Coronavirus Job Retention Scheme

HMRC have contacted us to confirm that the portal will open on 20th April 2020.

Coronavirus Job Retention Scheme

The portal opened on 20th April and a significant number of claims have been successfully submitted. HMRC have been processing payments within 4 – 6 working days of receiving the claim. The scheme has now been extended until the end of October with the introduction of new flexible furloughing from 1st July (click here for further details). A further update is expected on 12 June to provide the missing details.

A timeline of what we know so far is presented as follows:·

10 June

Last date on which an employee can be furloughed for the first time to be eligible for a claim to be made under the CJRS from 1 July.

30 June

Coronavirus Job Retention Scheme (CJRS) will close to employers who have not previously used the scheme.

1 July

Claims under the CJRS are restricted to employers already using the scheme and only in respect of “previously furloughed employees” – ie those furloughed on or before 10 June.

Flexible furloughing commences with employers able to bring furloughed employees back to work part-time. Employers will be responsible for paying an employee’s salary for the hours worked in accordance with their employment contact.

1 August

Employers will have to pay National Insurance and pension contributions for furloughed staff and will not be able to reclaim them through the CJRS.

The government contribution will now be 80% of wages up to a cap of £2,500.

1 September

In addition to National Insurance and pension contributions, employers will have to pay 10% of wages to make up 80% total up to a cap of £2,500.

The government contribution will now be 70% of wages up to a cap of £2,187.50.

1 October

In addition to National Insurance and pension contributions, employers will have to pay 20% of wages to make up 80% total up to a cap of £2,500.

The government contribution will now be 60% of wages up to a cap of £1,875.

31 October

The CJRS will close.

Flexible Furloughing

Flexible furloughing had previously been expected to be introduced from August but has now been brought forward to 1st July. As outlined above, employers will be responsible for paying the full wages for any time worked by employees during the flexible furlough period. Further details will be announced on 12 June and we will update our guidance then but we know:

  • Employers must agree any new flexible furloughing arrangement in writing with their employees
  • The minimum claim period for a grant to cover the employee’s furloughed hours will be one week.
  • To claim the grant, employers will need to report additional information for a claim period to HMRC:
    • the hours an employee works; and
    • the usual hours an employee would be expected to work.
  • From 1 July, claim periods will no longer be able to overlap months as they currently can. Employers can continue to make claims in anticipation of an imminent payroll run, at the point the payroll is run or after the payroll has been run.
  • The number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the current CJRS.

Calculating claims

HMRC have published their own calculator which can be found by clicking here. We have prepared our own data capture tool for clients’ use which can be found by clicking here and which we will update after 12 June when further details have been released.

Eligibility

All employers with a registered PAYE payroll scheme as at 19 March 2020 are eligible to make a claim in respect of any employees for whom an RTI submission notifying a payment in respect of the employee had been made on or before 19 March 2020.

An employee must be furloughed for a minimum of three weeks.

It is also clear that an employee must not work for the company in any capacity during this period. This is an important point of clarification as most employers will need at least one employee to maintain the administrative function of a company during the furloughed period. While there is no suggestion that directors are ineligible, the fact that no work can be carried out for the company during the furloughed period must be considered before making any such claim in respect of directors.

What you can claim

Employers can use a portal to claim a grant for 80% of furloughed employees’  usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions (3% of salary between £6,136 and £50,000 per annum) on that wage.

Minimum automatic employer pension contributions for March 2020 are 3% of any salary between £6,136 and £50,000 (this will change to between £6,240 and £50,000 effective April). If an employer’s pension contributions are more generous than this, there will still be a small cost to the employer. It may therefore be necessary to review your pension arrangements and take employment law advice as to whether it is possible to vary the contribution rate for furloughed employees.

This means that any employees with salary up to £37,500 will have 80% of their gross wage covered by the grant. Any employee with a salary above £37,500 per annum will have £2,500 of their gross pay covered by the grant. It remains at the discretion of the employer whether to top this amount up.

Example
Employer A pays employer contributions of 5% on all earnings (ie not just eligible earnings). Employees contribute 3% of their gross salary.

Employee A receives a salary of £37,500. At 80% of the employee’s monthly salary, the full government grant of £2,500 will be receivable to cover the gross salary and employer’s national insurance contribution. A further £59.66 will be receivable for pension contributions [ 3% x (30,000 – 6,136) / 12 ]. On normal contractual terms, the employer would make contributions of £125 [ 5% x 30,000 / 12 ] and as such there would be a cost to the employer of £65.34 per month based on the existing employment terms.

After deduction of employee national insurance contributions, PAYE and pension, employee A’s net pay will reduce by £406.25 per month compared to the previous month. [ 20% x £37,500 x {1 – (12% + 20% + 3%) } / 12 ].

Details of what you can claim based on an employee’s status are as follows:-

Full and part-time employees

The employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Any fees, commission and bonuses should not be included.

Employees whose pay varies

The calculations varies depending on the employee’s length of service as follows:-

  • 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. If Wenn Townsend prepare the payroll for you, we will complete this calculation on your behalf.

When you can claim

Employers can use this scheme anytime during this period. Claims can be made every three weeks. Claims can be backdated to 1st March if applicable.

HMRC will review the claim and make the payment of any amounts due via BACS to a UK bank account