HMRC has published details of the Extended Coronavirus Job Retention Scheme:
The key facts are:
The CJRS is being extended
until 31 March 2021.
The government will review
the scheme in January 2021.
30 November 2020 is the
last day employers can submit or change claims for periods ending on or before
31 October 2020.
The CJRS will remain open
until 31 March 2021. From 1 November 2020 employers can claim 80% of an
employee’s usual salary for hours not worked, up to a maximum of £2,500 per
month.
Employers can claim for
employees who were employed on 30 October 2020, as long as they have made a
PAYE RTI submission to HMRC between the 20 March 2020 and 30 October 2020,
notifying a payment of earnings for that employee. This may differ where they
have re-employed an employee after 23 September 2020.
All employers with a UK
bank account and UK PAYE schemes can claim the grant.
They do not need to have
previously claimed for an employee before the 30 October 2020 to claim for
periods from 1 November 2020.
Employers can furlough
employees for any amount of time and any work pattern, while still being able
to claim the grant for the hours not worked.
Employers might need to
contribute towards the cost of their furloughed employees’ wages for these
periods.
For periods from 1
November 2020, they will need to pay for the cost of employer NICs and pension
costs.
See: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Agreeing to furlough employees
Employers should discuss
with their staff and make any changes to the employment contract by agreement.
When employers are making decisions in relation to this process, including
deciding who to offer furlough to, equality and discrimination laws will apply
in the usual way.
To be eligible for the
grant, employers must have confirmed with their employee (or reached collective
agreement with a trade union) in writing that they have been furloughed. They
must:
·
ensure that the agreement is consistent with employment,
equality, and discrimination laws
·
keep a written record of the agreement for five years
·
keep records of how many hours employees work and the number of
hours they are furloughed (i.e. not working)
Employers can:
•
fully furlough employees – meaning they cannot undertake any
work for them while furloughed full time
•
flexibly furlough employees - meaning they can work for any
amount of time, and any work pattern, but they cannot do any work for them during
hours that employers record them as being on furlough
If employers flexibly furlough
employees, they will need to agree this with the employee (or reach collective
agreement with a trade union) and keep a new written agreement that confirms
the new furlough arrangement.
Key points:
•
make sure that the agreement is consistent with employment,
equality, and discrimination laws
•
keep a written record of the agreement for five years
•
keep records of how many hours employees work and the number of
hours they are furloughed (i.e. not working)
Employers do not need to
place all employees on furlough, and they can continue to fully furlough
employees if they wish. Employees cannot undertake any work for the business
during the time that the employer records them as being on furlough.
Where consistent with
employment law, any flexible furlough or furlough agreement made
retrospectively that has effect from 1 November 2020, will be valid for the
purposes of a Coronavirus Job Retention Scheme claim, as long as it is made
according to the conditions above. Only retrospective agreements put in
place up to and including the 13 November 2020 may be relied on for the
purposes of a claim.
Flexible furlough
agreements
There is no minimum
furlough period and agreed flexible furlough agreements can last any amount of
time. Employees can enter into a flexible furlough agreement more than once.
Although flexible furlough
agreements can last any amount of time, unless otherwise specified, the period
that they claim for must be for a minimum claim period of seven calendar days.
Employees are on furlough
As with previous versions
of the CJRS, during hours which employers record their employees as being on
furlough, they cannot ask them to do any work for the business that:
·
makes money for business / organisation or any organisation
linked or associated with the organisation
·
provides services for the business /organisation or any
organisation linked or associated with the organisation
The employee can:
·
take part in training
·
volunteer for another employer or organisation
·
work for another employer (if contractually allowed)
Employee taxes and pension
contributions
Employees will still pay
the taxes they normally pay out of their wages. Employers must deduct and pay
to HMRC income tax and employee National Insurance contributions on the full
amount that they pay the employee, including any scheme grant.
Employers must also pay to
HMRC the employer National Insurance contributions on the full amount that they
pay the employee, including any scheme grant.
Employers must report
these payments via a Full Payment Submission (FPS) to HMRC on or before the pay
date.
Employees will also still
pay pension contributions (both employer and automatic contributions from the
employee) unless the employee has opted out or stopped saving into their
pension.
Keeping employee rights
Employees still have the
same rights at work, including:
·
Statutory Sick Pay (SSP)
·
annual leave
·
maternity and other parental rights
·
rights against unfair dismissal
·
redundancy payments
Employers can continue to
claim for a furloughed employee who is serving a statutory notice period,
however CJRS grants cannot be used to substitute redundancy payments.
Holiday pay
Furloughed employees
continue to accrue leave as per their employment contract.
The employer and employee
can agree to vary holiday entitlement as part of the furlough agreement,
however almost all workers are entitled to 5.6 weeks of statutory paid annual
leave each year which they cannot go below.
Employees can take holiday
whilst on furlough. If an employee is flexibly furloughed then any hours taken
as holiday during the claim period should be counted as furloughed hours rather
than working hours.
Employees should not be placed
on furlough for a period simply because they are on holiday for that period.
Working Time Regulations (WTR) require holiday pay to be paid at the employee’s
normal rate of pay or, where the rate of pay varies, calculated on the basis of
the average pay received by the employee in the last 52 working weeks (twelve
weeks in Northern Ireland). Therefore, if a furloughed employee takes holiday,
the employer should pay their usual holiday pay in accordance with the Working
Time Regulations.
Employers will be obliged
to pay employees who are on holiday additional amounts over the grant, though
will have the flexibility to restrict when leave can be taken if there is a
business need and the correct notice is given. This applies for both the
furlough period and the recovery period.
If an employee usually
works bank holidays then the employer can agree that this is included in the
grant payment. If the employee usually takes the bank holiday as leave then the
employer would either have to top up their usual holiday pay or give the
employee a day of holiday in lieu.
Employees working for a
different employer
If contractually allowed,
employees are permitted to work for another employer whilst the business has
placed them on furlough.
For any employer that takes
on a new employee, the new employer should ensure they complete the starter
checklist form correctly. If the employee is furloughed from another
employment, they should complete ‘statement C’ on the list.
If the employee does
volunteer work
A furloughed employee can
take part in volunteer work during hours which the employer records them as
being on furlough, as long as it is for another employer or organisation.
If the employee does
training
Furloughed employees can
engage in training during hours which the employer records the employee as
being on furlough, as long as in undertaking the training, the employee does
not provide services to, or generate revenue for, or on behalf of their
business /organisation or a linked or associated organisation.
Where training is
undertaken by furloughed employees during hours which the employer records
employees as being on furlough, at the request of their employer, they are
entitled to be paid at least their appropriate national minimum wage for this
time. In most cases, the furlough payment of 80% of an employee’s regular wage,
up to the value of £2,500, will provide sufficient monies to cover these
training hours. However, where the time spent training attracts a minimum wage
entitlement in excess of the furlough payment, employers will need to pay the
additional wages (see National Minimum Wage Section below for more details).
Furloughed employees
working as union or non-union representatives or as pension trustees
During hours which are
recorded as the employee being on furlough, employees who are union or
non-union representatives may undertake duties and activities for the purpose
of individual or collective representation of employees or other workers.
However, in doing this, they must not provide services to or generate revenue
for, or on behalf of the business / organisation or a linked or associated
organisation.
During hours where the
employee is recorded as being on furlough, employees who are pension scheme
trustees or trustee directors of a corporate trustee may undertake trustee
duties in relation to the pension scheme. However, a professional, independent
pension scheme trustee who has been furloughed by the independent trustee
company cannot undertake trustee work that would provide services to or
generate revenue for, or on behalf of, the independent trustee company or any
organisation linked or associated with that independent trustee company during
hours which the employer records them as being on furlough.
Before making a claim
HMRC guidance on the steps
to take before calculating a CJRS claim can be seen here: https://www.gov.uk/guidance/steps-to-take-before-calculating-your-claim-using-the-coronavirus-job-retention-scheme
Before calculating how
much the business can claim from the CJRS, agents or employers will need to
work out employees’ wages. To do this you must work out:
·
the length of the claim period
·
what can be included when calculating wages
·
the employee’s usual hours and furloughed hours
The length of the claim
period
The claim period is made
up of the days the employer is claiming a grant for. The start date of the first
claim period is the date the first employee was furloughed.
For claim periods starting
on or after 1 July 2020, employers can claim for a period of less than seven
days if they are claiming for the first few days or the last few days in a
month. Employers can only claim for a period of fewer than 7 days if the period
they are claiming for includes either the first or last day of the calendar
month, and the employer has already claimed for the period ending immediately
before it.
Employers should match
claim periods to the dates they process their payroll, if possible.
Only one claim can be made
for any period so this must include all furloughed or flexibly furloughed
employees in the claim even if they are paid at different times.
If employers make more
than one claim, their subsequent claims cannot overlap with any other claim made.
Where employees have been furloughed or flexibly furloughed continuously (or
both), the claim periods must follow on from each other with no gaps in between
the dates.
Employers can claim
before, during or after they process the payroll as long as the claim is
submitted by the relevant claim deadline. However, when claiming for employees
who are flexibly furloughed, employers should not claim until they are sure of
the exact number of hours they will have worked during the claim period. This
means that employers should only claim when they have certainty about the
number of hours employees are working during the claim period.
If the pay period being claimed for includes days in more than
one month
Claim periods starting on
or after 1 July 2020 must start and end within the same calendar month. For
these months, if the pay period includes days in more than one month, employers
will need to submit separate claims covering the days that fall into each
month. Each of the claims should be calculated separately.
Claim periods cannot
overlap, so employers will need to make sure they include all of the employees they
want to claim for in each claim they make.
What to include when
calculating wages
If the employer has
already claimed for an employee who was on furlough during October, and they
are paid a fixed salary, they will follow the same usual wage calculation for
claim periods after 31 October 2020.
The amount employers
should use when calculating 80% of the employees’ wages for hours not worked,
is made up of the regular payments they are obliged to make, including:
·
regular wages paid to employees
·
non-discretionary payments for hours worked, including overtime
·
non-discretionary fees
·
non-discretionary commission payments
·
piece rate payments
The following should be
excluded from the calculations:
·
payments made at the discretion of the employer or a client -
where the employer or client was under no contractual obligation to pay,
including:
·
any tips, including those distributed through troncs
·
discretionary bonuses
·
discretionary commission payments
·
non-cash payments
·
non-monetary benefits like benefits in kind (such as a company
car) and benefits received under salary sacrifice schemes (including pension
contributions) that reduce an employee’s taxable pay
The entirety of the grant
received to cover an employee’s subsidised furlough pay must be paid to them in
the form of money. No part of the grant should be netted off to pay for the
provision of benefits or a salary sacrifice scheme.
Where the employer
provides benefits to furloughed employees, including through a salary sacrifice
scheme, these benefits should be in addition to the wages that must be paid
under the terms of the Job Retention Scheme.
Normally, an employee
cannot switch freely out of most salary sacrifice schemes unless there is a
life event. HMRC agrees that coronavirus counts as a life event that could
warrant changes to salary sacrifice arrangements if the relevant employment
contract is updated accordingly.
Non-discretionary overtime payments
If the employee has been
paid variable payments due to working overtime, these can be included when
calculating 80% of the wages as long as the overtime payments were
non-discretionary.
Payments for overtime
worked are non-discretionary when the employer is contractually obliged to pay
the employee at a set and defined rate for the overtime that they have worked.
Apprenticeship Levy and Student Loans
Employers should continue
to pay the Apprenticeship Levy as usual. Grants from the Job Retention Scheme
do not cover the Apprenticeship Levy.
Student Loan deductions
should continue to be made from the wages paid to employees.
National Minimum Wage
Individuals are entitled
to the National Living Wage, National Minimum Wage or Apprentices Minimum Wage
for the hours they are working or treated as working under minimum wage rules.
At least minimum wage
rates must be paid for all hours worked. Furloughed workers who are not working
can be paid the lower of 80% of their wages or £2,500 even if, based on their
usual working hours, this would be below their appropriate minimum wage.
However, time spent
training whilst furloughed is treated as working time for the purposes of the
minimum wage calculations and must be paid at the appropriate minimum wage
rate. As such, employers will need to ensure that the wages and furlough
payment provide sufficient monies to cover all working time including these
training hours. Where the pay is less than the appropriate minimum wage
entitlement, the employer will need to pay additional amounts to ensure at
least the appropriate minimum wage is paid for both working time and 100% of
the training time whilst furloughed.
Where a furloughed worker
is paid close to minimum wage levels and asked to complete training courses for
a substantial majority of their usual working time, employers are recommended
to seek independent advice or contact Acas.
If claiming for a member
of a Limited Liability Partnership (LLP)
If a member of an LLP is
treated as an employee (because of salaried members rules), employers must only
include payments that are either:
·
fixed
·
variable, but are varied without reference to the overall amount
of the profits or losses of the LLP
·
not affected by the overall amount of the LLP’s profits or
losses
Employees returning from
family-related statutory leave
Family-related statutory
leave includes maternity leave, paternity leave, shared parental leave,
adoption leave, parental bereavement leave, and unpaid parental leave.
For employees on fixed
pay, claims for full or part time employees furloughed on return from
family-related statutory leave should be calculated against their salary,
before tax, not the pay they received whilst on family-related statutory leave.
The same principles apply where the employee is returning from a period of
unpaid statutory family-related leave.
Employees returning to work after being on sick pay
For employees on fixed
pay, claims for full or part time employees furloughed on return to work after
time off sick should be calculated against their salary, before tax, not the
pay they received whilst off sick.
Claims for those on variable
pay, returning to work after time off sick, should be calculated using the
normal rules for employees whose pay varies.
Unpaid sabbatical or unpaid leave
If an employee has been on
unpaid sabbatical or unpaid leave, employers will need to use the amount they
would have been paid if they were on paid leave when calculating 80% of their
wages.
Employee’s usual hours and
furloughed hours
If an employee is fully
furloughed, employers do not need to work out their usual and furloughed hours
and you should work out the maximum wage amount. An employee is fully
furloughed if they do not do any work during the claim period.
If the employee is
flexibly furloughed, employers will need to work out the employee’s usual hours
and record the actual hours they work as well as their furloughed hours for
each claim period.
Employers can calculate the usual hours for
the entire claim period or for each pay period, or part of a pay period, that
falls within that claim period. HMRC guidance assumes that employers will
calculate on a pay period basis but either method is acceptable.
If employers calculate the
usual hours for the entire claim period and the result is not a whole number,
round it up to the next whole number. If employers calculate the usual hours on
a pay period basis you should round the result up or down to the nearest whole
number.
There are two different
calculations to work out employee’s usual hours, depending on whether they work
fixed or variable hours.
Work out usual hours for
employees who work variable hours, if either:
·
The employee is not contracted to a fixed number of hours
·
The employee’s pay depends on the number of hours they work
If neither of these apply,
work out the employee’s usual hours for an employee who is contracted for a fixed
number of hours.
The employee’s working
pattern does not have to match their pay period (for example, an employee could
be contracted to 40 fixed hours a week but be paid a variable monthly amount
because of shift allowances). HMRC will not decline or seek repayment of any
grant based solely on the particular choice between fixed or variable approach
to calculating usual hours, as long as a reasonable choice is made.
Work out the employee’s
usual hours for an employee who is contracted for a fixed number of hours and
whose pay does not vary according to the number of hours they work
Work out an employee’s
usual hours (for employees with fixed hours), by looking at their contracted
hours at the end of their reference period.
The reference period is the
last pay period ending on or before 19 March 2020 for employees who either:
·
were on the payroll on 19 March 2020 (meaning the employer made
a payment of earnings to them in the tax year 2019 to 2020 which was reported
to HMRC on a Real Time Information (RTI) Full Payment Submission (FPS) on or
before 19 March 2020
·
the employer made a valid CJRS claim for them in a claim period
ending any time on or before 31 October 2020
For all other employees,
the employee’s reference period will be their last pay period ending on or
before 30 October 2020. These employees will only be eligible for periods
starting on or after 1 November 2020.
HMRC guidance outlines how
to work out usual hours for an employee who works variable hours, if they are
paid per task or by piece work, and calculating the number of working and
furloughed hours for each employee.
The guidance also covers
calculating the number of working and furloughed hours for an employee that is
furloughed or flexibly furloughed for part of a claim period and an employee
takes leave while they are flexibly furloughed. You should refer directly to
the guidance in these circumstances. See: https://www.gov.uk/guidance/steps-to-take-before-calculating-your-claim-using-the-coronavirus-job-retention-scheme
JOB RETENTION SCHEME CALCULATOR
The Job Retention Scheme will remain open until 31 March 2021. For claim periods running until 31 January 2021, employees will receive 80% of their usual salary for hours not worked.
Use the HMRC calculator to
work out the figures needed to complete the claim through the CJRS scheme.
Employers can use this
calculator to claim for:
•
employees who are fully furloughed and therefore not working any
hours
•
employees brought back to work for some of their normal hours
from 1 July
•
most employees who are paid weekly, two weekly, four weekly or
monthly in fixed pay periods
•
employees from 1 August who have returned from statutory leave
such as maternity leave
The calculator cannot be
used for employees if they:
•
have an annual pay period
•
have been transferred under The Transfer of Undertakings
Protection of Employment (TUPE)
•
were not employed continuously before their furlough started
•
returned from statutory leave such as maternity leave in the
last 3 months (if the claim period is in July or earlier)
•
receive employer pension contributions outside of an
auto-enrolment pension scheme
•
ended furlough then began again during the same claim period
In these cases, work out
what employers can claim manually using the calculation guidance.
See: https://www.tax.service.gov.uk/job-retention-scheme-calculator/claim-period-start
FIND EXAMPLES TO HELP YOU
CALCULATE EMPLOYEES' WAGES
HMRC have issued examples
to help calculate employee's wages, National Insurance contributions and
pension contributions if claiming through the CJRS.
INDIVIDUALS EMPLOYERS CAN
CLAIM FOR WHO ARE NOT EMPLOYEES
Office holders
Office holders can be
furloughed and receive support through this scheme. The furlough, and any
ongoing payment during furlough, will need to be agreed between the office
holder and the party who operates PAYE on the income they receive for holding
their office. Where the office holder is a company director or member of a
Limited Liability Partnership (LLP), the furlough arrangements should be
adopted formally as a decision of the company or LLP.
Company directors
As office holders,
salaried company directors are eligible to be furloughed and receive support
through this scheme. Company directors owe duties to their company which are
set out in the Companies Act 2006. Where a company (acting through its board of
directors) considers that it is in compliance with the statutory duties of one
or more of its individual salaried directors, the board can decide that such
directors should be furloughed. Where one or more individual directors’
furlough is so decided by the board, this should be formally adopted as a
decision of the company, noted in the company records and communicated in writing
to the director(s) concerned.
Where furloughed directors
need to carry out particular duties to fulfil the statutory obligations they
owe to their company during hours which they are recorded as being on furlough,
they may do so provided they do no more than would reasonably be judged
necessary for that purpose, i.e. 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).
Company directors with an
annual pay period
CJRS can be claimed in
respect of employees who are paid annually, as long as they meet the relevant
conditions.
An employer can make their
claim in anticipation of an imminent payroll run, at the point they run their
payroll or after they have run their payroll.
Employers can only claim
in advance if the payroll run is imminent, and claims must be submitted within
14 days of the end of the relevant month, so businesses might need to pay any
annually paid employees earlier than usual for any time they are on furlough.
Claims for a period
starting on or after 1 November 2020
Employers must have made
an RTI submission between 20 March 2020 and 30 October 2020 notifying HMRC of a
payment of earnings to that employee.
The requirement for there
to be payment of earnings between 20 March 2020 and 30 October 2020 applies for
any employee being claimed for under the scheme, irrespective of how frequently
they are paid (e.g. weekly, fortnightly or monthly). This will be relevant for
those on an annual pay period if the last payment notified to RTI was before 20
March 2020 and no further payments were notified before 30 October 2020.
Salaried members of
Limited Liability Partnerships (LLPs)
Members of LLPs who are
designated as employees for tax purposes (‘salaried members’) under the Income
Tax (Trading and Other Income) Act (ITTOIA) 2005 are eligible to be furloughed
and receive support through this scheme.
The rights and duties of a
member of an LLP are set out in an LLP agreement and in the absence of an
agreement, default provisions in the LLP Act 2000, based upon company and
partnership law. Such an agreement may include separate agreement between the
LLP and an individual member setting out the terms applicable to that member’s
relationship with the LLP.
To furlough a member, the
terms of the LLP agreement (or any such agreement between the LLP and the
member) may need to be varied by a formal decision of the LLP, for example to
reflect the fact that the member will perform no work in the LLP for the period
of furlough, and the effect of this on their remuneration from the LLP. For an
LLP member who is treated as being employed by the LLP (in accordance with
s863A of ITTOIA 2005), the reference salary for this scheme is the LLP member’s
profit allocation, excluding any amounts which are determined by the LLP
member’s performance, or the overall performance of the LLP.
Agency Workers (including
those employed by umbrella companies)
Where agency workers are
paid through PAYE, they are eligible to be furloughed and receive support
through this scheme, including where they are employed by umbrella companies.
Furlough should be agreed
between the agency, as the deemed employer, and the worker, though it would be
advised to discuss the need to furlough with any end clients involved. As with
employees, agency workers should perform no work for, through or on behalf of
the agency that has furloughed them during hours which they are recorded as
being on furlough, including performing such work through or on behalf of the
agency for the agency’s clients.
Where an agency supplies
clients with workers who are employed by an umbrella company that operates the
PAYE, it will be for the umbrella company and the worker to agree whether to
furlough the worker or not.
Limb (b) Workers
Where Limb (b) Workers are
paid through PAYE, they can be furloughed and receive support through this
scheme.
Those who pay tax on their
trading profits through Income Tax Self-Assessment, may instead be eligible for
the Self-Employed Income Support Scheme (SEISS).
Contingent workers in the
public
The Cabinet Office has
issued guidance on how payments to suppliers of contingent workers impacted by
COVID-19 should be dealt with where the party receiving the contingent worker’s
services is a Central Government Department, an Executive Agency of a Central
Government Department or a Non-Departmental Public Body.See: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/892881/Procurement-Policy-Note-02_20-Contingent-Workers-Impacted-by-COVID-19.pdf
Sector Contractors with
public sector engagements in scope of IR35 off-payroll working rules (IR35)
Public sector bodies will
follow the Crown Commercial Services guidance in the vast majority of cases. In
a small number of cases, for example where organisations are not primarily
funded by the government and whose staff cannot be redeployed to assist with
the coronavirus response, it may be appropriate to claim under the Coronavirus
Job Retention Scheme. Contractors who are deemed employees according to the off
payroll working rules might be eligible for this scheme.
In this scenario, if the
public sector organisation wished to furlough a contractor, they would have to
confirm this with both the contractor’s Personal Service Company (PSC) and the
fee-payer (as set out in the off-payroll working rules, usually the agency
paying the contractor’s PSC). It should be formally agreed between these parties
that the contractor is to do no work for the public sector organisation during
their period of furlough. The fee-payer would be able to apply for the furlough
payment of 80% of the monthly contract value, up to a maximum of £2,500, as
well as the employer NICs on that subsidised wage. The fee-payer would then pay
at least the amount of wage-grant received to the PSC and report the payment
via PAYE using the contractor’s details, making the usual tax and National
Insurance contributions (NICs) deductions for contracts in scope of the
off-payroll rules. The PSC would then be required to report the amount it pays
to the contractor as deemed employment income via PAYE using box 58A on the
PAYE Real Time Information return.
Where a contractor is
continuing to receive payments from a public sector client (including through
the Coronavirus Job Retention Scheme or other any other scheme), income from
this client should be excluded from any calculation of the reference pay for
the purposes of the scheme if the contractor also decides to furlough
themselves as an employee or director of their own company.
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