Under the Coronavirus Job Retention Scheme (CJRS), government is to step in and cover staff wages (capped) for employees who were on the payroll at 19th March 2020 and otherwise at risk of redundancy due to the coronavirus pandemic. This will be in the form of an initial grant (CJRS V1) payable from 20th April 2020 and cover up to 80% of an employee’s wages up to £2,500. A second grant will be available (CJRS V2) for the 3 months to the end of October with the employer expected to contribute more. The affected employees are ‘furlouged’ (given a leave of absence) and retained for when the business needs them again. This is an online service (do NOT try to claim via phone). Click here to claim your grant.
- Furloughed members of staff must not work for the employer during the period of furlough. This agreement should be in writing and confirmation provided by both the employer and furloughed employee.
- Furlough is from 1 March 2020, so is to be backdated. It will last until the end of October with employers expected to share the costs from 1 August as part-time employees are phased back into the workplace. Note that while the scheme is backdated to the beginning of March as it is intended to support all those employed then, a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. This will of course be subject to employment law in the usual way.
- It is available to employees on the payroll at 19 March 2020 and included on the employer’s Full Payment Submission (FPS) before this date. You can claim for full-time and part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts. The scheme also covers employees who were made redundant recently if they are rehired by their employer. Our understanding is that currently, no claims can be made for annual payrolls.
- The employer will need to be registered for PAYE online in order to make the claim. You can register here.
- All UK businesses are eligible, ‘any employer on the country, small or large, charitable or non-profit’ to use the Chancellor’s words. This includes recruitment agencies (agency workers paid through PAYE) and public authorities.
- The scheme pays a grant (not a loan) to the employer.
- The grant will be paid to the employer through a new online system from 20 April 2020.
- The employer will pay the employee through payroll, using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll will continue as normal.
- Scheme will be administered by HMRC:
• Relevant employees must be designated as furloughed employees.
• Employers will submit information to HMRC through a new online portal.
• As this will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. The narrative used in the information released so far says ‘if your employer cannot cover staff costs due to COVID-19 they may be able to access support…’. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined, nor whether there is a bar of some description.
- The maximum grant to the end of July will be calculated per employee and is the lower of:
• 80% of ‘an employee’s regular wage’ and.
• £2,500 per month.
Plus the associated Employers’ national insurance contributions (ER NICs) on this amount and the minimum automatic enrolment employer pension contributions on that wage.
Fees, commission and bonuses should not be included.
This gives a maximum cap of £2,500 +£245 (ER NICs) + £59 (auto- enrolled pension contribution) = £2,804 of total possible grant that can be applied for per employee per month.
- August: Government will pay 80% of wages up to a cap of £2,500 with employers paying ER NICs and pension contributions
- September: Government pays 70% of wages up to a cap of £2,187.50 with employers paying 10% of wages, ER NICs and pension contributions, making up 80% total up to a cap of £2,500
- October: Government pays 60% of wages up to a cap of £1,875, with employers paying 20% of wages, ER NICs and pension contributions to make up 80% total up to a cap of £2,500
- Furloughed employees can not undertake work for or on behalf of the organisation, including providing services or generating revenue.
- To claim, you will need your ePAYE reference number, the number of employees being furloughed, the claim period, (start & end date), amount claimed, your bank account number and sort code, your contact name and phone number. You will also need to provide the following details for the employee/s being furloughed: NI number, salary, National Insurance & pension contribution info used to calculate the claim amount.
- Employers must pay at least the minimum Auto Enrolment employer pension contributions on behalf of their furloughed employees. But they can only claim back the minimum AE employer pension contributions on the earnings paid.
- From 1 July 2020 businesses have the option of bringing back furloughed employees into the workplace on a part time basis and will be responsible for paying their wages while in work. When claiming, employers will need to include the hours actually worked and the hours usually worked by the employee in the claim period.
- The scheme closes to new entrants after 30th June 2020, so employees must have been furloughed for a minimum of 3 weeks by 30 June to qualify for CJRS V2 later payments.
How to furlough Sole Directors
Sole directors can take advantage of the Job Retention Scheme but only to the extent of their PAYE salary.
The scheme applies to sole directors as follows:
- Dividends are NOT included as part of the amount which can be claimed
- Sole directors mush have been created by 28 Feb 2020
- A 2019/20 RTI report must have been filed by 19 March 2020
- The director must stop working in the business on services or revenue-generating activities; only statutory duties can be carried out
- The employers’ PAYE scheme must have been created and started by 28 February 2020 and you must also have a bank account in the UK. You must be on the payroll as at this date
- Full time and part time directors on the payroll can claim the grant
- A salary paid annually should be acceptable subject to certain filing deadlines
- The director can claim a grant of up to 80% of the ‘regular wage’ or £2,500 (whichever is lower). This claim can be backdated to 1 March 2020
- The ‘regular wage’ is taken as the higher of the same month’s earnings from the previous year or the average monthly earnings from the 2019-20 tax year
There are a number of other factors which should be considered and further information can be found on the GOV website – is your employer eligible for the furlough scheme? How to claim for employees’ wages under the furlough scheme. We are here to advise you specifically and help you get the help you need.
We appreciate there are various scenarios specific to your business and we can advise accordingly. Please email Julia Gallagher or call Julia on 01527 558539.