The Scheme, announced on 20 March 2020 is aimed at enabling employers to retain staff during the COVID-19 pandemic.
How does it work
The Government will refund 80% of each furloughed employee’s wages as a grant administered by HMRC, up to £2,500 per employee per month.
The grant will cover, per month, whichever is lower between the following two:
- 80% of each furloughed employees’ wages,
- £2,500 per month.
Plus the grant will cover employer’s NIC and the minimum automatic enrolment employer pension contributions.
The Scheme will retain the current form and rules until the end of June.
From July, employers will be able to take furloughed staff back on a part-time basis, ensuring greater flexibility of the Scheme. Employers will only pay for the hours that their employees are working, while 80% of wages for the remaining hours will still be covered by the Job Retention Scheme grant.
From August, employers will be asked to contribute towards their furloughed employees’ salaries, ensuring that each one continues receiving 80% of their wages, while the Government’s support to cover such percentage will lower. Employers’ contribution will increase gradually month over month:
- In August, employers will be required to pay for the National Insurance and minimum pension contributions for their furloughed employees. The Government will still pay 80% of their wages up to £2,500.
- In September, on top of NI and pension contributions, employers will be required to pay 10% of their furloughed employees’ salaries, with the Government covering the remaining 70% up to a £2,190 cap.
- In October, the employers’ contributions to their furloughed workers’ wages will increase to 20%, while the Government will still provide 60%, up to £1,875.
Crucially, the scheme will close to new entrants from 30 June. This means that the final date by which an employee can be furloughed for the first time will be 10 June, in order for their initial 3 weeks furlough period to be completed by 30 June.
Employers will have until 31 July to make any claims in respect of the period to 30 June.
On 20 April 2020, HMRC opened its portal to make a claim under the CJRS. In the video below, we take you through each of the steps of making a claim.
HMRC released their Job Retention Scheme Calculator tool, that we recommend using before making a claim on the portal. You can also read the full HMRC guidance on how to calculate your claim on the Gov.uk website.
For full-time and part-time employees, the full salary before tax must be used for the calculation. Instead, for workers with variable earning or on a hourly rate, employers must use whichever is higher between:
- their average monthly earnings for the 2019/20 tax year; and
- their earnings from the same monthly period in 2019.
At present time, this Scheme does not extend to dividends, meaning that owner-managed companies where the directors pay small salaries in favour of dividends should not rely on it for covering a significant part of their normal retribution. Directors can, however, be furloughed while they only fulfil their statutory duties.
Who is eligible
All UK businesses with a PAYE payroll as of 19 March 2020, that were enrolled for PAYE online are eligible for the Scheme.
All employees that were on payroll as of 19 March 2020 are eligible for the Scheme, including full-time and part-time employees, agency workers and zero-hour/flexible workers.
This includes those who were on payroll as of 28 of February and were made redundant prior to 19 March 2020 as a result of the COVID-19 outbreak, as long as they are then re-hired. In order to qualify for the grant, employees must be furloughed and stop working for the employer.
What is furloughing
“Furloughing” means putting employees on paid leave.
The Scheme is targeted at employees that cannot carry out any work for the company and would therefore be laid off without the Government’s support. This means that these employees have to be designated a ‘furloughed’ in writing and need to stop doing any work for the company in order to be eligible. The furlough has a minimum period of 3 weeks, and is subject to normal employment law.
Furloughed workers can still attend training, but if they do, they must be paid at least their minimum wage entitlement for those hours. If the grants don’t cover this, then the employer will have to top-up.
What you need to claim
Claims must be made to HMRC through the Coronavirus Job Retention Scheme portal.
You can make one claim every 3 weeks, although a claim can include multiple employees.
What you need to make a claim – in order to make a claim through the portal, you will need to prepare the following information:
- Your employer PAYE reference number
- Your Company Registration Number – if you don’t know this you can find this on the Companies House website
- Your bank account number and sort code
- Your contact details (name and phone number)
- The number of employees being furloughed
- For each furloughed employees you will need to indicate:
- Their name
- Their National Insurance [find this on BrightPay…] – Employees Tab on BrightPay portal, which shows all employees on payroll and their NI number as (NINO)
- Start and end date of their furlough
- The full amount you’re claiming for including employer National Insurance contributions and employer minimum pension contributions – you can calculate this here
What happens after you claim
After HMRC has reviewed your claim, you’ll receive the grant via BACS within 6 working days.
Make sure to keep your claim reference number and all records and calculations, in case HMRC needs to contact you about them.