Today we are going to focus on summarising the ins and outs of the Furlough scheme, also known as the Coronavirus Job Retention Scheme (CJRS)
HMRC has published details of the CJRS which are available to read in full here:
We do suggest a thorough read of the guidance as it covers many areas (although some areas are still open for interpretation and we expect further information to be issued over the coming weeks).
We have outlined some key points below:
- For the purposes of CJRS, “employee” includes workers and agency workers provided they are subject to PAYE
- The CJRS only applies to employees who were employed on or before 28 February 2020.
- Where an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for CJRS
- Employees on sick leave will continue to get Statutory Sick Pay and employees on statutory parental leave, such as maternity leave will continue to get statutory parental pay in the normal manner. These employees can be furloughed after this ends.
What employees will receive
- Employees will receive 80% of their salary (less the usual income tax and NI deductions) up to a cap of £2,500
- Employees that have more than one employer can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
Full-time and part-time employees
- For salaried employees (whether full or part-time), the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%.
- Fees, commission and bonuses should not be included.
Employees whose pay varies
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, employers 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, employers can claim for an average of their monthly earnings since they started work.
If the employee only started in February 2020, employers should use a pro-rata for their earnings so far to claim.
Employees that are paid the National Minimum Wage
The HMRC guidance confirms that Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.
Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.
However, if workers are required to for example, complete online training courses whilst 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.
Please note the increase in the NMW rates from April 2020.
What employers can claim and how to claim CJRS
- Employers can apply for 80% of the employees’ employment costs PLUS an additional amount for Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
- Employers can apply for CJRS through an HMRC online portal (which is yet to be set up and which should be in place by the end of April 2020). Eligible businesses are those that created and started a PAYE payroll scheme on or before 28 February 2020 & have a UK bank account.
- The CJRS will be a grant and not a loan i.e. employers will not have to pay back the grant to HMRC during better times.
- The CJRS grants will be backdated to 1 March 2020 for an initial period until 31 May 2020, although the government may extend this if necessary.
- It would appear that employers are not required to prove to HMRC when designating furloughed workers that they are unable to provide those workers with work, or that the employer would otherwise need to make redundancies (unless further details are provided by HMRC to state otherwise).
The effect of furlough leave on continuity of employment
- Being placed on furlough leave will not break continuity of employment (it is a ‘temporary cessation of work’ that preserves continuity). Designated furlough workers will continue to accrue statutory rights
If you require assistance in making your furlough claim, do not hesitate to get in touch with our friendly team who will do their best to assist you.