Posted: Wed 17th Jun 2020
To help employers deal with the impact of coronavirus the government launched the Coronavirus Job Retention Scheme (CJRS) to provide grants to cover part of the salary of employees' who would otherwise have been laid off.
The Coronavirus Job Retention Scheme was due to close on 31 October 2020 but the government has extended the scheme to 31 March 2021. Some of the information below may be out of date. Read the latest guidance here.
The latest official guidance for the Job Retention Scheme:
The Coronavirus Job Retention Scheme is a scheme open to all UK employers including charities and non-profits.
Employers can 80% of the usual monthly wage costs of furloughed employees (employees on a leave of absence) up to £2,500 a month.
Employers must pay income tax, employee National Insurance contributions and any pension payments.
Claims will be paid within six working days.
Employers across the UK can claim for employees who were employed and on their PAYE payroll on 30 October 2020.
Employees that were employed and on the payroll on 23 September 2020 who were made redundant or stopped working for their employer afterwards can be re-employed and claimed for.
How to furlough employees
Furloughing means keeping them on payroll but placing them on a leave of abscene during which they do not work for your business.
ACAS and HMRC offer the following guidance on how to furlough employees:
The employer needs to get agreement from the worker to do this, unless it's covered by a clause in the employment contract.
Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.
The employer can decide who to designate as a furloughed worker. If an employee disagrees with their employer's decision they'll need to talk to their employer and try to come to an agreement.
Any furlough agreements should be in writing. ACAS has published a furlough letter template here. It's a good idea to include:
the date furlough starts
when it will be reviewed
how to keep in contact during furlough
Employees can be furloughed for a minimum of three weeks.
Furloughed employees keep the same employment rights including Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and redundancy payments.
Employees you can claim for
Employers can claim for employees who were employed and on their PAYE payroll on 30 October 2020. The employer 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.
They can be on any type of contract including:
employees on agency contracts
employees on flexible or zero-hour contracts
To be eligible for the grant, furloughed employees cannot work for or on behalf of the organisation or business including providing services or generating revenue. While on furlough, the employee's wage will be subject to usual income tax and other deductions.
This scheme is only for employees on agency contracts who are not working.
There is no minimum furlough period. Flexible furlough agreements can last any amount of time. Employees can enter into a flexible furlough agreement more than once.
Although flexible furlough agreements can last any amount of time, unless otherwise specified the period claimed for must be for a minimum claim period of seven consecutive calendar days.
fully furlough employees - this means the employee does no work for the employer
flexibly furlough employees - this means employees can work for any amount of time, and any work pattern and claim the grant for the furloughed hours, with reference to hours the employee would usually have worked in that period
Employees on unpaid leave
If you placed your employees on unpaid leave after 28 February 2020 to deal with the impact of COVID-19, they can be furloughed and be eligible for the scheme.
Employees who are self-isolating or on sick leave
If an employees is on sick leave or self-isolating, they'll be able to get Statutory Sick Pay.
You cannot claim for employees while they're getting Statutory Sick Pay, but they can be furloughed and claimed for once they are no longer receiving Statutory Sick Pay.
You can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant.
Employees with caring responsibilities
Employees who are unable to work because they have caring responsibilities resulting from coronavirus can be furloughed. This includes employees who need to look after children.
Directors of limited companies
Directors of limited companies can use the scheme to access a grant for themselves if they had a salary through PAYE. Dividends are not covered by the scheme.
This includes sole directors of limited companies who are the sole employee.
Directors must stop working for their business during the period of furlough. They can perform their statutory duties.
The official guidance for this was published on 4 April. It states:
"As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed.
"Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would be judged reasonably necessary for the purposes, such as, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
"This also applies to salaried individuals who are directors of their own personal service company (PSC)."
How to make a claim
Claims will reopen for the Coronavirus Job Retention Scheme on 11 November 2020.
You will need to have the following:
a Government Gateway (GG) ID and password. If you don't already have a GG account, you can apply for one online
be enrolled for PAYE online. If you aren't registered yet, you can do so now
You'll need the following to make a claim:
your employer PAYE reference number
the number of employees being furloughed
National Insurance numbers for the furloughed employees
Names of the furloughed employees
Payroll/employee number for the furloughed employees (optional)
your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
the claim period (start and end date)
amount claimed (per the minimum length of furloughing of three consecutive weeks)
your bank account number and sort code
your contact name
your phone number
You will need to calculate the amount you are claiming. HMRC may retrospectively audit all aspects of your claim.
Claim for the 80% of the employee's salary.
Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.
You must pay the employee all the grant you receive for their gross pay and no fees can be charged from the money that is granted. You can choose to top up the employee's salary, but you do not have to.
If you have fewer than 100 furloughed staff you will be asked to enter details of each employee you are claiming for directly into the system - this will include their name, National Insurance number, claim period and claim amount, and payroll/employee number (optional).
If you have 100 or more furloughed staff you will be asked to upload a file with the information rather than input it directly into the system. We will accept the following file types: .xls .xlsx .csv .ods.
The file should include the following information for each furloughed employee: name, National Insurance number, claim period and claim amount, payroll/employee number (optional).
You should retain all records and calculations in respect of your claims.
If you use an agent who is authorised to act for you for PAYE purposes, they will be able to make a claim on your behalf. If you use a file only agent (who files your RTI return but doesn't act for you on any other matters) they won't be authorised to make a claim for you and you will need to make the claim yourself. Your file only agent can assist you in obtaining the information you need to claim (which is listed above).
What you can claim
You will receive a grant to cover 80% of an employee's regular wage or £2,500 per month, whichever is lower, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
Claims will be paid within six working days.
At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. You can choose to top up an employee's salary but you are not obliged to do so.
Employer National Insurance and Pension Contributions
All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.
You 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 £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.
You 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 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).
Income tax and Employee National Insurance
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.
The Coronavirus Job Retention Scheme was due to close on 31 October 2020 but the government has extended the scheme to 31 March 2021. Some of the information in this post may be out of date. Read the latest guidance here.
The latest coronavirus small business support information
We are keeping you updated on the latest information on how to access the government's coronavirus business support here. You can also find advice and ask a question on Enterprise Nation's coronavirus business advice hub. Follow Enterprise Nation on Twitter too for updates.