HMRC has announced that the Coronavirus Job Retention Scheme (CJRS) has been extended.
The scheme allows employers to put employees on furlough, which is a form of paid leave. Furlough can either be full-time or part time basis. Employees on furlough must receive at least 80% of their regular wages up to a maximum of £2,500 per month for any hours not worked.
From March to July, the government funded the 80% up to the £2,500 maximum, plus employer National Insurance Contributions (NICs) and pension contributions. But this was less between August and October 2020, removing government contribution on employer NIC and pension contributions, and lower percentage on government contribution on wages.
The scheme was expected to close on 31 October 2020 and be replaced with a new Job Support Scheme (JSS) but extended until 02 December 2020 and extended further until 30 April 2021.
Currently, the government will pay the 80% of an employee’s regular wages up to a cap of £2,500 for any hours not worked while on furlough. The employer will not have to pay to wages for hours not worked but will be responsible for employer NICs and pension contributions on the full amount paid to employees. For partial furlough, employers will also have to pay full pay for any hours worked. These arrangements will continue throughout the UK until 30 April 2021.
Who can claim?
All employers must have a UK bank account and a UK PAYE payroll scheme on or before 30 October 2020. The Scheme covers part of the wages of anyone who was an employee for tax purposes on 30 October 2020, as long as they were notified to HMRC on a PAYE Real Time Information (RTI) submission between 20 March 2020 and 30 October 2020.
There is no requirement for the employer to have used the Scheme previously or for the employee to have been on furlough at any point prior to 30 October 2020.
Employees made redundant after 23 September 2020 can be rehired and placed on furlough under the Scheme, as long as they were employed as at 23 September 2020 and they were notified to HMRC on an RTI submission between 20 March 2020 and 30 October 2020.
Which employees you can put on furlough?
You can put the employee on furlough as long as they were employed by you on or before 30 October 2020. You must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.
Employers must agree with the worker any furlough arrangements and confirm that agreement in writing. HMRC guidance makes it clear that whilst any furlough arrangements must be agreed with employees and recorded in writing, employees do not have to provide a written response confirming their agreement. This leaves open the possibility for employers to rely on implied consent in appropriate circumstances.
How do you compute a worker’s usual hours?
For employees who have previously been on furlough, employers will be able to use the same hours calculation that they have previously used under the scheme.
For an employee who was on the payroll as at 19 March 2020 or who was on furlough at any point on or before 31 October 2020, the worker’s usual hours will be their normal contractual hours at the end of the last pay period ending on or before 19 March 2020. For an employee, whose hours vary, the worker’s usual hours will be the higher of the average number of hours worked in the 2019/20 tax year or the hours worked in the corresponding period within the 2019/20 tax year.
For everyone else, the employees’ usual hours will be their normal contractual hours at the end of the last pay period ending on or before 30 October 2020. For such employees, whose hours vary, the worker’s usual hours will be the average of their hours worked between 06 April 2020 and the start of furlough.
The employer will then need to calculate the number of usual hours in the relevant claim period. For example, the number of hours an employee who is contracted to work 40 hours per week will have usual hours of 40 hours per week. The employer claims for the whole month of November will need to calculate the number of usual hours in the month. This is computed by dividing 40 (hours per week) by seven (the number of calendar days in a week), this is the daily hours, and then multiplying this by the number of calendar days in the claim period (30 days in November). This does not produce a whole number (171.43) the hours are rounded up to the nearest whole number (i.e. 172). The worker’s usual hours for November are 172.
Where a claim period does not match the pay period (for example, the employer pays weekly but submits monthly claims under the Scheme), the employer can calculate the employee’s usual hours in each pay period, instead of the claim period. If this method is used and the result is not a whole number, the hours are rounded up or down to the nearest whole number.
What records must be kept?
The employer must keep a written record of the agreed furlough arrangements. This must be kept for at least five years. In addition, where flexible furlough is used, employers must keep records of how many hours the worker works and the number of hours they are furloughed (i.e. not working). Records of all claims and calculations must be kept for at least six years and should include:
• the amount claimed and the claim periods for each employee
• the claim reference number
• the calculations used when preparing the claims
• the usual hours worked by flexibly furloughed employees (including the calculations that were required)
• the actual hours worked by flexibly furloughed employees.
When is the deadline for the employer to make its claim under the Scheme?
Any claims for furlough ending on or before 31 October 2020 must be submitted by 30 November 2020. Claims for furlough during November 2020 must be submitted by 14 December 2020. Claims to each subsequent month must be submitted by day 14 of the following month.
What happens when the Scheme ends?
HMRC had originally said that a new Job Support Scheme (JSS) would replace Coronavirus Job Retention Scheme. However, this is likely to be reviewed now that the Coronavirus Job Retention Scheme has been extended until 30 April 2021.
HMRC had also announced a Job Retention Bonus – will work alongside newly announced Job Support Scheme. A one-off bonus payable to employers of £1,000 for each furloughed employee who remains continuously employed until 31 January 2021. This bonus will now be suspended, given the Job Retention Scheme has been extended until 30 April 2021. HMRC has said it will look to announce an alternative job retention scheme at the appropriate time.