COVID-19: Coronavirus Job Retention Scheme (CJRS)

CJRS

Date

Apr 20, 2020

Categories

Covid-19

PAGE UPDATED 21/04/20

 

As of 20 April 2020, the Government’s online service to make your claim for the Coronavirus Job Retention Scheme (CJRS) is now open.  We have the capability to calculate and submit your CJRS Claim so please let us know if we can help.

 

Overview of the scheme

The principle behind the CJRS is that If you cannot maintain your current workforce because your operations have been severely affected by coronavirus (C19), you can furlough employees and apply for a grant that covers 80% of their 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.

This is a temporary scheme starting from 1 March 2020.  It was initially going to last for 3 months but has now been extended until 30 June 2020, and employers can use the scheme anytime during this period. It is designed to help employers whose operations have been severely affected by CV-19 to retain their employees and protect the UK economy. However, all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus.

 

Who can claim?

You must have created and started a PAYE payroll scheme on or before 19 March 2020, enrolled for PAYE online and have a UK bank account.

Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities.

 

Employees you can claim for

You can only claim for an employee who was on your PAYE payroll on or before 19 March 2020.  However, an RTI submission to HMRC must also have been made in respect of this employee on or before 19 March 2020.  If an employee was on your payroll by 19 March, but you did not notify HMRC on an RTI submission until the end of March, this employee will not be eligible.

Employees hired after 19 March 2020 cannot be furloughed and claimed for in accordance with this scheme.

If you made an employee redundant or they stopped working for you on or after 28 February 2020 then you can re-employ them and put them on furlough.  To be eligible they must have been on your payroll on 28 February, and an RTI submission notifying payment in respect of that employee must have been made to HMRC by 28 February.

Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed.

To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation. This includes providing services or generating revenue. Employers are free to consider allocating any critical business tasks to staff that are not furloughed. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

 

Period of furlough and multiple jobs

Employees 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.

Employees cannot work for the employer during the period of furlough leave. They can however work for a different and unconnected employer during this period. An employee with multiple employers can be furloughed by more than one at the same time and in that case, each employment can pay the worker up to the maximum £2,500 at the same time.

 

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 the 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 confirm in writing to their employee stating that they are being furloughed. The employee must also respond in writing to declare their acceptance of the furlough terms. A record of this communication must be kept for five years. 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.

The conditions for receiving CJRS do not displace an employee’s existing employment contract, so a furloughed employee will still be entitled to holiday, maternity and sick pay as per their existing terms of employment.

 

Tax effect of CJRS

The grant paid to the employer is included within the business’ taxable profits for income tax or corporation tax purposes. It is not clear whether the grant is taxable on an employer who is not trading, such as those employing domestic staff, eg, an individual employing a nanny. The gross salary and associated NIC and pension costs continue to be tax deductible in the usual way.

The employee is taxed on the salary paid by the employer as usual.

 

How much you can claim

You will need to claim for:

  • 80% of your employees’ wages (even for employee’s on National Minimum Wage) – up to a maximum of £2,500. Do not claim for the worker’s previous salary.
  • minimum automatic enrolment employer pension contributions on the subsidised wage

You can choose to top up your employee’s salary, but you do not have to. Employees must not work or provide any services for the business while furloughed, even if they receive a top-up salary.

Grants will be pro-rated 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 way you work out your employees’ wages is different depending on what type of contract they’re on, and when they started work.

There is a calculator and multiple worked examples on the Gov.uk website, to help you establish how to calculate the 80% of your employees’ wages.

 

Full or part time employees on a salary

Claim for the 80% of the employee’s salary, as of 28 February 2020, before tax.

 

Employees whose pay varies

If the employee has been employed for 12 months or more, you can claim the highest of either the:

  • same month’s earning from the previous year
  • average monthly earnings for the 2019-2020 tax year

If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work. If the employee only started in February 2020, work out a pro-rata for their earnings so far, and claim for 80%.

 

Employer National Insurance and Pension Contributions

You’ll still need to pay employer National Insurance and pension contributions on behalf of your furloughed employees, and you can claim for these too.

You cannot claim for:

  • additional National Insurance or pension contributions you make because you chose to top up your employee’s salary
  • any pension contributions you make that are above the mandatory employer contribution

 

Past Overtime, Fees, Commission, Bonuses and non-cash payments

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.

 

Benefits in Kind and Salary Sacrifice Schemes

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.

Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.

 

Apprenticeship Levy and Student Loans

Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the Job Retention Scheme do not cover these.

 

National Minimum Wage

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW)/ Apprentices Minimum Wage (AMW) for the hours they are working or treated as working under minimum wage rules.

This means that furloughed workers who are not working can be paid the lower of 80% of their salary or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage. However, time spent training is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage, taking into account the increase in minimum wage rates from 1 April 2020. As such, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. Where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.

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.

 

Company Directors

Company directors can be furloughed and receive 80% of their salary. They can continue to fulfill their basic director’s duties provided that these are limited to statutory administrative tasks and do not extend to working in the company. Many owner-managed company directors or shareholders pay themselves small salaries and the balance of their income as dividends. Be aware that only a director’s basic salary is relevant to the scheme and it does extend to dividends.

 

What you will 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:

  • a Government Gateway (GG) ID and password – if you don’t already have a GG account, you can apply for one online. Be aware that it can take up to 10 working days to open a GG account
  • your ePAYE reference number – if you aren’t registered yet, you can do so now on the Gov.uk website
  • the number of employees being furloughed
  • name and National Insurance number of each employee being furloughed
  • if you have fewer than 100 furloughed staff you will need to input information directly into the system for each individual employee; if you have 100 or more furloughed staff then you can upload a file with information for each employee – the following file types are accepted: .xls .xlsx .csv .ods
  • 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 that you want the grant to be paid into. This can take up to 6 days after filing the furlough claim
  • your contact name
  • your phone number

 

It is the employer’s responsibility to make the claim, but we may have the capability to calculate and submit your CJRS claim on your behalf. All of the PT team are working as normal, so please do let us know if we can help with calculating or submitting your claim. Remember HMRC will retain the right to retrospectively audit all aspects of your claim.

The full guidance from HMRC can be found at: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

 

Summary
Coronavirus Job Retention Scheme (CJRS)
Article Name
Coronavirus Job Retention Scheme (CJRS)
Description
Updated guidance on the Coronavirus Job Retention Scheme (CJRS), which provides businesses with financial support to pay 80% of an employee’s salary to protect against redundancies due to the current crisis.
Author
Publisher Name
Paish Tooth
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