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UPDATE ON THE CORONAVIRUS JOB RETENTION SCHEME (“CJRS”)
There has been some clarification on the CJRS:
- Owner managers/Directors can furlough themselves
- They must do no income generating work but can continue to run the business from a statutory perspective, eg preparing accounts and returns.
- Parents employing nannies can furlough the nanny
- Furloughed workers cannot work for the employer that furloughed them but can undertake training, work for other employers, work on self-employed basis, or volunteer.
- The PAYE scheme must have been in existence on 28 February 2020.
- Changes can be made to March payrolls to change employers status to “furloughed” from 1st
- HMRC’s Portal will probably be available from 21st April.
FULL DETAILS OF CJRS AS FAR AS WE KNOW AT PRESENT
What is the Job Retention Scheme?
It involves employers placing their employees on “furlough”. Employers who do this will be able to obtain a grant from the Government to cover 80% of “furloughed employees” wages, to a maximum of £2500 per employee per month.
Which employees can the grant be claimed for?
Any UK employer with a UK bank account will be able to claim, but the employee must have been on your PAYE payroll on 28 February 2020. The employee can be on any type of contract ― part time, full time, employed agency, zero hours, variable hours.
If an employee was made redundant after 28 February 2020, the employer can agree to re-employ and place on furlough instead. Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
Employees on sick leave or self-isolating should get statutory sick pay, but can be furloughed after this. Employees who are shielding in line with public health guidance can be placed on furlough.
Once agreed, the employer must write to the employee confirming they have been furloughed to be eligible to claim. We will provide a suitable letter if you request by email to sara@warringtonaccountants.co.uk
If employees currently have more than one employer, they can be put on furlough by one employer and continue to work for another, if it is permitted within their employment contract. If they are put on furlough by more than one employer, they’ll receive separate payments from each employer. The 80% of their normal wage up to a £2500 monthly cap applies to each job.
Employees who refuse furlough may be at risk of redundancy or termination of employment, depending on the circumstances of the employer. However, this must be in line with normal redundancy rules and protections. The employer can still make the employee redundant while they are on furlough or afterwards. Normal equality laws apply when deciding who should go on furlough.
Do I need to get agreement from my employees before designating them as furloughed workers?
Unless there is a right to furlough in the employment contract, employers must gain agreement with their employees on designating them as a furloughed worker and reducing their pay to 80%. It is not anticipated that employees will withhold agreement when it is explained to them that the likely only other alternative is to make them redundant.
What about furlough and the public sector?
Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion ― and correspondingly not furlough them.
This also applies to non-public sector employers which receive public funding for staff costs. Organisations which are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff.
What do I need to know about the pay element?
Employers must pay employees at least 80% of their usual monthly earnings, up to a maximum of £2500.They can claim for a minimum of three weeks and for up to three months ― but this may be extended. They can choose to pay employees more than the grant ― but they do not have to. Employees will still pay income tax, National Insurance contributions and any other deductions from wages.
If employees have been employed (or engaged by an employment business in the case of agency workers) for a full year, employers will claim for the higher of either: the amount the employee earned in the same month last year, or an average of their monthly earnings from the last year. If they have been employed for less than a year, employers will claim for an average of their monthly earnings since they started work. The same arrangements apply if the employee’s monthly pay varies such as if the employee is on a zero-hour contract.
If the employee started work in February 2020, the employer will pro rata the earnings from that month. 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.
Once the employer has worked out how much of an employee’s salary they can claim for, they must then work out the amount of Employer National Insurance contributions and minimum automatic enrolment employer pension contributions they are entitled to claim.
What if I have an employee on/about to go on maternity leave?
Employees must take at least two weeks’ maternity leave (four weeks if in a factory or workshop) immediately following the birth of a baby. This is a health and safety requirement. In practice, most women start their maternity leave before they give birth.
If the employee is eligible for statutory maternity pay (SMP) or Maternity Allowance, the normal rules apply, and they will be entitled to claim up to 39 weeks of statutory pay or allowance. If they qualify for SMP, they will still be eligible for 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. Some employers “top up” statutory maternity pay and their employees are eligible for an enhanced, earnings related rate of pay.
If the employee is eligible for enhanced (contractual) maternity pay from employer, this is included within the wage costs that the employer can claim through the scheme.
The same principles apply if they qualify for contractual adoption pay, paternity pay or shared parental pay.
If an employee is currently pregnant and due to start maternity leave, they will start maternity leave as usual.
If their earnings have reduced due to a period on furlough or statutory sick pay prior to their maternity leave starting this may affect their statutory maternity pay.
The same principle applies to contractual adoption pay, paternity pay and shared parental pay.
What’s the position on tax, Employer National Insurance and pension contributions?
Wages of furloughed employees will be subject to income tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.
All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.
Employers can claim a grant from HMRC to cover wages for a furloughed employee equal to the lower of 80% of an employee’s regular salary or £2500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.
Employers can choose to provide top-up salary in addition to the grant. Employer National Insurance contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. 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 5 April and will be £520 per month from 6 April 2020 onwards).
Is NMW/NLW payable during furlough?
Pay when on furlough does not have to meet NMW/NLW because these rates are only payable for hours worked.
However, if workers are required to for example, complete online training courses while they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
What will I need to make a claim?
Only one claim can be made at least every three weeks (minimum period of furlough). The employer will need:
- its ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of three weeks)
- its bank account number and sort code
- its contact name
- its phone number
The employer should make claim in accordance with actual payroll amounts at the point at which payroll is run or in advance of an imminent payroll.
The employer must pay the employee all the grant it receives for their gross pay, no fees can be charged from the money that is granted.
Can employees do any work for me during furlough?
Once employees are on furlough, they will not be able to work for their employer, but can undertake online training or volunteer subject to public health guidance, as long as they are not making money for their employer or providing services to their employer.
If workers are required to, for example, complete training courses while they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
If the employer chooses to place the employee on furlough, the employee will need to remain on furlough for a minimum of three weeks. However, the employer can place an employee on furlough more than once, and one period can follow straight after an existing furlough period, while the scheme is open.