Coronavirus Job Retention Scheme – how to make a claim
27th March, 2020
Following the Chancellor's announcement of employee wage support on 20th March, employers across the country have been 'furloughing' staff in anticipation of making a claim for wages via the Coronavirus Job Retention Scheme (CJRS).
However during this time, there have been significant gaps in our knowledge of how the CJRS would work in practice. Last night (26 March) the Government published further guidance which answers some (but not all) of the most common queries.
Who can make a claim via the CJRS?
Any UK organisation with:
- a PAYE payroll scheme in place on or before 28 February 2020; and
- a UK bank account.
This includes charities, recruitment agencies and businesses in administration. Public sector organisations (and non-public sector organisations) can also claim via the scheme but not where they receive public funding for staff costs.
Which employees can be furloughed?
Businesses are only able to furlough employees who were on the PAYE payroll on 28 February 2020. It is now clear that employers are not able to furlough employees who commenced work after this date but can rehire and immediately furlough employees who it made redundant since 28 February 2020.
- atypical employees, including those on casual or zero hour contracts can be furloughed, as can agency workers;
- employees who were placed on unpaid leave prior to 28 February 2020 cannot be furloughed;
- employees on sick leave or who are self-isolating can only be furloughed once this period of leave is brought to an end;
- employees who are shielding in line with public health guidance can be furloughed;
- employees on family leave such as maternity, paternity, adoption or shared parental leave can only be furloughed once this period of leave is brought to an end;
- the information received from the Treasury via the CBI is that employees cannot be on both annual leave and furlough leave at the same time. To take annual leave, furlough leave must be brought to an end and that annual leave will continue to accrue whilst an employee is furloughed.
What work can a furloughed employee do?
Whilst furloughed, employees cannot carry out work for their employer. They are permitted to carry out voluntary work, either for the employer or for a third party but this cannot involve the provision of services to or generate revenue for, or on behalf of, their employer.
Furloughed employees can also undertake training but must receive at least the National Minimum Wage/National Living Wage for this time which may require the employer to top up their wage above the 80% subsidy received from the Government.
Employees who have agreed to accept reduced hours or reduced pay cannot be furloughed unless and until there is no more work for them to carry out and they would otherwise be made redundant.
How do employers make a claim to HMRC?
HMRC is currently building an online portal through which employers must provide the following information in respect of their claim:
- ePAYE reference number;
- number of employees being furloughed;
- furlough start and end date (claim period);
- amount claimed;
- bank account number and sort code;
- contact name; and
- phone number.
The earliest date a claim can be made from is 1 March 2020.
The most recent guidance expressly states that employers can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Whilst not explicit in the guidance, the Treasury has confirmed that employees can be furloughed multiple times subject to each period being of a minimum duration of 3 weeks.
On receipt of a claim, HMRC determines that the employer is eligible for the grant claimed and if so, makes a payment via BACS to the employer’s bank account. The current guidance does not require employers to provide any additional evidence in support of the claim, including evidence that the furloughed employees would otherwise have been made redundant. Notwithstanding this we recommend retaining evidence of this decision making process, and the calculation of the grant claimed, as HMRC retains the right to retrospectively audit all aspects of the claim. Communications between employers and employees regarding them being furloughed must also be recorded and retained.
What can employers claim for?
The grant from HMRC covers:
- the employee’s wage. This is capped at the lower of 80% of their regular wage, or £2,500 per month;
- the associated Employer National Insurance contributions; and
- the minimum automatic enrolment employer pension contributions on that subsidised wage.
Employers now have certainty that in addition to the payment of wages under the CJRS, the grant also covers the employer’s expenditure on Employer NICs and pension contributions on the furloughed wage.
Employers who choose to ‘top up’ an employee’s wage will not be able to make a claim for Employer NICs or pension contributions on the top up element of the wage. In addition, voluntary pension contributions above the minimum mandatory employer contribution of 3%of income above the lower limit of qualifying earnings cannot be claimed under the CJRS. Payments of fees, commission and bonuses should not be included in the claim to HMRC.
We await further guidance on how claims for Employer NICs and pension contributions should be calculated.
For salaried employees (both full and part time), employers should claim 80% of the employee’s gross salary as at 28 February 2020, up to £2,500 per month.
Where an employee has been on maternity leave prior to being furloughed and the employer pays additional contractual payments beyond the statutory minimum, these should be included in the calculation of an employee’s wage for the purpose of the employer’s claim.
For employees whose pay varies, employers must identify the employee’s:
- earnings for the same month in the previous year; and
- average monthly earnings from the 2019-2020 tax year.
An employer is able to claim for the higher of the above figures, up to £2,500 per month.
For employees who have not been employed for 12 months, an employer should calculate and claim for the employee’s average monthly earnings since employment began.
Employers will not be penalised if the amount claimed falls below National Minimum Wage or National Living Wage.
Employers pay wages subject to usual income tax and other deductions such that the employee will receive 80% of their normal wages, capped at £2,500 gross per month, less usual deductions.
For further information, please get in touch.