*Including updates correct as of 15th April 2020.
The Coronavirus Job Retention Scheme (CJRS) was introduced by government at the end of March.
Michelle Tyson, Director of recruitment agency, Tyson Wilson Ltd, gives a breakdown and overview of some of the key points from the government guidance.
Michelle said: “The coronavirus pandemic is unprecedented and is having significant impacts on businesses across all sectors in the UK. The government have introduced a range of measures to help businesses and employees, but it can be tricky to interpret the guidance based on individual circumstances. In this article, we cover the key points from the guidance that are applicable to most, to try and ensure that you are aware of the scheme’s criteria.”
If your business has been severely impacted by coronavirus (COVID-19), you can ‘furlough’ employees and apply to HMRC for a grant that covers 80% of their usual monthly wage, up to a maximum of £2,500 (gross) per month. In addition, you can also claim for associated Employer National Insurance contributions and employer pension contributions (the minimum amount required under the automatic enrollment scheme of 3%). While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
What is the Coronavirus Job Retention Scheme?
Michelle explained: “The Coronavirus Job Retention Scheme (CJRS) is a temporary scheme that is in place from March 1st 2020 to June 30th 2020. It may be extended, if necessary. Claims are made by employers online via a new portal, which is expected to go live around April 20th 2020. It is important to note that each period of furlough must last for at least 3 consecutive weeks to be eligible to claim. It is envisioned that employers will be able to make a claim once every 3 weeks from when the portal goes live. Employees can be put on and off furlough. However, each period on furlough must last for at least 3 weeks to be eligible to claim.”
When the scheme was first announced, you could only claim for furloughed employees that were on your PAYE payroll on or before February 28th 2020. However, this has now been updated. *You can now claim for employees that were on your PAYE payroll on or before March 19th 2020 and which were notified to HMRC on an RTI submission on or before March 19th 2020.*
Which employees are eligible for the scheme?
Michelle clarified: “Employees can be on any type of employment contract, including full-time, part-time, agency, flexible, zero-hour, or fixed term contracts. Fixed term contracts can be renewed or extended during the furlough period. Where a fixed term employee’s contract ends because it is not extended or renewed, you will no longer be able to claim for them.”
In addition, it has been clarified that foreign nationals are eligible to be furloughed. To be eligible, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation or any linked or associated organisation. This includes providing services to the organisation or generating revenue for the organisation.
Apprentices can be furloughed in the same way as other employees and they can continue to train whist furloughed. However, it is important to note that Apprentices must be paid at least the Apprenticeship Minimum Wage, National Living Wage, or National Minimum Wage (as applicable to your organisation) for time they spend training.
“This means Apprentices should receive their full, normal wage for any days spent training as opposed to receiving 80% of their normal wage for those days” said Michelle.
“You can still claim for any days spent training, which means in theory you are ‘topping up’ their wage for those days.”
If an employee is working on reduced hours or for reduced pay, they are not eligible for the scheme. If an employee started unpaid leave after February 29th you can put them on furlough instead. If an employee went on unpaid leave on or before February 28th, you cannot furlough them until the date on which it was agreed they would return from unpaid leave.
CJRS and Directors
The official guidance goes into more detail on others who are eligible for the CJRS, including office holders, company directors, salaried members of Limited Liability Partnerships, etc. However, the eligibility of company directors seems to be a common question.
Michelle said: “The eligibility of company directors for the CJRS is one of the most common queries we deal with. HMRC were not very clear on this to begin with, but the guidance has been updated and now states clearly that company directors can furlough any salary they receive through PAYE. However, the conditions of furlough still apply in that they cannot carry out any services for the business or generate revenue for the business. They can continue to carry out their duties under the Companies Act. Furlough payments do not take into consideration dividends.”
CJRS and SSP
If an employee is on sick leave or is self-isolating as a result of Coronavirus, they will be eligible for Statutory Sick Pay (SSP), subject to meeting the other eligibility criteria. CJRS is not intended for short-term absence from work due to sickness or self-isolation. However, if the organisation wishes to furlough an employee for business reasons, who is on sick leave or self-isolating, they can. The employee will no longer receive SSP and will instead be classified as a furloughed employee. You can claim back from both the CJRS and the SSP rebate scheme for the same employee but not for the same time period.
‘Shielding’ Employees and Caring Responsibilities
In addition, employers are entitled to furlough employees who are ‘shielding’ in line with public health guidance, or who are off work to stay home with someone who is shielding, or who are off work on long-term sick leave. Employees who are unable to work because they have caring responsibilities resulting from coronavirus can also be furloughed. For example, employees who cannot go to work because they need to look after their children.
Employees With More Than One Employer
If an employee has more than one employer, they can be furloughed for each job. Each job is separate and the cap of £2,500 (gross) per month applies to each employer. Where an employee has more than one employer, they can be furloughed in one job and receive a furloughed payment but continue working for their other employer/s and receive their normal wages.
Michelle added: “If an employee has one employer, and is furloughed by that employer, they can receive a furloughed payment and seek additional temporary employment with another employer provided their Contract of Employment permits it and/or their employer agrees.”
Employees Volunteering and Training
A furloughed employee can take part in volunteer work, provided it is not for your organisation or a linked or associated organisation. Furloughed employees can also participate in training, so long as while completing the training the employee does not provide services to or generate revenue for, or on behalf of, their organisation, or a linked or associated organisation.
Michelle said: “Where an employee completes training at the request of their employer, the guidance is clear that there are minimum wage requirements that need to be met for any time spent training while on furlough. This will only impact employees who are normally on minimum wage or close to it, as the 80% furlough payment will bring their wage to below minimum wage for the duration of their furlough. In this instance, employers will need to top-up wages to at least minimum wage for any time the employee spends training at the request of the employer.”
Agreeing To Furlough Employees
Michelle warned: “In general, it is advised that employers discuss furlough with their employees and make any temporary changes to the Contract of Employment by agreement. When employers are making decisions in relation to the furlough process, such as deciding who to offer furlough to, equality and discrimination laws still apply. To be eligible for the grant, employers must confirm – in writing – to their employee that they have been furloughed. A record of this communication must be kept for five years.”
Grant Amounts and Furloughed Wage Calculation
Employers can choose to ‘top up’ employee salaries but are under no obligation to. Employees must not work or provide any services for the organisation while furloughed, even if they receive a topped-up salary. When completing the claim, the claim start date will be the date that the employee stopped working for the organisation and started furlough – not the date the decision was made, or when the employee received written confirmation of their furloughed status. Grants will be pro-rata for employees who are furloughed for part of a pay period.
For employees on a salary, employers will claim for 80% of their last pay period prior to March 19th 2020 up to a maximum of £2,500 (gross).
For employees whose pay varies, for example those who work irregular shift patterns or regular overtime – if they employee has been employed for 12 months or more, you can claim the highest of either the same month’s earning from the previous year or their average monthly earnings for the 2019-2020 tax year, up to a maximum of £2,500 (gross).
If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work until the date they are furloughed, up to a maximum of £2,500 (gross).
For employees who have been employed for less than one month, work out a pro rata for their earnings so far, and claim for 80% up to a maximum of £2,500 (gross).
You can claim for any regular payments you are obliged to pay employees, such as wages, past overtime, fees, and compulsory commission payments. However, discretionary bonuses, tips, commission payments, and non-cash payments should be excluded.
Claims Process
To make a claim, you will need the following information:• Your employer PAYE reference number.• The number of employees being furloughed.• National Insurance Numbers for the furloughed employees.• Names of the furloughed employees.• Payroll/employee number for the furloughed employees (optional).• Your Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number.• The claim period (start and end date).• The amount being claimed (per the minimum length of furloughing of 3 consecutive weeks).• The bank account number and sort code receiving the grant payment.• A contact name.• A contact phone number• The total amount you are claiming for.
Note – HMRC retain the right to retrospectively audit all aspects of your claim.
If you have less than 100 furloughed staff, you will be asked to enter the details of each employee you are claiming for directly into the system. If you have 100 or more furloughed staff, you will be asked to upload a file with the information rather than input it directly into the system. You should retain all records and calculations in respect of your claims.
Tax Treatment of the Coronavirus Job Retention Grant
Payments received by a business under the scheme are made to offset deductible revenue costs. They must therefore 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 deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
Michelle concluded: “This is a confusing and difficult time for everyone, business owners, directors, and employees included. You should aim to have regular and clear communication with employees, as much as is practicable, and do your best to answer their questions or refer them to government guidance.”