The Coronavirus Job Retention Scheme will close on 31 October 2020.
On 24 September, the Chancellor announced the introduction of the Job Support Scheme (JSS) to help businesses facing lower demand due to coronavirus keep employees in their employment. This followed calls from the CBI for an urgent successor to the Job Retention Scheme, which closes on 31 October 2020. An expansion of the JSS was announced on 9 October to support businesses, on more generous terms, which are legally required to close because of local restrictions or have previously been unable to open. You can find out more information about whether the JSS can help your business here. And more information on the expanded JSS can be found here.
The Coronavirus Job Retention Scheme is changing:
On 29 May the Chancellor outlined details on the second phase of the Coronavirus Job Retention Scheme (CJRS), which has been extended until the end of October. The changes include the introduction of flexibility from 1 July 2020, a month earlier than previously announced, and asking businesses to contribute to the pay of employee’s furloughed hours from 1 August 2020.
Below you will find everything your business needs to know about furloughing employees in the second phase of the Coronavirus Job Retention Scheme. From who’s eligible to how to claim support, here are the answers to the top questions businesses are asking.
You can find the government’s updated guidance for employers here. Updated guidance for employees can be found here. Making a claim under the Scheme is accessible here. Where the guidance does not clarify outstanding questions, the CBI is following up with the government to issue further clarification in subsequent guidance.
How will the JRS change from 1 July?
Employers will be able to furlough employees on a part-time basis while permitting part-time work, with employers able to agree any working arrangements with previously furloughed employees. Employers will be required to pay the worker’s normal wages for any hours worked when not on furlough, while still being able to claim the grant for the hours not worked. There will be no minimum furlough period, that is no minimum amount of time that an employee must be on temporary leave, allowing employers a high degree of flexibility to decide the hours and shift patterns employees will work on their return.
It’s important to note that there is no obligation for an employer to use “flexible furlough” – employers are free to continue full furlough for employees until the scheme ends on 31 October 2020.
How will cost sharing between the employer and the government work in the second phase of the JRS?
From August 2020, the level of government grant provided through the JRS will be tapered. All employees will continue to receive 80% of their salary (up to £2,500 per month) until 30 October, with employers’ contributions gradually increasing as follows:
August: The government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICs and pension contributions.
September: The government will pay 70% of wages up to a cap of £2,190. Employers will pay ER NICs, pension contributions and 10% of wages to make up the 80% wages or £2,500 total cap.
October: The government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up the 80% wages or £2,500 total cap.
What happens if an employer has not claimed enough from the JRS?
If an employer has made an error that has resulted in receiving too little money, they will still need to ensure they pay their employees the correct amount. Businesses should contact HMRC to amend their claim.
After 31 July, employers will no longer be able to add employees to a claim relating to the period up to 30 June. It is important to make sure that any remaining claims still to be made for the period to 30 June include all eligible employees. But amendments for any other errors made that resulted in not claiming enough from the JRS will still be permitted after 31 July.
What happens if an employer has claimed too much from the JRS?
If an employer has made an error in a claim and has therefore received too much, they must pay this back to HMRC. Further information can be found here.
In this situation employers can:
- Tell HMRC as part of their next online claim. In this case their new claim will be reduced (by the overclaimed amount in the previous claim) and they will need to keep a record of the adjustment for six years
- Contact HMRC to pay the money back. They should only do this if they are not submitting another claim.
If an employer has overclaimed a grant and has not repaid it, they must notify HMRC by the latest of either:
- 90 days after the date they received the grant they were not entitled to
- 90 days after the date they received the grant that they were no longer entitled to keep because circumstances changed (as an example the employee you were claiming for has left in the meantime)
If employers do not do this, they may have to pay a penalty.
What does ‘closed to new entrants’ mean?
In its second phase, the CJRS will be closed to new entrants from 30 June. Thereafter, it will only be available to employers that have previously used the scheme and for employees they have previously furloughed. Any employee who has been furloughed for at least three consecutive weeks between 1 March and 30 June is eligible for furlough after 1 July. Employees do not need to be furloughed on 30 June date itself to qualify.
Are there any exceptions to the 10 June cut-off date to furlough employees for the first time?
Yes. An employer can furlough an employee returning from statutory maternity, paternity, shared parental or parental bereavement leave after 10 June, even if furloughed for the first time.
Is there a cap on how many employees an employer can furlough at any one point?
Yes. A company cannot furlough more than the maximum number of people furloughed in any previous month. For example, if an employer submitted three claims between 1 March 2020 and 30 June in which the total number employees furloughed in each respective claim was 30, 20 and 50 employees, the maximum number of employees that employer could furlough in any single claim starting on or after 1 July would be 50.
Does the salary calculation take into consideration commission and bonuses that are usually paid in the reference period?
Employers can claim for regular payments they are obliged to pay their employees. This includes compulsory commission, as well as fees and past overtime. However, discretionary commission should be excluded, as well as discretionary bonuses (including tips) and non-cash payments.
As the government’s contribution to the grant decreases, do employers have to top up the 20% of an employee’s wage and go beyond the guaranteed 80% of employee’s salary?
No. But all employees will continue to receive 80% of their salary (or max £2,500 per month) until October as employers’ contributions will increase An employer can choose to top up an employee’s salary beyond the guaranteed 80% but is not obliged to.
Is there a minimum furlough period?
From 1 July, part-time furloughing of employees is possible and employers are able to agree any working arrangements with previously furloughed employees. This means that there is no minimum furlough period; that is, no minimum amount of time that an employee must be on temporary leave.
Is there a minimum claim period?
Yes, the period that an employer can claim for must be for a minimum claim period of seven calendar days (one week). It will only be possible to claim for a period of less than a week if the period claimed for includes the first or last day of the month and a claim has already been made for the immediately preceding period.
Can a claim period span two months?
No. It will not be possible for a claim period to span two calendar months because the level of government subsidy will change each month. Employers can only make one claim per claim period and must therefore claim for all workers furloughed during the claim period.
Employers can continue to make claims before, during or after the payroll is run. Employers can make claims up to 14 days before the end of the claim period. However, for flexible furlough, it is best to wait until as close to the end of the claim period as possible, so that the employer is certain of the actual hours worked by the worker during the claim period.
Can an employee work while on furlough?
No. During hours in which an employee is recorded as being on furlough, an employer cannot ask them to do any work that: makes money for their organisation or any organisation linked or associated with their organisation or provides services for their organisation or any organisation linked or associated with their organisation. But employees can take part in training, volunteer for another employer or organisation, work for another employer (if contractually allowed).
Can an employee undertake training while on furlough?
Yes. Furloughed employees can engage in training during hours in which an employer records them as being on furlough, as long as in undertaking the training the employee does not provide services to, or generate revenue for, or on behalf of their organisation or a linked or associated organisation.
Where training is undertaken by furloughed employees, at the request of their employer, they are entitled to be paid at least their appropriate national minimum wage for this time.
Are employers breaching the law if the 80% of an employee’s wage paid by the government (and the employer) falls below National Living Wage (NLW) or National Minimum Wage (NMW) rates?
No. Individuals are only entitled to the NLW/NMW for the hours they work. Furloughed workers are not allowed to work for you during this period, so there is no minimum wage to comply with. You have to pay the lower of 80% of their salary or £2,500. This is the case even if, based on their usual working hours, this falls below NLW/NMW.
Are National Insurance Contributions and auto enrolment still due on the £2,500 grant? Can the grant be used to pay non-wage costs such as employer NIC or pensions contributions?
Employers remains liable for associated Employer NIC and minimum automatic enrolment. If the employer decides to pay a top up, the employer will be responsible for paying the additional NIC and automatic enrolment.
Employers are also responsible for any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings.
From 1 August, employers are required to pay NIC and minimum automatic enrolment for the hours that their employees are furloughed.
Can employees that were due a pay rise during the furlough period still receive it? If so, can employers claim for 80% of the employees’ new salary via the grant?
The guidance does not clarify this question.
How does the Coronavirus Job Retention Scheme interact with Statutory Sick Pay (SSP)?
Employees that have been furloughed have the same rights as they did previously – this includes employees’ entitlement to SSP where they are eligible.
If employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee. Such an employee can continue to be furloughed from 1 July so long as the employer has previously submitted a claim for them in relation to a furlough period of at least three consecutive weeks taking place any time between 1 March 2020 and 30 June.
However, if an employee becomes sick while furloughed it is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate. If a furloughed employee who becomes sick is moved onto SSP, employers can no longer claim for the furloughed salary.
How does the Coronavirus Job Retention Scheme interact with the Apprenticeship Levy?
Apprentices can be furloughed and continue to train during this period. This includes the 20% of-the-job requirement for the Apprenticeship Levy. All apprentices must be paid the appropriate minimum wage for the time they spend training – i.e. the Apprenticeship Minimum, National Living or National Minimum Wage. Employers need to pay this in full, covering any shortfall between an employee’s appropriate minimum wage and amount they can recover via grant. The grant does not cover employers’ Apprenticeship Levy obligations.
Does an employer need to demonstrate that it is otherwise planning redundancies in order to furlough individuals?
The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 19 March 2020, which were notified to HMRC on an RTI submission on or before 19 March 2020.
Was the employee employed with you as of this date?
Date RTI submission notifying payment was made to HMRC
Eligible for CJRS?
28 February 2020
On or before 28 February 2020
28 February 2020
On or before 19 March 2020
28 February 2020
On or after 20 March 2020
19 March 2020
On or before 19 March 2020
19 March 2020
On or after 20 March 2020
On or after 20 March 2020
On or after 20 March 2020
Can employers roll employees on and off furlough?
Yes. Under the second phase of the JRS employers will still be able to bring employees off furlough and re-furlough them at a later date.
Will employees accrue holiday whilst being on furlough?
Can employees take holiday (including bank holidays) whilst being on furlough? If so, do employers have to top up the government’s grant money to pay holidays at full pay?
Yes, furloughed workers can take annual leave and the JRS grant continues during this time. Holiday pay must be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Employers will have the flexibility to restrict when leave can be taken if there is a business need and the correct notice is given. In cases where an employee usually works on bank holidays the employer can agree that this is included in the grant payment. If an employee usually takes the bank holiday as leave then the employer would either have to top up the employee’s pay to their usual holiday pay or give them a day of holiday in lieu.
Can an employee on furlough with one employer start a new paid job with a second employer?
Yes, so long at is it contractually allowed by the original employer. The second employer will need to complete a starter checklist, which can be found here.
Can company directors, owner-mangers or pension trustees be furloughed?
Yes. Complying with statutory duties does not constitute ‘work’ during the period of furlough.
Can employees working on a Tier 2 visa be furloughed via the Job Retention Scheme? Do employers have to top up grant money to meet the minimum salary threshold of a Tier 2 migrant?
Employees that are Tier 2 migrants can be furloughed. The Home Office has confirmed that employers do not need to top up an employee’s salary beyond the 80% or £2,500 cap paid by the government to meet minimum Tier 2 salary thresholds.
Can the employer choose to furlough some but not other employees within a business or department?
Yes. Employers will need to ensure that their consultation and notification processes for furloughing employees is in line with relevant equalities and employment law.
Do employers have to go through a selection process, like for redundancy, when furloughing individuals?
Yes. When furloughing employees, employers are still subject to relevant employment and equalities laws. This includes proper consultation with employees and notification that they will be put on furlough.
Will furloughed employees have to sign a new employment contract?
The guidance does not specify that employees need to physically sign a new employment contract. To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming through the scheme. Collective agreement reached between an employer and a trade union is also acceptable for the purpose of such a claim.
Employees can enter into a flexible furlough agreement more than once. There needs to be a written record of the agreement, but the employee does not have to provide a written response. A record of this communication must be kept for five years. If employees are furloughed part-time the employer should keep records of how many hours their employees work and the number of hours they are furloughed.
If an employee asks to be furloughed because they cannot work due to childcare responsibilities (because of nursey/school closures) can an employer agree to this?
Yes. Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. Such an employee can continue to be furloughed from 1 July so long as they were put on furlough for three consecutive weeks ending on or before 30 June. This applies to employees that cannot work because they are caring for children or a vulnerable individual in their household.
Can employers furlough employees that have been told to ‘shield’ themselves in line with public health guidance?
Yes. Employees who are unable to work because they are shielding in line with public health guidance (or need to stay home with someone who is shielding) can be furloughed. Such an employee can continue to be furloughed from 1 July so long as they were put on furlough for three consecutive weeks ending on or before 30 June. Employers must ensure they follow all existing employment and equalities law – the decision to furlough an employee in a vulnerable group should be an agreement between both parties.
Does an employer need to reach agreement with an employee before being ‘on furlough’, as is the usual process for any reduction in pay?
Yes. Both employees and their employer must agree before an individual can be put ‘on furlough’ – usual consultation and notification processes apply.
Is there a minimum period within which the employer cannot make a furloughed employee redundant?
No. Employers can make employees redundant while they are ‘on furlough’ or immediately after. If an employee is made redundant while on furlough, their redundancy rights are not affected.
When the government ends the Scheme, employers will need to decide whether employees can return to work and, if not, consider whether it is necessary to make them redundant. Employees that have been furloughed have the same rights as they were entitled to previously – this includes rights against unfair dismissal and redundancy.
On 31 July the government has introduced new legislation that ensures that furloughed employees receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate. The changes will also apply to statutory notice pay and awards for unfair dismissal cases that need to be based on full pay rather than wages under JRS. But this legislation does not impact any enhanced redundancy pay that may be stipulated in the terms and conditions of an employee’s individual employment contract.
How to calculate salary for hours worked on flexible furlough from 1 July?
To calculate the pro-rated subsidy for flexible furlough, the employer will have to calculate the employee’s usual working hours in the relevant claim period and subtract the hours actually worked during the period. This will give the number of furlough hours in the claim period. Employers should then pro-rate the grant claim, using the proportion of furlough hours against usual hours.
For an employee who has fixed contractual hours, the employee’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, 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. Employers will need to make this proportionate to the claim period by dividing employee’s usual hours by the number of calendar days in the work-pattern to get usual daily hours, multiplied by the number of days in the claim period (rounded up if not a whole number). For detailed guidance and example calculations please see here.
What is the process employers need to go through to apply for, and receive, the government’s grant?
To calculate a grant claim, employers will need to calculate employee’s usual working hours subtract their actual hours worked during claim period. Workers who are on full-time furlough will receive 80% of their regular wages up to the cap of £2,500 per month. Employees on flexible furlough will receive the grant proportionate to their furloughed hours – which means any hours worked will also reduce the maximum government subsidy available on a pro-rata basis. Information about how to access and apply for grants can be found here.
Can a new employer furlough the employees of a previous business in cases when a change in ownership happened?
Yes, a new employer can furlough employees of a previous business transferred after 28 February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership. In order to claim in these circumstances, the new employer needs to have previously submitted a claim for the employees in relation to a furlough period of at least three consecutive weeks taking place any time between 1 March 2020 and 30 June.
A new employer is also eligible to claim under the CJRS in respect of the employees of a previous business transferred after 10 June 2020 as long as:
- the TUPE or PAYE business succession rules apply to the change in ownership.
- the employees being claimed for have previously had a claim submitted for them by their prior employer in relation to a furlough period of at least three consecutive weeks taking place any time between 1 March 2020 and 30 June
In these circumstances, the maximum number of employees that the new employer can claim for will be the total of both:
- the maximum number of employees the new employer claimed for in any one claim ending on or before 30 June
- the number of employees that are being transferred to the new employer which have had a claim submitted for them in relation to a furlough period of at least three consecutive weeks taking place any time between 1 March 2020 and 30 June. This is subject the maximum cap the previous employer was subject to.
Can a new PAYE scheme consolidated after the 28 February make claims under the JRS?
Yes. If a group of companies have multiple PAYE schemes and there is a transfer of all employees from these schemes into a new consolidated PAYE scheme after 28 February 2020, the new scheme will be eligible to furlough those employees. To claim in these circumstances, the new employer needs to have previously submitted a claim for them in relation to a furlough period of at least three consecutive weeks taking place any time between 1 March 2020 and 30 June.
In addition, where a group of companies have multiple PAYE schemes and there is a transfer of all employees from these schemes into a new consolidated PAYE scheme after 10 June 2020, the new scheme will be eligible to continue to furlough and claim for employees that have previously had a claim submitted for them in relation to a furlough period of at least three consecutive weeks taking place any time between 1 March 2020 and 30 June.
How will the Coronavirus Job Retention Grant be treated with regard to tax purposes?
Payments received under JRS must 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.
Can furloughed employees continue working as union or non-union representatives?
During hours which an employer records employee as being on furlough, employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers. However, in doing this, they must not provide services to or generate revenue for, or on behalf of the organisation they work for or a linked or associated organisation.
What is the Job Retention Bonus?
On 8 July the Chancellor announced the Job Retention Bonus – a one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Under the Job Retention Bonus scheme payments will be made from February 2021. Further information can be found here.
Who is eligible for the Job Retention Bonus?
Employers will be able to claim for employees who:
- Were furloughed and had a Coronavirus Job Retention Scheme claim submitted for them that meets all relevant eligibility criteria for the scheme
- Have been continuously employed by the relevant employer from the time of the employer’s most recent claim for that employee until at least 31 January 2021
- Have been paid an average of at least £520 a month between 1 November 2020 and 31 January 2021 (a total of at least £1,560 across the three months). The employee does not have to be paid £520 in each month, but must have received some earnings in each of the three calendar months that have been paid and reported to HMRC via RTI
- Have up-to-date RTI records for the period to the end of January
- Are not serving a contractual or statutory notice period, that started before 1 February 2021, for the employer making a claim.