Under the Coronavirus Job Retention Scheme (CJRS), all UK employers are able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during COVID19.
This scheme has been extended until 30 September 2021.
HMRC has now released a step-by-step guide that explains the information that employers need to provide to HMRC to make a claim through the Coronavirus Job Retention Scheme. It also describes the processes involved.
Government guidance on calculating how much you have to pay your furloughed employees for hours on furlough and how much you can claim back has been updated with new maximum wage tables and claim dates.
HMRC will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 per month.
The aim of the scheme, for employees, is to avoid redundancies and protect jobs. All employers in the UK will be eligible to participate in the scheme. For now, employers will continue to pay the furloughed workers, but at the reduced scheme rate. The Government then reimburses the employer. All employers who make a claim on the scheme will be available on public record. If you would like to request that HMRC does not publish these details, you can learn how to do so here.
Who can claim?
Any UK organisation with employees can apply, including:
recruitment agencies (agency workers paid through PAYE)
You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme.
Who in my business is eligible for JRS?
In order to ensure employees are eligible for JRS, you must:
Designate affected employees as ‘furloughed workers,’ and notify your employees of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:
employees on agency contracts
employees on flexible or zero-hour contracts
To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
This scheme is only for employees on agency contracts who are not working. If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
If you have not already, we would advise that you seek HR support to help facilitate this process.
Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication. Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.
Work out what you can claim
The scheme is being administered by HMRC. Therefore, employers must submit information to HMRC about workers who have been furloughed, together with their earnings.
Full time and part time employees:
For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.
Employees whose pay varies:
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:
the same month’s earning from the previous year
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. If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.
Employer National Insurance and Pension Contributions:
All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.
You can claim a grant from HMRC to cover wages for a furloughed employee, equal to the lower of 80% of an employee’s regular salary or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.
You can choose to provide top-up salary in addition to the grant. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).
National Living Wage/National Minimum Wage:
Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working. Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.
However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
How much support will the business get?
The CJRS furlough grant for May and June will remain at 80% of the employees’ usual pay for hours not working. From 1 July 2021, the level of grant will be reduced, and you will be asked to contribute towards the cost of your furloughed employees’ wages. To be eligible for the grant you must continue to pay your furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.
The scheme will then be limited to 70% for July and then 60% for August and September. This phased reduction will operate in a similar way as in September and October 2020 with the employer being required to contribute the remaining 10% and then 20% of an employee’s regular pay so that they continue to receive 80% pay for furloughed hours.
In addition to the 10% and 20% contributions, employers will continue to be responsible for paying employers national insurance and pension contributions on the full amount being paid to employees.
What you'll need to make a claim
Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.
To claim, you will need:
your ePAYE reference number
the number of employees being furloughed
the claim period (start and end date)
amount claimed (per the minimum length of furloughing of 3 weeks)
your bank account number and sort code
your contact name
your phone number
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.