The UK Government’s Coronavirus Job Retention Scheme (CJRS) is a temporary scheme in order to support all UK employers that have been affected by the COVID-19 outbreak. Furloughed employees will receive 80% of their wages through the scheme.
Changes to the CJRS from October 2020
From 1 October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work – employers will pay ER NICs, pension contributions and 20% of wages to make up 80% of the total up to a cap of £2,500. Employers will continue to have to pay furloughed employees’ National Insurance (NI) and pension contributions.
Many smaller employers have some or all of their employer NIC bills covered by the Employment Allowance so will not be significantly impacted by that part of the tapering of the government contribution.
Around a quarter of CJRS monthly claims relate to wages that are below the threshold where employer NICs and auto enrolment contributions are due, and so no employer contribution will be required for these furloughed employees in August.
Job Retention Bonus (JRB)
The CJRS will end on 31 October 2020 and the government has announced the introduction of the Job Retention Bonus to support employers who keep on their furloughed employees in meaningful employment.
The Job Retention Bonus is a one-off payment of £1,000 which is paid to employers for every employee who they previously furloughed under the Coronavirus Job Retention Scheme (CJRS), and who remains continuously employed until 31 January 2021. Eligible employees must earn at least £520 a month on average between 1 November 2020 and 31 January 2021. Employers will be able to claim the Job Retention Bonus after they have filed PAYE for January and payments will be made to employers from February 2021.
More information about the Job Retention Bonus can be found on the government’s website.
If you have over-claimed
If you have made an error in a CJRS claim that means you received too much money, you must pay this back to HMRC.
If you are continuing to claim, you can inform HMRC you have over-claimed in a previous claim. When you apply for your next claim, you’ll be asked if you need to reduce the amount to take account of a previous error. Your new claim amount will be reduced to reflect this and you should keep a record of this adjustment for six years.
If you have over-claimed and do not plan to submit further claims, HMRC is working on a process that will allow you to let them know about your error and pay back any amounts that you have over-claimed.
If you have under claimed
Only over claims can be adjusted in a future CJRS claim, and so if you have under claimed you should not adjust the next claim. To correct an earlier under claim of the CJRS grant you should call HMRC on 080 0024 1222 and they will put through a parallel claim for the extra grant due and provide you with a claims reference number.
Part time furloughing from July 2020
From 1 July 2020, the scheme will be made more flexible to enable employers to bring previously furloughed employees back part time. The government will continue to pay 80% of their wages for normal hours they do not work up until the end of August. Employers will be responsible for paying employees wages in full for the hours they work. Any working hours arrangement agreed must cover at least one week and be confirmed to the employee in writing. When claiming the CJRS grant for furloughed hours, employers need to report and claim for a minimum period of a week. They can choose to make claims for longer periods such as on monthly or two weekly cycles if preferred.
Also from July, the maximum number of employees you can claim for in any period cannot be higher than the maximum number you have claimed for in a previous period. For example, if your highest single claim for periods up to 30 June was for 100 people, you can’t claim for more than this number in later periods.
Completing your claim
HMRC have introduced a save and return option which means you can complete the claim at your leisure rather than in one go.
It is important to ensure your claim is correct to avoid any delay in payments being made. In order to do so follow the steps below:
- read the guidance before you apply on Gov.uk, there’s a step-by-step guide to applying and a calculator
- check your employees are eligible, by looking at the guidance on GOV.UK
- check your calculations each time you submit a claim, in case any details have changed
- only submit one claim per pay period – you can’t submit another claim for overlapping periods; this means that in each claim you should include all furloughed employees paid during that period
- if you have missing National Insurance numbers for employees, do try and find them so it doesn’t delay your claim; if an employee doesn’t have a National Insurance number yet, you should contact HMRC in order to complete your claim
- double check all of the information in the claim before you submit it, including your bank details.
After you make a claim – reporting employees’ wages to HMRC
If you’ve claimed a grant through the Coronavirus Job Retention Scheme, you should check if you need to report payments on the PAYE Real Time Information system. This will depend on whether you are using the grant to pay wages or to reimburse wages that you’ve already paid.
Find out more in HMRC’s recorded webinars
There are two HMRC webinars about the Coronavirus Job Retention Scheme on HMRC’s YouTube channel which include an overview of the scheme and a detailed session about how to make a claim.
On Wednesday 22 April, HMRC stated that they have noticed that some employers have had difficulty accessing the system because they do not have an active PAYE enrolment. In order to make a claim directly, employers need to:
- Have a Government Gateway (GG) ID and password – if your client does not already have a GG account, they can apply here
- Be enrolled for PAYE online – if your client isn’t registered yet they can do so now
We have put together a Job Retention Scheme calculator designed to help you record information required for a Job Retention Scheme grant claim.
Reports of a possible scam linked to the CJRS portal
We have been made aware of a possible scam linked to the CJRS portal. After submitting a claim, a legitimate looking email is received to say that the claim has not gone through properly and the claimant needs to provide some additional information in order to rectify the issue. Please remain vigilant when submitting a claim.
What you need to know about making a claim
- You can claim for employees that were employed as of 19 March 2020 and were on your PAYE payroll on or before that date; this means that you will have made an RTI submission to HMRC of payment of that employee on or before 19 March 2020
- Employees that were employed as of 28 February 2020 and on payroll (i.e. notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for you after that, and prior to 19 March 2020, can also qualify for the scheme if you re-employ them and put them on furlough.
- The CJRS closed to new entrants on 30 June. Employers will only be able to furlough employees that they have furloughed for a full three-week period prior to 30 June. Claims in respect of the period to 30 June need to be made by 31 July. This applies to both employees furloughed for the first time and those you have previously furloughed and claimed for.
- The government confirmed on 9 June that parents on statutory maternity and paternity leave who return to work in the coming months will be eligible to be furloughed after the 10 June cut off date, but only if their employer has previously furloughed employees.
How to claim
Before you make a claim:
- Please read all the available guidance on GOV.UK before you apply
- Gather all the information and the precise calculations you need before you start your application – if Ellacotts is your payroll provider, we will help you do this
- You can find out more in the calculation guidance where you can access a claim calculator – this will allow you to check your claim for most employees who are paid the same amount each pay period
- Access HMRC’s step-by-step guide for additional help.
After you’ve made a claim:
- Keep a note or a print-out of your claim reference number – you won’t receive a confirmation SMS or email
- Retain all records and calculations for your claims, in case HMRC need to contact you about them
- Expect to receive the funds six working days after you apply, provided your claim matches records that HMRC hold for your PAYE scheme – please do not contact HMRC before this time
- Please ask your furloughed employees not to contact HMRC directly – they will not be able to provide them with any information on individual claims
If you want Ellacotts to act on your behalf
- You will need to tell provide us with which UK bank account you want the grant to be paid into, in order to ensure funds are paid as quickly as possible to you.
- We will need to already be registered as your agent with HMRC.
Information required to make a claim
- A Government Gateway (GG) ID and password – if you don’t already have a GG account, you can apply for one online. If we are you agent we will have this information
- Be enrolled for PAYE online – if you aren’t registered yet, you can do so now.
- The following information for each furloughed employee you will be claiming for:
- National Insurance number
- Claim period and claim amount
- PAYE/employee number (optional)
- If you have fewer than 100 furloughed staff – you will need to input information directly into the system for each employee
- If you have 100 or more furloughed staff – you will need to upload a file with information for each employee; we will accept the following file types: .xls .xlsx .csv .ods
Please note: If Ellacotts is already your payroll provider, your Payroll Administrator will be in contact with you to ensure everything is in place.
HMRC state that they are expecting phone demand to be beyond their capacity to offer a normal service and therefore the service is designed to be self-serve with guidance in place.
Businesses, and agents that are authorised to act on behalf of clients for PAYE matters, will be able to claim. However, file only agents, including Payroll Bureaus, will not be able access the service due to data protection reasons.
CJRS is open to all employers who have furloughed employees to make a claim. Employers must remember to discuss with their staff the intention to furlough and make any changes to the employment contract by agreement; legal advice should be sought on the process.
What will the grant cover:
- 80% of furloughed employee’s usual monthly wage costs up to £2,500 a month.
- It will cover the employer’s National Insurance and the minimum automatic enrolment employer pension contributions on that wage.
- Any regular payments that the employer is obliged to make (i.e. wages, past overtime, fees and compulsory commission payments).
- It will be prorated if your employee is furloughed for part of a pay period. The start date is the date of the furlough and not the date that the negotiations started.
What the grant doesn’t cover:
- Discretionary bonus (including tips) and commission payments
- Non-cash payments
- Benefits in kind
- Benefits provided through salary sacrifice (including pension contributions).With regards to salary sacrifice, you can normally change or cancel this because of a life event. HMRC has confirmed that COVID-19 is such a life event that could warrant a change
- If you decide to top up an employee’s pay, any additional National Insurance or pension contribution payable, will not be funded
- If you pay an employer pension contribution above the minimum requirements, the excess contributions will not be covered by the grant
The guidance now makes specific mention of eligible individuals who are not employees, but are paid under PAYE and that they can be furloughed.
- Office holders (including company directors)
- Salaried members of Limited Liability Partnerships
- Agency workers (including umbrella companies)
- Limb (b) workers
- An individual engaging a nanny
- Employees on fixed term contracts (provided contract hasn’t ended and hasn’t been extended)
- Shielding employees who are unable to work from home and would otherwise have been made redundant
- Employees with caring responsibilities
When furloughing a Company Director steps must be taken by the Board of Directors and recorded; once furloughed they can fulfil their statutory obligations but not undertake any work which would generate commercial revenue or provide services to or on behalf of their company. This point extends to include a Personal Service Company.
Coronavirus Job Retention Scheme FAQs
We have summarised what this should mean for employers:
What types of business are eligible?
Any UK organisation with employees can apply, including:
- Recruitment agencies (agency workers paid through PAYE)
- Public authorities
Who can I claim for?
- Employees must have been on your PAYE payroll scheme on 28 February 2020
- Employees can be on any type of contract including:
- Full time
- Agency contract
- Flexible hour’s contract
- Zero Hours Contact
You can claim for any employees that you have had to put either put on unpaid leave or have been unable to physically work due to the impact of COVID-19 on your business after 28 February 2020.
If they were already on leave before this date you would not be able claim. You can only claim once the employee has ceased doing all work for the business.
What do I need to do when selecting which employees to furlough?
When you 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 should write to their employee confirming that they have been furloughed and that they are to cease all work. The employer must keep a record of this communication until at least 30 June 2025.
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.
What if my employee does not agree to be furloughed?
If your employee refuses your request to be put on furlough you may then need to consider redundancy options. However, this must be in line with normal redundancy rules and procedures.
I have made employees redundant due to the impact of COVID-19, can I make a claim for them?
Yes if you made them redundant after 28 February 2020. However,to be able to make a claim you will have to rehire them.
I have an employee who is absent on statutory leave, what options do I have?
You cannot furlough an employee that is absent due to sickness. However, once their sickness ends and they return to work you will be able to furlough them and make a claim from their return date to work date.
Maternity, Adoption, Paternity or Shared Parental Leave
There is no change to their entitlement and they may continue on leave. However, if they are due to return to work you may then furlough them from their return date.
Can my employee do any work?
A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for or on behalf of your organisation.
However, if they are required to, for example, complete online training courses whilst they are furloughed, then they must be paid at least the National Living Wage or National Minimum Wage for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
An employee can seek other employment, however, this is contract dependent.
Whilst my employees are furloughed what are their contractual rights?
Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity and other parental rights, rights against unfair dismissal and to redundancy payments.
This also includes the accrual of Holiday Entitlement. However, new measures have been put in place to allow up to 4 weeks of statutory annual leave to be carried over into the next 2 years. Please remember this leave has to be taken and cannot be paid to your employees unless they are leaving your employment.
How much can I claim?
You can claim 80% of your employee’s contractual monthly salary up to a cap of £2,500.00, plus your employer costs (Employers National Insurance and Ers Pension capped at 3%)
Your employee’s payment is subject to Tax and National Insurance in the same way their usual salary would be.
What if my employee’s hours are variable?
If your 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.
Can I top up my employees’ wages?
Yes, you can top up the employees’ wages with the additional 20%. However, you will be liable for any employers National Insurance and employers pension costs on any additional payment.
What about commission and bonuses?
Contractual commission and previous overtime can be included. However, any other types of Commissions and bonuses can’t be included in the calculation of your claim. If you pay out any commission or bonuses you would be liable for any employers National Insurance and employers pension costs.
As a business we contribute more than 3% into our employees’ pension, can I claim over 3%?
No, you can only claim the minimum mandatory employer auto enrolment contribution of 3%. Any additional pension will be your liability to pay. You cannot reduce your employees’ pension contribution as it will be a contractual part of their pay.
Claims can be made for TUPE and other transfers after 28 February 2020.
How often can I claim?
You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.
Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.
You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.
What do I need to make a claim?
To claim, you will need:
- Your PAYE reference number
- The number of employees being furloughed
- The claim period (start and end date)
- Amount claimed (per the minimum length of furloughing of 3 weeks)
- Your bank account number and sort code
- Your contact name
- Your phone number
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
What happens if I can’t afford the wage bill before the Grant comes through?
The government have set out a number of business support schemes to assist you during this time.
What happens when the grant comes to the end?
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether your employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
What we don’t know
How this affects owner-managed businesses where there are only shareholder directors and the business hasn’t closed but is not generating income.
Get in touch with us
Visit our COVID19 Hub for more information on the latest Coronavirus updates including financial support for businesses and individuals.