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The government are regularly updating guidance in connection the Coronavirus Job Retention scheme, to make the information easy to digest we have collated a summary and Q&A of most commonly asked questions.
Coronavirus Job Retention Scheme at a glance:
- A cash grant that is designed to allow employers to retain staff who would otherwise be laid off
- Employers can claim a grant of up to 80% of furloughed employees’ salary costs subject to a monthly cap of £2,500, plus the associated employers’ NI and auto-enrol costs (see changes to the scheme from July)
- The scheme was initially open for 4 months from 1 March 2020, and has since been extended to 31 October 2020
- The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 19 March 2020, are enrolled for PAYE online, and have a UK bank account (see changes to eligibility from July)
- The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer
- The HMRC portal by which claims are made went live on 20th April 2020, guidance from HMRC about making a claim can be found here
- HMRC have issued a simple calculator (doesn’t work at present for all scenarios) which can be used to determine the claimable amount and can be found here
- On 29th May 2020 the government announced various changes to the scheme. Employers currently using the scheme will have more flexibility to bring their furloughed employees back to work part time whilst still receiving support from the scheme, albeit at a reduced rate (see changes to the scheme from July)
Government announcement 29 May 2020:
What has changed following the government announcement?
From 1 July, employers can bring back to work employees that have previously been furloughed for any amount of time and any shift pattern, while still being able to claim CJRS grant for their normal hours not worked.
When claiming the CJRS grant for furloughed hours employers will need to report and claim for a minimum period of a week.
The scheme will close to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full 3 week period prior to 30 June.
This means that the final date by which an employer can furlough an employee for the first time will be 10 June, in order for the current 3 week furlough period to be completed by 30 June. Employers will have until 31 July to make any claims in respect of the period to 30 June.
Further guidance on flexible furloughing and how employers should calculate claims can be found here.
Furlough:
What does the government mean by furloughing?
Furloughing is not a term recognised in current UK law however, we understand the term used by the government to mean the below:
- ‘Furloughing’ is an alternative to laying people off
- Employees are kept on the payroll instead of dismissing them through redundancy or without pay
What do I need to do to furlough an employee?
- You will need to designate affected employees as furloughed employees
- In order to furlough an employee, you must either have had the right to furlough them in their original contract (these are usually called ‘lay off’ clauses and are generally only found in employment contracts in industries such as manufacturing where they have peaks and troughs) or have agreed alternative terms with reduced 80% wage if applicable
- 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 for at least 5 years.
It is important to note that if you intend varying the contracts of 20 or more employees at one establishment then the collective consultation rules apply and where possible you should consult with the unions or, if none, elected representatives and file an HR1 form. As you are not making redundancies at this stage, you will not have to wait 30 days before furloughing employees. If there is no recognised union and no elected representatives then given that time is of the essence, employers will probably take a view that these are extraordinary circumstances and that they will take their chances in consulting directly with the employees and argue ‘special circumstances’ if the point is taken. As no-one is being made redundant at this stage then an employee cannot claim a protective award.
We recommend that where appropriate you obtain legal or HR advice for contract variations.
What if my employee doesn’t agree to furlough?
We think it’s likely most employees will accept furlough even on a reduced salary of 80% on the basis that the alternatives are likely either to be redundancy (that the company may or may not be able to afford) or unpaid leave.
If the employee does not agree then you will have to proceed with a redundancy process, obviously considering all alternatives to redundancy before making a final decision. Remember that if there are 20 or more employees in one establishment then it is important to go through collective consultation which means consulting with a union or elected representatives if there is no union for a 30 day period (20-99 employees) or 45 day period (100 or more) and filing an HR1 form (failure to do this is a criminal offence).
What should be in a furloughing agreement?
This should include:
- The employee’s agreement to be furloughed.
- Confirmation of when that starts or started if this was an employee made redundant and where they have done no work for the employer since that date. If they have been made redundant then agreement that the redundancy has been withdrawn and repayment of any redundancy payments or pay in lieu of notice which has already been made.
- Confirmation of how the employer can bring the furlough leave to an end.
- Confirmation that the employee will not be required or allowed to carry out any work for the employer during the furlough period other than volunteering or training. If they are doing on-line training they must receive the minimum wage.
- What the employee will be paid and, if relevant, agreement by the employee to accept less than their contractual pay.
- If applicable, agreement that they will be treated as using up statutory and contractual holiday entitlement during the furlough period.
- If there are any applicable statutory rights e.g. maternity, shared parental or adoption leave and pay, confirmation that these will continue and if they were receiving enhanced contractual payments, agreement to reduce these to 80% of their contractual level, capped at £2,500 per month.
- Asking the employee to ensure that the employer has up-to-date contact details for the employee and asking the employee to remain contactable.
- Reserving the right for the employer to make unilateral changes to the scheme and telling them how any such changes will be advised to them.
- Confirmation that all other express and implied terms of the contract of employment remain in force so remember to check if there are other terms that need to be varied.
How do you decide who to furlough?
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.
We are not experts in employment law and you should take legal advice where appropriate.
Employees eligible for furlough include:
- Full-time employees
- Part-time employees
- Employees on agency contracts
- Employees on flexible or zero-hour contracts
If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages from the date on which you furloughed them through the scheme. This applies to employees that were made redundant or stopped working for you after 28 February, even if you do not re-employ them until after 19 March. This applies as long as the employee was on your payroll as at 28 February and had been notified to HMRC on an RTI submission on or before 28 February 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020
Can Directors of limited companies be furloughed?
The government guidance is not explicit when it comes to directors being furloughed. However, our current view is that directors can be furloughed so long as they do not complete any services or revenue generation for the company, this is because all the same conditions and rules that apply to employees, apply to directors.
This raises the question as to whether directors of single director companies can be furloughed, and still complete statutory obligations as director. Guidance from the CBI suggests single company directors can be furloughed without clashing with CA2006 rules, allowing them to continue to complete their statutory duties.
HMRC’s current guidelines state:
Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
This also applies to salaried individuals who are directors of their own personal service company (PSC).
Care must, therefore, be taken if you are the last director, not to undertake any non-statutory work, which would disqualify you from meeting the furlough criteria.
This is our understanding of the guidance; however, the rules may be subject to change. We suggest you make the regular director salary payments as usual. A claim can then be made if it is possible, provided the director has been furloughed and has not performed any work for the company.
As a director of a limited company, can I claim universal credits?
Yes, directors may be eligible for universal credits. Each claim is specific to the individual, therefore please visit the universal credits site.
Can the employee do any work whilst on furlough?
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.
Update: Latest government announcements state that from July, employees will be able to return to work part time and the employer will still receive support. Refer to changes being made to the scheme.
Can I put someone on furlough if they are on unpaid leave?
If an employee started unpaid leave after 28 February 2020, you can put them on furlough instead. If you put them on furlough then you should pay them at least 80% of their regular wages, up to the monthly cap of £2500.
If an employee went on unpaid leave on or before 28 February, you cannot furlough them until the date on which it was agreed they would return from unpaid leave.
Can I put someone on furlough if they are on statutory sick pay?
If your employee is on sick leave or self-isolating as a result of Coronavirus, they’ll be able to get Statutory Sick Pay, subject to other eligibility conditions applying. The Coronavirus Job Retention Scheme is not intended for short-term absences from work due to sickness, and there is a 3 week minimum furlough period.
Short term illness/ self-isolation should not be a consideration in deciding whether to furlough an employee. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee.
Can I put an employee on furlough if they have another job?
If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
Can a furloughed employee do volunteer work or training?
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.
However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the National Living Wage (NLW)/ National Minimum Wage (NMW) for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
Can we bring employees back temporarily off furloughing and then furlough them again if we are not busy?
Any employees you place on furlough must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.
Update: Latest government announcements state that from July, employees will be able to return to work part time and the employer will still receive support. Refer to changes being made to the scheme.
Can an apprentice be furloughed?
Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed.
However, you must pay your Apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means you must cover any shortfall between the amount you can claim for their wages through this scheme and their appropriate minimum wage.
What about employees who were made redundant or stopped working after 28 February 2020?
If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages from the date on which you furloughed them through the scheme. This applies to employees that were made redundant or stopped working for you after 28 February, even if you do not re-employ them until after 19 March. This applies as long as the employee was on your payroll as at 28 February and had been notified to HMRC on an RTI submission on or before 28 February 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020
Can I put someone who is shielding on furlough?
Employees who are unable to work because they are shielding in line with public health guidance (or need to stay home with someone who is shielding) can be furloughed.
Can you furlough employees with caring responsibilities?
Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children can be furloughed.
What happens if my employee is on a fixed term contract?
Employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended before their natural conclusion during the furlough period without breaking the terms of the scheme. There is no minimum period which must be left to run on a fixed term contract to enable it to be renewed or extended, but it must not have ended. The furlough period must be for a minimum period of three consecutive weeks. Where a fixed term employee’s contract ends because it is not extended or renewed before its natural conclusion you will no longer be able claim grant for them once the contract ends. Fixed term contracts which ended, without extension or renewal, on or before 19 March 2020 will not qualify for the grant once they have ended.
Making a claim:
Which businesses are eligible for the Coronavirus Job Retention scheme?
Any UK organisation with employees can apply, including:
- Businesses
- Charities
- Recruitment agencies (agency workers paid through PAYE)
- Public authorities
You must have created and started a PAYE payroll scheme on or before 19 March 2020, you must have enrolled for PAYE online (this can take up to 10 days) and you must 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.
Refer to updated guidance where changes to eligibility going forward are shown.
What does the scheme provide?
Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.
This gives a maximum cap of £2,500 +£245 (employers’ NIC) + £59 (auto- enrolled pension contribution) = £2,804 of total possible grant that can be applied for per employee per month.
For an illustration please click here.
Refer to updated guidance which shows changes to the amounts employers will be eligible to claim.
Do I have to pay my employee their full salary?
At a minimum, employers must pay their employee the lower of 80% of their regular gross wage or £2,500 gross per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
My employee is on reduced hours, will they still be eligible for furlough?
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.
Refer to updated guidance shown in connection to flexible furlough.
As the scheme is backdated to 1 March 2020 can we claim from then even though the employee was working in March?
No, it is only backdated to allow those made redundant since 1 March to be reinstated and furloughed.
Grants will be prorated if your employee is only furloughed for part of a pay period.
Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to confirming their furloughed status.
The HMRC portal
When is the portal available?
The portal became available on the 20th April 2020, guidance issued from HMRC in relation to making a claim can be found here.
What information will I need to claim?
- 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 Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- your bank account number and sort code
- your contact name
- your phone number
Update: The latest government announcement details additional information in connection to hours worked will need to be included on future claims, click here for further guidance.
You will need to calculate the amount you are claiming, HMRC have issued a tool that will assist you in calculating the amount claimable which can be found here.
HMRC will retain the right to retrospectively audit all aspects of your claim.
If you have fewer than 100 furloughed staff you will be asked to enter details of each employee you are claiming for directly into the system – this will include their name, National Insurance number, claim period and claim amount, and payroll/employee number (optional).
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. We will accept the following file types: .xls .xlsx .csv .ods
The file should include the following information for each furloughed employee: name, National Insurance number, claim period and claim amount, payroll/employee number (optional).
How often can I submit a claim?
You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.
Update: Claims can no longer overlap a month.
Can my agent make the claim for me?
If you use an agent who is authorised to act for you for PAYE purposes, they will be able to make a claim on your behalf. If you use a file only agent (who files your RTI return but doesn’t act for you on any other matters) they won’t be authorised to make a claim for you and you will need to make the claim yourself. Your file only agent can assist you in obtaining the information you need to claim (which is listed above).
What do you do after you have claimed?
HMRC will check your claim, and if you’re eligible, pay it to you by BACS to a UK bank account, HMRC have stated it will take 6 working days from submission to receive payment.
You must pay the employee all the grant you receive for their gross pay in the form of money.
Furloughed staff must receive no less than 80% of their reference pay (up to the monthly cap of £2500).
Employers cannot enter into any transaction with the worker which reduces the wages below this amount. This includes any administration charge, fees or other costs in connection with the employment.
Calculating the reclaimable amount:
How do I calculate the wage cost for full and part time employees?
For full time and part time salaried employees, claim for the 80% of the employee’s salary, as in their last pay period prior to 19 March 2020.
If, based on previous guidance, you have calculated your claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) you can choose to still use this calculation for your first claim.
Refer to HMRC’s calculator here.
Changes to the scheme were announced on 29 May 2020, refer to updated guidance here.
What counts as usual monthly wage costs?
You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.
The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary. Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.
How do I calculate usual monthly wage costs where it 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.
How does it work for employer’s national insurance and auto enrol costs?
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 2020 and will be £520 per month from 6th April 2020 onwards).
Refer to updated guidance above in connection to claiming for NI and pension costs.
Do minimum wage rules apply?
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.
Running the payroll:
Do I still need to submit monthly payroll information to HMRC?
Yes, businesses are still required to make monthly submissions to HMRC in connection to payroll.
While on furlough will the employees wage be subject to income tax and other deductions?
Yes, wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.
Employee rights:
What happens when the scheme ends?
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
What rights do furloughed employees have?
Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
Tax implications of businesses
How do you treat the grants received for business tax purposes?
Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s 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.
How does the job retention scheme impact the apprenticeship levy and student loan repayments?
Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the Job Retention Scheme do not cover these.
