibility for support between this and the previous scheme.

The Government paying up to 80% of wages for staff

pound sign

This scheme was devised to  help preserve employment during the critical phase of the coronavirus pandemic.  In effect, it pays of a proportion of employees’ wages if they are unable to work as a result of the pandemic.

The extended scheme includes the option of flexible furlough where by eligible employees can be furloughed on a part time basis and the employer can claim the grant for the proportion of time that they remain on furlough, whilst paying the employee as normal for the time they spend working.

How it works

The scheme introduced the ‘furloughed worker’, i.e. – those told there is no paid work for them to do for the time being.  In these circumstances:

  • The Government has provided 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.

Here are the key elements of the scheme.  These are supplemented by our FAQs to provide you with much more information.:

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

Further guidance is awaited from the government to confirm details of claim calculations, we will update our guidance when this is available. The following points are assumed to be carried over from the previous scheme but please treat with caution until further guidance is confirmed.

1 – Employment contracts are not broken during furlough. In simple terms this means that an agreement is required between employer and employee that their employment is being furloughed.

2 – The employer is granted 80% of the employee’s 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.

3 – 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”.

4 – 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.

5 – Any entity with a UK payroll and a UK bank account can apply and foreign nationals can be included in the scheme.

6 – 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.

7 – When on furlough, an employee cannot undertake work for or on behalf of the organisation or associated businesses, 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 – Details of how to claim under the extended scheme are yet to be confirmed, Employers can claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month. The employer must meet Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. 

10 – Qualifying employers must have created and started a PAYE payroll scheme on or before 30 October 2020 and have a UK bank account.  You must also enrol – if you have not already – for PAYE online.

11 – If you are a current Menzies payroll client, providing Menzies have full access, rather than “file only” access, we are 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 your 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.

12 – Furloughed employees must have been on company PAYE payroll and appeared on an RTI submission by 30 October 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 our FAQs covering TUPE transfers, merging of payrolls and other options for employees outside the scope of the scheme for their new employer.  We are not yet sure about the ability to rehire ex employees and include them in the scheme.

13 – Employees of individuals are eligible e.g. nannies.

14 – 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.

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 unable to work because they have caring responsibilities resulting from COVID-19 can be furloughed e.g. those that need to look after children.

17 – 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.

18 – 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.’

19 – Apprentices can be furloughed and can continue to train, for which they should receive the appropriate minimum wage.  Further guidance is provided

20 – 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.

21 – Furlough wages will be subject to usual income tax and other deductions.

22 – All the salary element of the grant must be paid to employees as gross salary.

23 – If the scheme ends but employees are unable to return to their duties, redundancy may be necessary.

24 – Employees will continue to pay AE contributions unless they have opted out or cease saving.

25 – 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.

26 – Detailed guidance was previously 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.

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