Introduction

In March the government introduced the Job Retention Scheme (CJRS) to support businesses whose operations have been severely impacted by the COVID-19 outbreak.  The scheme has now been updated and amended for the period 1 July – 31 October 2020.

The CJRS seeks to avoid the need for permanent redundancies and layoffs by enabling employers to “furlough” employees (put them on ‘paid’ leave of absence) and re-claim a proportion of their wage costs.

The information provided in this guide is a summary of our interpretation of the CJRS for the period 1 July 2020 – 31 October 2020.

The scheme is complex and you should refer to the Government Website for full details or if you need further support or have questions please contact:  CV19questions@peoprohr.com

Time period the scheme covers

The original scheme commenced on 1 March 2020. With effect from 1 July 2020 a number of changes will be implemented and this guide covers the details as they apply for the period 1 July – 31 October 2020.

Eligibility

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 19 March 2020.

Employees must have been on payroll and included on an HMRC RTI submission on or before 19 March 2020 and have a UK bank account to be eligible. The following different types of employees are covered:

• full-time employees
• part-time employees
• employees on fixed term contracts
• employees on agency contracts
• employees on flexible or zero-hour contracts

Employees who have stopped working for an employer (for any reason – including redundancy) since 28 February 2020, but before 10 June 2020 can be rehired and placed on furlough; provided they were on payroll and included in an HMRC RTI submission on or before 28 February 2020.

Similarly, employees who have stopped working for an employer (for any reason – including redundancy) since 19 March 2020, but before 10 June 2020 can be rehired and placed on furlough; provided they were on payroll and included in an HMRC RTI submission on or before 19 March 2020.

From 1 July 2020, only employees who have previously received payments under the CJRS will qualify for further grants. They must have been furloughed for at least 3 consecutive weeks between 1 March and 30 June 2020. This means that the last day an employee could have started furlough for the first time was 10 June 2020.

The number of employees that can be included in a single claim made after 1 July 2020 cannot exceed the maximum number of employees in any previous claim for the period up to 30 June 2020. (Note: This limit may differ where you have an employee returning from statutory parental leave – see below).

Employees are not permitted to perform work of any kind for the employer during the furlough period. However, if the employment contract allows, a furloughed employee can do paid or unpaid (voluntary) work for another employer or organisation.

What can an employer claim?

Prior to the scheme changes on 1 July, employees placed on furlough were not permitted to work and the employer could claim the lower of 80% of an employee’s regular salary (as at the last pay period prior to 19 March) or £2,500 per month, plus the associated employer national insurance contributions and minimum automatic enrolment employer pension contributions based on the furloughed wage.

From 1 July 2020, employers can bring furloughed employees back to work, of a flexible basis,  for any amount of time and any shift pattern, payable at the normal working rate, and also claim job retention payments for normal hours they are not working.

From 1 August 2020, the level of CJRS payment will gradually be reduced and will need to be made up by the employer to cover at least 80% (capped at £2,500) of normal time not worked. 

Additionally, from 1 August 2020, employers will be required to pay the associated employer national insurance contributions and minimum automatic enrolment employer pension contributions based on the furloughed wage.

Employer claims for furlough periods on or after 1 July 2020 must be for a minimum of 7 days.

The level of support and phasing is shown below:

The following must be included as “normal wages” when calculating the 80% of wages for hours not worked:

• regular wages you paid to employees
• non-discretionary payments for hours worked, including overtime
• non-discretionary fees
• non-discretionary commission payments
• piece rate payments

But should not include:

• discretionary bonuses and commission
• tips
• non-monetary benefits such as the value of health insurance or a company car
  (however, these should continue to be provided at the employers expense unless mutually agreed otherwise).
• salary sacrifice benefits, including pension contributions
  (however, HMRC have agreed that COVID-19 counts as a life event enabling employees to change their salary sacrifice arrangements)

What is payable to the employee?

Companies are required to pay the furloughed employee at least the lower of 80% of an employee’s regular wage or £2,500 per month – but can top this up if they chose.

When the scheme ends

When the government ends the scheme, businesses will need to make a decision, as to whether employees can return to their normal duties. This will of course depend on the current and future business situation. If not, it may be necessary to consider other options such as redeployment or redundancy.

Statutory deductions

Payments made to employees are subject to employee tax, national insurance and automatic enrolment pension contributions.

Topping up payments

Employers can choose to pay more than they claim through the scheme, but are required to bear the cost of the top up plus associated employer national insurance and automatic enrolment pension contributions.

The furloughing process

Unless the employment contract has an explicit “lay off” clause, companies are required to consult and gain employee acceptance to the furlough.

Employers should claim payments through the scheme using an online portal which went live on 20 April 2020.

Employers will need to:

• objectively and fairly select which employees will be furloughed.  Note that equality and discrimination laws continue to apply
• consult, confirm in writing and gain written consent from affected employees – including in relation to any flexible / reduced working arrangements that can be introduced from 1 July 2020
• ensure employees are not working for them during the hours they are claiming as furlough – (note there are exclusions for training)
• calculate the amounts to be reclaimed through the scheme
• submit a claim through the government portal – see detail at the end of this guide
• a combined claim can be made to cover all furloughed employees
• retain written confirmation of each furlough per employee for 5 years

Holiday entitlement and pay

Furloughed employees continue to accrue holiday as per their employment contract, however entitlement can be varied by mutual agreement subject to the statutory minimum. Employees can take holiday whilst on furlough, but this period must be paid at the normal rate of pay.

Special considerations

This is not an exhaustive list – but covers the most common situations – if in doubt refer to the government guidance.

Unless stated otherwise, the eligibility criteria relating to dates of employment, payroll and RTI submission dates as well as the requirement for a previous 3 week continuous period of furlough between 1 March and 30 June 2020 apply to the special cases detailed below.

Employees whose pay varies – the basis for the amount to claim should be the higher of either:

• average monthly earnings in the 2019/20 tax year (or since they started if after April 2019)
• earnings from the month 1 year prior to the date of

Redundancies – employees already made redundant on or after 28 February 2020 can be covered if they are reinstated to employment and as long as they were on payroll as at 28 February and had been included on an HMRC RTI submission on or before 28 February 2020. Entitlement to the scheme can be backdated to the date of redundancy.

Employees on sick leave – retain their right to Statutory Sick Pay (SSP).  However, it is up to employers to decide whether to move furloughed employees who become ill onto SSP or to keep them on the furlough scheme.

Employees who are “shielding” on public health guidance – can be furloughed.

Employees who are unable to work because of caring (for example childcare) responsibilities – can be furloughed.

New hires – into a business cannot be furloughed if they weren’t on the payroll on 28 February 2020.

Maternity/paternity/adoptive leave  – statutory payments continue as normal. Enhanced payments can be treated in the same way as normal salary and re-claimed through the scheme. However, the employee’s average weekly earnings may need to be calculated differently, if the employee was furloughed and then started leave on or after 25 April 2020.

Employees returning from statutory maternity, shared parental, adoption, paternity or parental bereavement leave after 10 June – can exceptionally be included in the scheme for the first time if:

• other employees in the organisation have been furloughed between 1 March and 30 June 2020
• the employee started maternity, shared parental, adoption, paternity and parental bereavement leave before 10 June and returned after 10 June
• the employee was on payroll and an RTI submission made for them on or before 19 March 2020

Employees on unpaid leave can be furloughed if their leave started after 28 February 2020.

Employees with second jobs can be furloughed from one job and continue to work for the other.

Apprentices who are furloughed can continue to train but must be paid at least the apprenticeship minimum wage/national living wage/national minimum wage as appropriate for all the time they spend training.

Limb B workers (who do not have a formal employment contract, but have a form of agreement to undertake or perform work in an employment-like capacity) – can be furloughed if paid through PAYE.

Employees on fixed term contracts – can be furloughed.

Agency workers – can be furloughed by the agency, but in consultation with the employing company.

Individuals (as opposed to companies) – can furlough people they employ – for example nannies – if they are paid via PAYE and meet the eligibility criteria.

Company directors – can be furloughed and can continue to perform statutory duties only and not more than “would reasonably be judged necessary for that purpose”.

Foreign nationals – are eligible to be furloughed, subject to them having the legal right to work in the UK.

Publicly funded employees – are generally not eligible to be covered by the scheme.

There are potentially other special circumstances and categories of workers not included in the section above.  Please refer to the government website or contact CV19questions@peoprohr.com.

Employment rights

Furloughed employees retain their statutory employment rights including statutory sick pay entitlement, maternity, paternity and other parental rights, protection against unfair dismissal and to redundancy payments.

Submitting a claim

Employers should submit claims using the HMRC Portal:

The government have also published further guidance and an on line and calculator.

To claim, employers will need:

• to be registered for PAYE online
• their employer PAYE reference number
• national insurance numbers for the furloughed employees
• names of the furloughed employees
• payroll/employee number for the furloughed employees (optional)
• self assessment unique taxpayer reference or corporation tax unique taxpayer reference or company registration number
• the claim period (start and end date)
• amount claimed
• bank account number and sort code
• contact details

Employers will need to calculate the amount they are claiming. HMRC retain the right to retrospectively audit all aspects of any claim. Payments may be withheld or need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information or found to be fraudulent.

Where there are fewer than 100 furloughed staff the details of each employee will need to be manually entered into the system. Where claims for more than 100 employees are being made an upload file is provided.

All records and calculations in respect of claims need to be retained.

HMRC will check the claim, and if eligible, pay it by BACS to a UK bank account.

Furloughed staff must receive no less than 80% of their reference pay (up to the monthly cap of £2500).