Coronavirus Job Retention Scheme and Furloughed Workers

This is a developing article that will be updated throughout the day. Last updated 29 May 2020 at 6.30pm.

On 29 May 2020, The Chancellor announced a gradual withdrawal of the government’s Coronavirus Job Retention Scheme over the next five months.

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Coronavirus Job Retention Scheme – Key Dates

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers. It is designed to support employers whose operations have been severely affected by COVID-19. The scheme ends on 31 October;
Between 1 March and 31 July 2020, employers will be reimbursed 80% of the employee’s regular wage, up to £2,500 per employee, per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions;
10 June 2020 will be the last day employees can put staff on furlough, with the scheme closing for new employees to go on furlough after the end of June;
From 1 July 2020, employers will have the flexibility to bring back employers for a number of days per week.
From August 2020 the taper starts, the government still pays 80% of wages up to £2,500 but employers must now pay ER NICs and pensions contributions;
From September 2020, Government pays 70% of wages up to a cap of £2,187.50. Employers will be asked to pay 10% towards employees wages plus ER NICs and pension contributions;
From October 2020, Government pays 60% of wages up to a cap of £1,875. Employers will be asked to pay 20% towards employees wages plus ER NICs and pension, with the scheme ending on 31 October;

Coronavirus Job Retention Scheme – Key Points

Employers can claim for any regular payments they are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments is excluded;
Employers can choose to provide top-up salary in addition to the grant but does not have to nor will it be funded through the scheme;
The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account;
Furloughed employees must have been on the PAYE payroll on or before 19 March 2020 and can be full-time, part-time, agency contractors or those on flexible or zero-hour contracts. Salary will be calculated as follows:-
- - For salaried employees: salary before tax as it stood on 28 February 2020;
  - For employees with irregular earnings who have been employed for a full 12 months: the higher of: (a) same month’s earnings from the previous tax year; or (b) average monthly earnings from the 2019/2020 tax year
  - For employees with irregular earnings who have been employed for less than 12 months: an average of monthly earnings since employed.
    - Further guidance on how employers can calculate Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions will be released before the scheme goes live.

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer;
A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for the business;
Employees must be furloughed for a minimum of 3 consecutive weeks;
Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working, therefore furloughed employees would fall below NLW/NMW. This means that furloughed workers who are not working can be paid the lower of 80% of their salary or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage.
When the scheme ends, employers can make a decision as to whether the furloughed employees can return to work or be made redundant;
HMRC confirmed employees can be furlough by one employer and continue to work for another or take on a new employment;
Directors of Limited companies and members of LLPs can be furloughed in the same way as other employees and continue to complete statutory duties but will only be able to claim 80% of their PAYE salary (not dividends), up to £2,500 per month.

How to furloughed employees

Furloughed is when employers ask employees to take a temporary leave of absence due Coronavirus (COVID-19) but kept on the payroll.
Affected employees will need to be designated as ‘furloughed workers’. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation and therefore a variation of contract is recommended. Employers may need to seek legal or HR advice on the process;
To be eligible, employees must be furloughed and cannot work. If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.
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;

How to claim Coronavirus Job Retention Scheme

The online HMRC service for employers to use to claim under the Coronavirus Job Retention Scheme (CJRS) is now available.
Employers will need to calculate the amount being claimed. HMRC published guidance on how to calculate 80% of wages, NICs and pension contributions, along with an online calculator.
Employers pay the furlough payment of 80% of an employee’s regular wage, up to the value of £2,500 (or the total amount if voluntarily topped up) and processed through payroll and report payments to HMRC using the Real Time Information (RTI) system;
Employers to submit one claim every 3 weeks;
Once HMRC has checked your claim, and if you’re eligible, will pay by BACS to a UK bank account within 6 working days of claim submission;
Employers can claim 14 days in advance of payroll and potentially have the funds from HMRC to pay employees;
HMRC have confirmed they will “retain the right to retrospectively audit all aspects of your claim”.

Coronavirus Job Retention Scheme – Key Dates

Coronavirus Job Retention Scheme – Key Points

How to furloughed employees

How to claim Coronavirus Job Retention Scheme

Further Reading

Bhimal Hira