Hassle Free HR – Coronavirus Job Retention Scheme
On Friday 20 March, the government announced its plans to provide financial assistance to help employers retain employees for an extended period of time, despite not being able to offer work, in order to avoid lay-offs and redundancies. They have called it the “Coronavirus Job Retention Scheme” and this page contains helpful information on how to use the scheme and who is eligible, etc.
What is the Coronavirus Job Retention Scheme?
The scheme enables employers to place their employees on “furlough” which essentially means putting employees on temporary leave of absence where they do not work and receive no pay, but are still retained and recorded as employees, to be brought back into the workplace when required. Employers who do this are able to obtain a grant from the Government to cover 80% of the furloughed employees’ wages, up to a maximum of £2,500 per employee per month, up until 1 September where payment of the scheme changes (more information below). The scheme is open to all employers, there are no restrictions. There has been a common misconception that this scheme is only applicable for employers who are considering lay-offs or redundancies, but the Government clarified that the scheme applies to any employee who is furloughed due to circumstances created by the Coronavirus.
HMRC opened the online portal, that allows employers to apply for the Coronavirus Job Retention Scheme, on 20 April 2020. The first reimbursements were made to employers on 30 April 2020.
The scheme was originally intended to be operational for three months, meaning the scheme was expected to end at the end of May 2020. However, on 12 May 2020 Chancellor Rishi Sunak confirmed the scheme was extended until October 2020, with some further “flexible” changes being implemented in July 2020. To avoid confusion, a separate section with information specifically referring to the “Flexible Furlough Scheme” can be found further down on this page.
On 29 May 2020 the Government confirmed that the Coronavirus Job Retention Scheme will remain in operation until 31 October 2020, as stated above, but will close to new applicants from 30 June 2020 onwards. An employee can only continue to be furloughed after this date if they have already been on furlough for three full weeks before 30 June 2020, which means the “cut off” date for new applicants is actually 10 June 2020.
On 17 July 2020 the Government confirmed that the Coronavirus Job Retention Scheme (original version and “flexible furlough) can be claimed for an employee who is service their statutory and / or contractual notice period. However, the grant cannot be used to substitute redundancy payments. It should be noted that the wording the Government has used is “serving notice”, not “payments in lieu of notice” so this only applies to employees who remain on furlough or flexible furlough during their notice period.
Original Coronavirus Job Retention Scheme
Who is Eligible?
- Any UK employer with a UK bank account is able to claim, but the employee must have been on PAYE payroll on 19 March 2020. As this date is mid-month, this only applies to employers who submitted real time information payroll data by 19 March 2020. Where this did not happen, employees who were hired in March may not qualify for furlough.
- The employee can be on any type of contract – part time, full time, employed agency, zero hours, apprenticeship, or variable hours, etc.
- Employees hired under a work visa. The Government has confirmed that placing an employee on furlough will not “breach” their work visa, as many employers feared.
- If an employee was employed on 28 February 2020 but made redundant before the 19 March 2020, you can agree to re-employ them and place them on furlough instead. The same can be said for employees who resigned or were dismissed after the 28 February 2020 but before the 19 March 2020, but it may be the case that, for specific business reasons, you do not want to re-employ these ex-employees and you’re under no obligation to do so. We advise employers to give this situation careful consideration before deciding how to act.
- Employees hired after 19 March 2020 cannot be furloughed or claimed for in accordance with this scheme.
- Employees who were TUPE’d over to their new employer on or after 28 February 2020, but before 19 March 2020, are eligible for furlough from their new employer if the TUPE or PAYE business succession rules apply to the change in ownership.
- Employees on sick leave or self-isolating should get Statutory Sick Pay (SSP), but they can be furloughed after their period of self-isolation / they recover from their illness. If an employee becomes ill during their period of furlough they should receive SSP, furlough should not be “abused” to “top up” the earnings of employees who would usually receive SSP.
- Employees who are classed as “Highly At Risk” and are therefore shielding in line with public health guidance can be placed on furlough. For more information on people classed as “Highly At Risk” please click here. Once the employee is no longer required to shield, they can return to the workplace or remain on furlough, depending upon the needs of the Company.
- Employees with “Caring Responsibilities”, which could cover anything from an elderly / vulnerable relative, to a child who is unable to attend school, can be placed on furlough. This was clarified on 4 April 2020 after it was decided unpaid leave for caring responsibilities could negatively impact women more than men, as women statistically tend to adopt more caring roles in family dynamics.
- Employees can only be placed on furlough if there is a written agreement between employer and employee. A “notice” of furlough will not suffice. Once it has been agreed, you must write to your employees confirming they have been furloughed and that you will be claiming 80% of their wages from the Coronavirus Job Retention Scheme.
- Employees who have two different jobs can be furloughed from both of their jobs, you do not need to consider an employee’s second job role when deciding if you will or will not place an employee on furlough.
- Employees who are furloughed are able to find alternative employment without their original role, or their furlough payments, being affected. However, the alternative employment cannot be with an employer who is “linked” to the original employer, any second role an employee takes must be entirely separate.
- Directors can be furloughed, but whilst on furlough they are unable to complete any work for the Company (other than their statutory duties) and only income subject to PAYE can be included in the amount claimed from the Government.
- Employees who are employed by their own Company (the Company that they own) can be placed on furlough. Owning the Company does not mean an employee is ineligible.
- Employees can be placed on furlough more than once, so you can choose to “rotate” your employees if you want to ensure fairness in the workplace. Before 1 July 2020, employees could only be rotated once they had been furloughed for a minimum of 3 weeks, but after 1 July 2020 the minimum period will be removed, meaning a period of furlough can be shorter than 3 weeks, which would enable more frequent rotation.
- Employees who refuse furlough may be at risk of redundancy or termination of employment, depending on the circumstances of your Company. However, any dismissal must be carried out in line with normal fair dismissal procedures and normal redundancy rules apply. You can still make the employee redundant while they are on furlough, or afterwards if there is still no work available for the employee. In this case, statutory redundancy pay (if applicable) and statutory notice, must be calculated on the employee’s normal average or actual weekly pay, prior to furlough.
- Normal equality laws apply when deciding who should go on furlough. You should ensure that you do not inadvertently discriminate against an employee with a protected characteristic, in line with the Equality Act 2010, when making your decisions.
- Employees who have been placed on furlough for a minimum of 3 weeks between 1 March 2020 and 30 June 2020 can continue to benefit from the scheme, or the Flexible Furlough Scheme (below) after 30 June 2020. If an employee has not been furloughed for a minimum of 3 weeks before 30 June 2020, they cannot be furloughed thereafter, with the exception of Maternity Leave returners (see below).
- Unless there is a right to furlough in the employment contract, you must gain agreement with your employees on designating them as a furloughed worker and reducing their pay by 20%.
- The agreement must be mutual between employer and employee. A “notice” of furlough, where an employee is “told” they are furloughed, rather than “asked”, is not acceptable.
- It’s unlikely that employees will withhold agreement when it is explained to them that the likely only other alternative is unpaid leave or redundancy.
- The agreement must be made in writing, it cannot be verbal. A record of this written agreement must then be retained for a minimum of 6 years, as it is expected the HMRC will audit claims once the Coronavirus crisis is over.
- We have a template letter which can be used for placing employees on furlough, and others to help you manage the Coronavirus situation – please contact us if you would like more information on these.
Public-Sector / Government Funding
- Where employers receive public funding for staff costs, and that funding is continuing, employers should use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them.
- This also applies to non-public sector employers who receive public funding for staff costs.
- Organisations who are receiving public funding specifically to provide services necessary to respond to the Coronavirus are not expected to furlough staff.
Calculating What to Claim
- Up until September 2020, you can claim at least 80% of your employees’ usual monthly earnings, up to a maximum of £2,500. From 1 – 30 September 2020, you will be able to claim at least 70% of your employees’ usual monthly earnings, up to a maximum of £2,190. You will be required to pay the additional 10% of their earnings, so your employees still receive 80% of their earnings. From 1 – 31 October 2020, you will be able to claim at least 60% of your employees’ usual monthly earnings, up to a maximum of £1,875. You will be required to pay the additional 20% of their earnings, so your employees still receive 80% of their earnings.
- Regardless of the percentage received from the Government, you must pay your employees at least 80% of their usual monthly earnings, up to a maximum of £2,500. The entire grant you receive must go to the employees; it cannot be used for any other purpose.
- Before 30 June 2020, you will be required to claim for a minimum of 3 weeks. From 1 July 2020 there is no “minimum” period for furlough, but claims must be for a period of 7 days or longer, any period of furlough or flexible furlough (below) that lasts less than 7 days will not be funded by the Government. There is no maximum claim period, you can continue to claim until the end date of the scheme (which is currently specified as 31 October 2020).
- You can only claim for payments from the employee’s first date of furlough (the first date the employee does not attend work), not the date the decision to furlough employees was made or communicated to employees, if these two dates are different.
- You can choose to “top up” the 80% employees are entitled to under the scheme, so that your employees’ pay remains the same as it was before they were furloughed. You do not have to do this though, it’s your choice.
- Your employees will still pay Income Tax, National Insurance contributions and any other deductions, such as pension contributions, from the wages they receive. The amounts payable will be altered to reflect the amount of money employees receive whilst they are furloughed.
- For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February 2020, should be used to calculate the 80%. “Past Overtime” payments, fees, and compulsory commission payments can be included. Discretionary commission payments and bonuses, tips, conditional payments or “benefits in kind” should not be included.
- If your employee has been with the Company for less than a year, you should claim for an average of their monthly earnings since they started work.
- For employees who’s monthly pay varies, who have been employed / on PAYE for a full year, you can choose to claim the higher of either:
- the amount the employee earned in the same month last year, or
- an average of their monthly earnings from the last year
- If you have employees who started work in February or before 19 March 2020, you should pro-rata their earnings from that month to calculate what to claim.
- Once you have 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 must pay for each employee. These can be included in the amount you are entitled to claim up until 31 July 2020. From 1 August 2020 onwards, you will be required to pay National Insurance and Pension contributions, you will no longer be able to claim these payments from the Government.
- The last date you can claim for any period ending on or before 30 June 2020 is 31 July 2020.
Family Friendly Leave and Furlough
- All employees must take at least 2 weeks Maternity Leave (4 weeks if in a factory or workshop) immediately following the birth of a baby. This is a health and safety requirement so an employee cannot be furloughed during this timeframe and cannot therefore be furloughed.
- In practice, most women start their Maternity Leave before they give birth.
- If an employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, then they will receive this rather than be furloughed. Normal rules apply and they will be entitled to claim up to 39 weeks of statutory pay or allowance. If they qualify for SMP, they will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower).
- The statutory flat rate is currently £151.20 a week. Some employers ‘top up’ Statutory Maternity Pay and their employees are eligible for an enhanced, earnings related rate of pay. If you do this, then you can claim the “enhanced” part of the maternity pay through the Coronavirus Job Retention Scheme.
- If you have an employee who is currently pregnant and due to start Maternity Leave, they will start Maternity Leave as usual.
- If your employee’s earnings have reduced due to a period on furlough or statutory sick pay prior to their Maternity Leave starting, this may affect their Statutory Maternity Pay. We are in the process of clarifying this.
- An employee who returned from Maternity Leave after 10 June 2020 can be placed on furlough, and they can continue to benefit from the scheme after 1 July 2020 even if they have not been furloughed for a minimum of 3 weeks before 30 June 2020. The employee must have been on the Company payroll on or before 19 March 2020.
- To furlough a Maternity Returner, you must have previously submitted a claim for another employee for a minimum of 3 weeks between 1 March 2020 and 30 June 2020.
- The above information also applies to Adoption Leave, Paternity Leave and Shared Parental Leave.
Tax, Employer National Insurance and Pension Contributions
- Wages of furloughed employees are subject to Income Tax and National Insurance as usual. Your 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.
- You are liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings, unless your employee has opted out or has ceased saving into a workplace pension scheme. The amounts payable will be altered to reflect the amount of money your employees receive whilst they are on furlough, you will not be required to pay contributions based on the employees’ usual earnings.
- 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 furloughed employees, equal to 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, up until 31 July 2020. After 31 July 2020, you will still be able to claim and receive the grant for employee earnings, but you will no longer be able to claim for employer National Insurance or Pension contributions.
- Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary (where you choose to “top up” your employees’ earnings to 100% of their wages during the furlough scheme) 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 has been £520 per month since 6 April 2020).
National Minimum Wage (NMW) / National Living Wage (NLW)
- When an employee is on furlough and receiving 80% of their normal wages, it does not matter if this amount is less than the NMW / NLW, because the employee is not working.
- However, if workers are required to complete online training courses whilst they are furloughed, then they must be paid at least the NMW / NLW for the time spent training, even if this is more than the 80% of their average wages.
What You Will Need to Make a Claim
- your ePAYE reference number (if you are not already enrolled for PAYE online then you must sign up. This scheme is only available for employers who use PAYE online systems. The process can take 10 days).
- the number of employees being furloughed
- the claim period (start and end date of the furlough. Up until 30 June, the minimum period of furlough is 3 weeks. After 1 July 2020, there is no “minimum period” of furlough, but the claim period must last at least 7 calendar days)
- the amount you are claiming
- your Company bank account number and sort code
- a contact name and phone number
- You should make the claim in accordance with actual payroll amounts at the point at which payroll is run, or in advance of an imminent payroll.
- You must pay the employee all the grant they receive for their gross pay, no fees can be charged from the money that is granted.
Working During Furlough
- Once employees are on furlough, they will not be able to complete work for you before 1 July 2020, but they can undertake online training or volunteer (subject to public health guidance), as long as they are not making money for, or providing services to, the Company.
- Whilst an employee is on furlough and cannot complete work for you (which they can do after 1 July 2020), they can seek alternative employment and this will not prevent them from receiving their furlough payments as long as their other employer is not “linked” to your Company.
- If you place an employee on furlough, the employee will need to remain on furlough for a minimum of 3 weeks (up until 30 June 2020, after which there is no “minimum period”), but it can last longer if necessary, whilst the scheme is operational.
- You can support your furloughed employees by helping them to find volunteering or training opportunities. This could help employees to maintain positive mental health during furlough, which can be isolating and lead to low mood.
- Apprentices on furlough can continue with their training but whilst training they must not provide services or generate revenue for their employer.
- The apprentice, employer and training provider may need to consider whether a break in learning and/or granting extensions to the timetable for assessments, is necessary.
- HMRC have stated that they will not be pausing apprenticeship levy payments for employers.
Furlough and Annual Leave
HMRC has confirmed that employees on furlough can also utilise their annual leave. When an employee is on annual leave, they should receive their full contractual pay / the usual pay they would receive whilst on annual leave.
The Government has also confirmed that employees will be able to “carry-over” any untaken annual leave entitlement for the next two holiday years. More information on how holidays entitlement has been impacted by the Coronavirus can be found here.
The “Flexible Furlough Scheme” from 1 July 2020 onwards
On 29 May 2020, the Government confirmed that furloughed employees can return to work on a part-time basis from 1 July 2020 onwards. This part-time working can be in the form of any shift pattern etc., as long as the total weekly hours worked are below the number of hours the employee is contracted to work and would have usually worked before they were placed on furlough. When the employee is not working on a part-time basis, they will remain on furlough and they will continue to receive 80% of their usual wages. On 12 June 2020 further clarification was provided for the Flexible Furlough Scheme, which is detailed below:
Who is Eligible?
- Any employee who has been furloughed for a minimum of three consecutive weeks between 1 March 2020 and 30 June 2020 is eligible for the Flexible Furlough Scheme.
- The number of employees you can claim for from 1 July 2020 cannot exceed the total number of employees you claimed for before 30 June 2020.
- Similar to the original CJRS, before entering into a “flexible furlough” agreement / part-time working with an employee, the agreement must be confirmed in writing. A lack of a written agreement could prevent the employee from being eligible to receive grant funding.
- Employees can enter into a Flexible Furlough Agreement more than once, so if you have previously rotated employees via the Original CJRS, you can continue to do this.
Calculating What to Claim
The majority of information for calculating a claim remains the same as the above guidance for the Original CJRS. Where there are differences, these are detailed below:
- If an employee returns to work on a part-time basis, whilst still being covered by the scheme, the employer must ensure the employee receives their contractual / full pay for any hours worked. The employer cannot claim the funding for this.
- For any time when the employee is not completing work and is at home on furlough, the employee is entitled to receive 80% of their usual wages. The employer can claim this money, or a percentage of the 80%, as they can under the Original CJRS.
- The employer will need to calculate your employee’s usual hours, as well as the hours they have worked under the furlough scheme, for each claim period. If the employee’s working hours are fixed, or their pay does not vary with the number of hours worked, the reference period for calculating their hours will be the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020. If your employee works variable hours, which is defined as:
- An employee who is not contracted to a fixed number of hours
- An employee who’s pay is dependent on the number of hours they work
The Government has provided a helpful calculation that can be used to calculate their “usual hours”. This calculation can be found here.
- The “wage cap” implemented by the Government as part of the scheme, which is £2,500 until 31 August, £2,190 from 1 – 30 September, and £1,875 from 1 – 31 October, is still applicable during flexible furloughing, but is amended based upon the proportion of time an employee works during the period claimed for. For example, if an employee is at home for 60% of September and remains under the scheme but working for the other 40% of the time, then 60% of the cap applies to the employee. In this case, the cap would go from £2,190 to £1,314.
- The earliest you can make a claim for dates in July 2020 is 1 July 2020.
- Claims should only be made when you are sure of the exact number of hours an employee will have worked during the claim period. If you claim in advance and your employee works for more hours than you have stated when claiming, you will be required to pay some of the grant back to HRMC.
Tax, Employer National Insurance and Pension Contributions
The majority of information for tax responsibilities etc. remains the same as the above guidance for the Original CJRS. Where there are differences, these are detailed below:
- You will be responsible for the national insurance contributions and pension contributions for any hours where an employee has worked. This cannot be included in the money you claim from the Government. The grant will continue to cover the employer contributions for any non-working time, up until 31 July 2020.
National Minimum Wage (NMW) / National Living Wage (NLW)
- Employees must receive their usual contractual pay for any hours worked under the scheme. This means that they must receive at least the National Minimum Wage or National Living Wage for these hours, whichever is applicable.
- An employee who is managed under the Flexible Furlough Scheme can complete training during the hours they are recorded as “furloughed”, but they must receive at least the National Minimum Wage for these hours.
What You Will Need to Make a Claim
In addition to the information / steps that will need to be taken to make a claim under the Original CJRS, employers will need to provide the following:
- The number of hours the employee would normally have worked before being placed on furlough, for the period being claimed for.
- The number of hours the employee has or will have worked during the period being claimed for.
- A record of both of these numbers will need to be retained for a period of 6 years, in case the Company’s use of the scheme is ever audited.
Last reviewed on 21 July 2020