CJRS
 
Sentient Group Ltd
 
Info Update 2020/12                                                         Issue Date: 27/03/2020
 
Coronavirus Job Retention Scheme
 
To support employers whose operations have been severely affected by coronavirus (COVID-19), the Chancellor of the Exchequer introduced the Coronavirus Job Retention Scheme (CJRS).

HMRC has now published some guidance on the CJRS. This is below, although we have tried to condense it, slightly.

What is the CJRS?
The scheme enables employers to claim 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period of the scheme.

When did CJRS start and how long will it last?
It is temporary, and open for three months, starting 1st March 2020. However, the Chancellor of the Exchequer did state he would keep it under review and that the scheme might be extended.

Who can use the CJRS?
The scheme is open to all UK employers including: business, charities, recruitment agencies (agency workers paid through PAYE) and public authorities providing they have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme.

Who can you claim for?
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, whether full-time; part-time; or on agency contracts; or flexible or zero-hour contracts. For the avoidance of any doubt:
  • employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme; and
  • this scheme is only for employees on agency contracts who are not working.

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

During the furloughed period:
  • Employees cannot undertake work for or on behalf of the organisation. This includes providing services or generating revenue.
  • The employee’s wage will be subject to usual income tax and other deductions.

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.

You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for the organisation.

To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.

What if your employee is on unpaid leave?
Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
 
What if your employee is on Statutory Sick Pay? 
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.

What if your employee has more than one job?
If your employee has more than one employer, they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
 
Can employers rotate employees on furlough leave? 
There is nothing in the guidance which prohibits rotating furlough leave amongst employees.  However, furlough leave has to be a minimum period of 3 weeks.  This means that if an employee has completed a 3 week period of furlough leave and has returned to work; if the employee was to be furloughed for a second time, that would need to be for a minimum 3 week period. 

What if your employee does volunteer work or training?
A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.

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.

What if your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay?
If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, or Statutory Adoption Pay (SAP) or Statutory Paternity Pay (SPP) etc., the normal rules apply. However, if you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme. The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.

How do you work out what you can claim?
Employers need to make a claim for wage costs through this scheme.
You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Note: Fees, commission and bonuses should not be included.

As a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.

HMRC will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.

Full time and part time employees
For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Again, 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, you 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, you can claim for an average of their monthly earnings since they started work.

If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.

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 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 5th April and will be £520 per month from 6th April 2020 onwards).

National Living Wage/National Minimum Wage
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.

What you’ll need to make a claim
Employers should discuss with their staff and make any changes to the employment contract by agreement. 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.

To claim, you will need:
  • your PAYE reference number
  • the number of employees being furloughed
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 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 will retain the right to retrospectively audit all aspects of your claim.

Claim
You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.

What to do after you’ve claimed
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, 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. 
 
What happens when the government ends the scheme?
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).

Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.

Employees that have been furloughed
Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

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.
 
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.

Tax Treatment of the Coronavirus Job Retention Grant
Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles. Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes. 
 
 
The advice and comment in this update is not meant to be an authoritative statement of the law. The articles and summaries should not be applied to any specific set of facts and circumstances without seeking further advice. Whilst every care is taken to ensure that the content is correct Sentient cannot accept responsibility for the accuracy of statements made nor the result of any actions taken by individuals after reading such.
 
 
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