Coronavirus Job Retention Scheme: Government Update

The Government has published further information regarding the new Coronavirus Job Retention Scheme (CJRS) which provided much needed clarification as to how the scheme will operate and who it will apply to. 

We have set out below an overview of the additional confirmed criteria applicable to the CJRS and how to make a claim under the scheme. 

Eligibility Requirements

Any UK organisation with employees can apply for the CJRS, including businesses, charities, recruitment agencies (agency workers paid through PAYE), and public authorities.

Those eligible under the CJRS:

• employers with a PAYE payroll scheme created on or before 28 February 2020 and with a UK bank account;
• employees can be on any type of contract including full-time or part-time employees, agency contracts, or employees on flexible or zero-hour contracts in order to be furloughed;
• employees who were made redundant since 28 February 2020, if they are rehired by their employer, can be furloughed;
• only employees on agency contracts who are not working can be eligible under the scheme;
• employees who are not completing any work for or on behalf of their employer. 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 their employer’s organisation;
• employees with more than one employer can be furloughed for each job. Each job is classed as separate, and the cap applies to each employer individually;
• employees who are shielding in line with public health guidance can be placed on furlough;
• where a company is being taken under the management of an administrator, the administrator will be able to access the CJRS.

Those who are not eligible under CJRS:

• employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with the scheme;
• if an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and the employer will have to continue paying the employee through its payroll and pay their salary as per the terms of their contract of employment;
• employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February 2020;
• employees currently on sick leave or self-isolating cannot be place on furlough leave and should be paid Statutory Sick Pay. However, after the period of sick leave such employees will become eligible for the CJRS and can be furloughed;
• the Government has advised that it is not their intention for the public sector to benefit under the CJRS and expects employers who receive public funding for staff costs to use that money to continue to pay staff as normal, and therefore not furlough them. This also applies to non-public sector employers who receive public funding for their workforce costs;
• the Government has advised that it does not expect organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19 to furlough staff.

Employees that have been furloughed continue to benefit from the same rights under employment law as they previously did, including Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

Maternity Leave, contractual adoption pay, paternity pay or shared parental pay

Existing employment law continues to apply. Therefore, any employees who are currently on, or plan to take, Maternity Leave must do so, and any employees who qualify for Statutory Maternity Pay (SMP) will remain entitled to claim up to 39 weeks of statutory pay or allowance.

The SMP such employees are entitled to claim remains as 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.

If an employer offers enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that can be claimed through the CJRS.

The same principles outlined above apply where an employee qualifies for contractual adoption, paternity or shared parental pay.

What will the 80% reimbursement cover?

Employers will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses are not included.

All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees and should continue to make such payments.

At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month, even if, based on their usual working hours this would be below the National Living Wage/National Minimum Wage. Employers must pay the employee all of the grant received for their gross pay, no fees can be charged from the money that is granted.

An employer can choose to provide a top-up salary in addition to the grant however is under no obligation to do so. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through the CJRS. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).

Whilst an employee cannot complete any work for its employer whilst on furlough leave, if the employee is required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the National Living Wage/ National Minimum Wage (NLW/NMW) for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

How to calculate the reimbursement

Employers will need to calculate their claim before making an application through the scheme.  This calculation will need to take into account the wages of its employees, and the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions they are entitled to claim. The Government are expected to issue further guidance on how to calculate a claim before the scheme becomes operational.

Employers can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for and can be backdated to 1 March 2020 if required.

Calculating the reimbursement:

• Full-time and part-time employees. For full-time and part-time salaried employees, the employee’s actual salary before tax, as of 28 February 2020, should be used to calculate the 80%. Fees, commission and bonuses should not be included;
• Employees employed less than a year. If the employee has been employed for less than a year, an employer can claim for an average of their monthly earnings since they started work;
• Employees employed since February 2020. If the employee only started in February 2020, the employer should use a pro-rata for their earnings so far to claim;
• Employees with varying pay. If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, an employer can claim for the higher of either:
• the same month’s earning from the previous year; or
• average monthly earnings from the 2019-20 tax year

Employers should note that HMRC will retain the right to retrospectively audit all aspects of claims made.

Making a claim under the scheme

Employers will need to make a claim through the HMRC portal (when available) and provide the following information:

• ePAYE reference number;
• number of employees being furloughed;
• claim period (start and end date);
• amount claimed (per the minimum length of furloughing of 3 weeks);
• bank account number and sort code of the employer;
• contact name; and
• phone number.

The Government have advised that employers should make a claim in accordance with actual payroll amounts at the point at which they run their payroll or in advance of an imminent payroll.

Once HMRC have approved the claim they will pay it via BACS payment to the UK bank account provided by the employer.

Tax Treatment of the Coronavirus Job Retention Grant

The Government have advised that payments received by a business under the scheme are made to offset these deductible revenue costs and must therefore be included as income in the business’ calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles. Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

Due to the unprecedented nature of the Coronavirus pandemic, the guidance on how to adapt to its impact evolves daily and becomes out of date very quickly. We recommend that you keep checking to ensure you are following the most up to date guidance. Further, in addition to the public guidance, there are always specific circumstances that individual employers must consider, such as particular employee or employer arrangements or issues. If in doubt, please take advice. You can contact our specialist Employment team on 0161 941 4000 or via email.