There was a lot of speculation before Johnson’s update on 20th March as to how the government was planning to further support employers. What they have come up with, which has been received gratefully by many, is the Coronavirus Job Retention Scheme. As suggested by its name, the scheme’s primary objective is to prevent the laying-off of employees whose salaries would have been unpayable.
For employers to access this support, they will first need to identify and designate “furloughed workers” (workers who would have been temporarily laid off) and notify the employees of this change of employment status. This communication with the employee must be kept, but can be an email. This will largely depend on their employment contract and may be subject to dispute or negotiation. Employers will then need to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (opened on Monday 20th April). Once the furloughed workers have been identified, HMRC will reimburse up to 80% of their salaries; this is capped at £2,500 per employee per calendar month.
Calculating the claim
The £2,500 cap relates to the gross salary element only, and any related employer contributions towards NI or pensions (at the auto-enrolment rate) can be claimed in addition. Note that as April is the start of a new tax year, all employers in receipt of Employers Allowance will have the £4,000 benefit reset, which means that only employers with large payrolls will make NI contributions in April. The government has confirmed that you can’t claim back the employers NI until your allowance has been used. Therefore, most claims in April will just be the gross pay (at 80%) and pension contributions. For employees who’s pay varies each month, if the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:
o The same month’s earning from the previous year
o The average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
The scheme is open to any employer in the country and will cover the cost of wages backdated to 1 March 2020. It will continue until the end of October and can include workers who were in employment on or before the 19th March 2020 (if an RTI submission had been made to HMRC before this date). A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.
CJRS v2 (From 1 July)
The second phase of the CJRS is set to begin on 1st July, a month earlier than originally planned. CJRS v2, which it is being called, brings the possibility for employees to work part-time and remain furloughed part-time. The government’s decision to bring the date forwards is an indication of the stance towards getting employees back to work and could bring some much-needed flexibility for employers.
CJRS v2 changes
The amount of grant money available to businesses will not change for July or August, but the government contribution is set to reduce over the remaining two months. In September, 70% of the employee’s wages will be available to claim, followed by 60% in October, with the employer making up remaining amount (10% in September and 20% in October). From the 1st August, the grant will no longer cover National Insurance or pensions contributions made by the employer.
There is no longer a minimum furlough period of 3 weeks. Employees can be part time furloughed, whilst working part time, but the total number of furloughed employees cannot exceed the maximum number of furloughed workers during CJRS v1.
It is important to note that to be eligible for the furlough grant from 1 July, employees must have already completed 3 weeks of furlough. This means, in effect, that employees must be furloughed by 10 June to qualify for CJRS v2. The Coronavirus Job Retention Scheme will not be accepting new applicants after 30 June. More detailed guidance will be released on 12 June.
An interesting nuance concerns the treatment of employees who would usual work on Bank Holidays. Government guidance states that for these employees, Bank Holiday work payments can be included in the grant. For employees who would have taken these days as leave, the holiday is expected to be given in lieu at a later date.
CJRS v3 (November 2020)
Unlike the second iteration of the CJRS, all employers will now be able to furlough any staff who were on payroll on 30 October; there is no requirement to have been furloughed previously. This will enable more businesses across the UK to receive support.
The CJRS has become increasingly more expensive for employers over recent months. The scheme is now being rolled back to its August variation, in which the government covered 80% of furloughed staff’s wages (up to £2,500) and the employer only covered National Insurance and pension contributions. Since July, employers have been able to bring back employees part-time, and furlough them for the rest. This will continue.
Claims can now be made online, with the government aiming to make payments within 6 days. In the meantime, it may be necessary for businesses to make use of the Coronavirus Business Interruption Loans. Please get in touch if you would like help making your claim, or visit the portal here.