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Beyond the balance sheet

The Coronavirus Job Retention Scheme - what you need to know

Tom Walker 18/3/2021 8 minute read

Tom Walker ACA on the Chancellor's scheme to assist employers in retaining staff during the COVID-19 pandemic.

The Chancellor has helped businesses and their employees by creating a scheme with the aim of preventing mass redundancies!

Part of a huge stimulus package for the UK economy aimed at the private sector, The Coronavirus Job Retention Scheme was conceptualised very quickly and is one of several initiatives to support employers through the pandemic.

In this blog post we explain the scheme and how it works. Further support is also available on the coronavirus business support website

Looking to make use of the Coronavirus Job Retention Scheme? Get in touch >

This then means these employees can go back to their workplace when the health and economic environments improve. Below we cover all the aspects you need to know about CJRS:

1. What is a work furlough?

2. How CJRS works

3. The rules

4. The HMRC online portal

5. What you'll need to access the grant

6. For company directors

7. Flexible furlough to bring employees back

8. A warning on fraud

2. How CJRS works

CJRS is administered as a grant from the government and to make use of the scheme you need to:

  • Identify the employees who would have been made redundant, they are then termed as "furloughed workers"
  • Communicate with these employees about these changes to their working day
  • Send the information about furloughed employees through to the HMRC online portal

The furlough scheme was due to close at the end of April 2021 but the Chancellor extended it to September in the Budget 2021. Instead it will now be phased out gradually. This means from July 2021 employers will have to make a 10% contribution to furlough pay and that will increase to 20% for the following months of August and September.


3. The rules

1. CJRS will be available to all employees that are on your payroll as of 19 March 2020.

2. You can only claim the grant once you have agreed with the members of your staff that they are to be furloughed. That means they stop working for you.

3. Furloughed employees can't do any work for you as their employer during the furlough period, it is for staff who are without work. 

4. The grant is paid to you through the online portal system.

5. You pay employees through your payroll and HMRC reimburse you after that.

6. The grant per employee is 80% of usual monthly wages up to £2,500 (whichever is lower) plus the associated Employer National Insurance Contributions and minimum auto enrolment pension contributions. 

7. As an employer, under the extended scheme, you don't have to have claimed previously for an employee to be eligible for furlough.

8. For periods ending on or before 30 April 2021, you can claim for their employees you employed on 30 October 2020. You just have to have made a PAYE RTI submission to HMRC between 20 March 2020 and 30 October 2020.

9. After 1 May 2021 you can claim for employees who were employed on 2 March 2021, as long as you've made a PAYE Real Time Information submission between 20 March 2020 and 2 March 2021.

10. If you want to top up pay levels, you can, but you will not be able to claim for more than 80 per cent of salary up to £2,500. 

11. If you apply top up salary then Employer National Insurance Contributions and auto enrolment on the additional top-up salary will not be funded through the scheme.

12. Whether your employment contract with furloughed employees needs to be re-negotiated is a matter for employment law.

13. An employee may be furloughed in their employment with you, however, this doesn't impact their employment with another business where relevant.

14. Furloughed employees can be of any contract type which includes full-time employees, part-time employees, flexible or zero-hours contracts, and those on agency contracts as long as they are included in the payroll submissions.

15. Employees on sick leave and receiving Statutory Sick Pay (SSP), can't be furloughed until after SSP ends.

16. Where employees qualify for Statutory Maternity Pay (SMP), the normal rules apply.

17. For the calculation, full-time and part-time employees salaries, before 19 March 2020, should be used as the calculation for the 80% grant. Bonuses and discretionary commissions can't be included.

18. Where employees pay varies and they've been employed by your business for 12 months you can claim for the higher of the same month’s earning from the previous year, or average monthly earnings from the 2019-20 tax year.

19. Where employees pay varies and they've been employed by your business for less than a year, the calculation is based on their average earnings from when they first started working.

20. Where your employee is furloughed and so temporarily sent home because there’s no work, they continue to build up (‘accrue’) holiday in the usual manner.

4. The HMRC online portal

The HMRC online portal opened from Monday 20 April 2020. You can access it through the HMRC website using your online PAYE account. It is therefore essential you know your passwords.

Make sure you do your calculations so they are ready from the previous working month. The portal doesn't do any calculations for you. If you use payroll software then you should be able to extract this.

5. What you'll need to access the grant

You will be able to make a claim every 3 weeks. Claims should be made to HMRC when you run, or just in advance of when you run your payroll. You will need to calculate the amount you are claiming on an individual basis. To make a claim you'll need:

  • The number of employees being furloughed
  • The names of these employees
  • National Insurance numbers for the employees being furloughed
  • To state the claim period (start and end date)
  • Your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
  • How much, the amount, being claimed
  • The PAYE reference number
  • Bank account number and sort code
  • Contact details, name and phone number

Importantly, 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, 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. The file should include the following information for each furloughed employee:

  • Name
  • National Insurance number
  • Payroll/employee number (optional)

6. For company directors

Salaried company directors can also be furloughed if a board deems it necessary. Needless to say directors may need to implement particular duties so that a company fulfils its statutory obligations. Where this is the case, the furloughed director may do so but no more than what is reasonably required for such tasks.

Their work, while furloughed, can't include things that generate revenue or services to customers or clients. The same regulation applies to contractors who are directors of their own personal service company.

7. Flexible furlough to bring employees back 

Flexible furlough was brought in by Rishi Sunak with a view to support and prepare businesses for a transition period in which people return to work. Employers can exercise a ‘flexible furlough’ policy which means your employees are able to return to work on a part-time basis whilst being furloughed. This has been seen as a key component to getting businesses and the economy up and running again.

Employers can decide on hours of work and shift patterns, but the furloughed employee isn't allowed to resume full-time status.

8. A warning on fraud

HMRC are encouraging individuals to come forward where they suspect there have been fraudulent furlough claim. This could for example be in instances where employees continued to work for their employer whilst being on furlough. 

The Chancellor also announced in the Budget 2021 that a special task force of 1,000 investigators was being formed to scrutinise fraudulent furlough claims.

For further advice and support in relation to these matters, be sure to get in touch.

How will the tax changes impact on your finances? Find out in our FREE Budget  guide

The content of this post was created on 20/04/2020 and updated on 18/03/2021.

Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.

 

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