HM Revenue and Customs published guidance on 26 March 2020 setting out further information on the Coronavirus Job Retention Scheme (CJRS). This provides detail on which businesses and employees will be covered by the CJRS, what counts as ‘furloughing’ and how employees’ wages will be calculated. It is expected that the scheme will be up and running by the end of April.
How will the scheme work?
The new HMRC guidance confirms that the CJRS should be up and running by the end of April, and that payments will be backdated to 1 March 2020, where applicable. Employers can use the HMRC online portal, which is currently in development, to submit information on those employees who have been designated as “furloughed”. Employers will then be able to claim a subsidy to cover 80% of a furloughed employee’s salary up to the limit of £2,500 per month. Employers will also be able to claim employer national insurance contributions and the minimum automatic enrolment employer pension contributions (currently 3%) in respect of furloughed employees.
The scheme will be open to all UK employers, including charities, recruitment agencies and public authorities, so long as they have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Which employees will be eligible?
CJRS will cover employees who have been on the payroll since 28 February 2020 on any type of contract. This means that part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts are also covered by the scheme. The minimum period of furlough is three weeks.
Employees hired after 28 February 2020 are not eligible to be furloughed. Employees who have been made redundant since 28 February can be furloughed if they are rehired by their former employer. Similarly, employees currently on unpaid leave can be furloughed but only if unpaid leave started after 28 February 2020. Employees who are on sick leave or who are self-isolating should receive statutory sick pay, however they can be furloughed after this. Those in high-risk groups who are ‘shielding’ in line with government guidance can be placed on furlough.
Employees who are furloughed will not be able to do any work for their employer. They will be allowed to take part in volunteer work or complete training as long as this does not provide services to, or generate revenue for, the employer. The scheme does not cover the wages of employees working reduced hours, and they should continue to be paid by their employers in the normal way.
Guidance for employers
The guidance recommends that employers discuss furlough leave with their staff and that the changes to their working arrangements and pay are agreed. Employers should then write to their employees confirming that they have been furloughed and keep a record of this communication.
While an employee is on furlough, the employer should pay the employee 80% of salary capped at £2,500 per month. Employers may choose to top up wages to 100% but they are not obliged to do so.
For full-time or part-time salaried employees, the gross salary on 28 February 2020 should be used to calculate the 80% that will be claimed. Fees, commission and bonuses should not be included. For those on zero hour contracts or working variable hours, employers can claim the higher of the same month’s earnings in 2019 or the average monthly earnings in the 2019-2020 tax year. If an employee has been employed for less than a year, an average of their monthly earnings since they started can be used.
What you need to make a claim?
To claim through the HMRC portal, employers will need to have worked out the number of employees being furloughed, how long the furlough is to last (the minimum length is three weeks) and the amount to be claimed. HMRC will not calculate the amount on behalf of employers but may carry out an audit at a later date. Employers can submit further claims if the furlough period continues for longer than stated in their previous claim.