As lockdown restrictions are eased, the hugely popular Coronavirus Job Retention Scheme (CJRS) has been extended until the end of October, with the possibility of taking furloughed employees back to work on a part-time basis (Flexible Furlough), and the Government’s contribution to employees’ wages gradually decreasing.
While the Scheme will keep its original form until the end of June, changes in its rules and how the grant amount is calculated will kick in starting on 1st July 2020.
In this short guide, we outline the main updates to the Scheme and how to correctly work out the grant amount in order to put in your next claim.
Unless specified, the eligibility rules will stay the same as their original form, except that no new employees can be furloughed after the June pay period.
From 1 July 2020, employers can only claim for employees that had already been furloughed for at least 3 weeks. This does not include employees returning from parental leave after 10 June 2020, which will remain eligible to be furloughed for the first time.
What changes are coming on 1 July 2020?
1. Furloughed Employees can be brought back part-time
The most significant change to the Scheme is surely the possibility for furloughed employees to resume work on a part-time basis.
From 1st July, claims will be made based on the difference between hours worked and usual hours.
This means that, while employers will be required to pay their employees for the number of hours they work, the Government will provide 80% of wages for the remaining hours through a grant.
This will not directly affects how grants are claimed, but it must be noted that employers will need to calculate the grant amounts based on the number of hours worked and the usual hours before claiming.
Below is a more detailed guide to calculating usual hours and claim amounts.
2. All claim periods must start and end within the same month
In order to facilitate grant amount calculations, from 1 July 2020 HMRC will require employers to only put in claims that start and end within the same calendar month, and will not be allowed to cover more than one payroll period.
Only one claim per period can be made, and claim periods cannot overlap. This means that each claim must contain all furloughed – or on flexible furlough – employees, even when they are paid at different times.
In order to simplify the claim process, we recommend that – where possible – claim periods match payroll periods, and that they end on the date that payroll is processed.
It is possible to make a claim before, during or after payroll is processed, even before the previous claim period has ended.
3. There is no more minimum furlough period
While the Scheme previously required employers to put in claims for a minimum period of three weeks, there is now no minimum claim period.
However, claims for periods shorter than one week will only be allowed if:
- the period includes the first or last day of a calendar month;
- the employer made a claim for the period immediately prior.
4. The Government’s contribution to wages will gradually decrease
While the Government will still provide 80% of employees wages (for the hours not worked), plus Employer NICs and Pension Contributions for the whole of July, this will change starting in August.
Month after month, the Governments’s contribution to employees’ wages will decrease, while employers will be expected to top that up so that employees keep receiving 80% of the wages and their NICs and Pension Contributions are paid.
The changes are outlined, month by month, in the table below:
|Employer NICs & Pension Contributions||Yes||No||No||No|
|Wages||80% up to £2,500||80% up to £2,500||70% up to £2,187.50||60% up to £1,875|
|Required employer contribution||–||Employer NICs & Pension Contributions||10% up to £312.50 + Employer NICs & Pension Contributions||20% up to £625 + Employer NICs & Pension Contributions|
How to calculate usual hours and claim amounts
While the claim process hasn’t changed too much from its previous version, HRMC’s Job Retention Scheme Calculator has been updated to allow for flexible furlough.
By providing the number of hours worked during the claim period, in addition to the usual pay and hours, the calculator will work out the claim amount to insert in your claim, as follows:
Pay based on furlough days:
Usual Pay ÷ Days in pay period × Days in claim period
Pay based on hours (not) worked:
Pay based on furlough days ÷ Usual hours × (Usual hours – Hours worked)
80% of Pay based on hours (not) worked
It must be noted, however, as reported by ICAEW, that the calculation for the “usual hours” may be slightly counterintuitive
This, in fact, is not based on merely counting the working hours within a pay period, but it must be calculated by multiplying the average working hours per day by the number of days within the pay period.
So, for example, if an employee’s contract requires them to work for 35 hours per week, the usual hours for a 31-day month would equate: 35 ÷ 7 × 31 = 155 hours.
In general, when contracts require a certain number of work hours per week, usual hours are calculated as follows:
Weekly work hours ÷ 7 × Days in claim period