We have been keeping you informed of the Governments responses to the coronavirus pandemic since the Chancellor announced a series of measures to support businesses and their employees. One of those measures is the CJRS, that allows employers to claim 80% of the wages of staff (up to a maximum of £2,500 per employee) that they have furloughed (been put on temporary leave).
HMRC is working at pace to deliver the service that will allow businesses to make a claim. For our clients where we provide payrolls services we will have already contacted you to ease the process.
Furlough Scheme cut-off date
The furlough scheme cut-off date was extended in an announcement on 15th April 2020. You may have wondered why we had not informed you of this already. The measure was introduced after a review to extend the scheme in order to capture employees who had started new employment after the original cut-off date of 28th February. However, as ever, the devil is in the detail and the guidance states:
Employers can claim for furloughed employees that were employed and on their PAYE payroll on or before 19 March 2020. This means that the employee must have been notified to HMRC through an RTI submission notifying payment in respect of that employee on or before 19 March 2020.
This actually means that a new employee that is salaried and paid at the end of the month is unlikely to be included in an RTI submission prior to the 19th March and will therefore fall through the net and be unable to be included in a furlough claim. Weekly paid new employees would probably be captured by this change and be able to be furloughed. We were expecting that perhaps this would be revised as it doesn’t appear to achieve all its objective hence our delay in advising you. It appears now, that this will not be revised again and the guidance above is final.
Service launch today (20 April 2020)
Further guidance was issued on Friday evening (17th April 2020) and can be found here.
HMRC are expecting phone demand to be beyond their capacity to offer a normal service. Therefore, the service is designed to be self-serve with guidance in place.
We have included below the pertinent points which we consider are most applicable to our clients however, we encourage you to look at the guidance which is clear and concise. Please note the service is extremely busy. The payment should be made 6 days after submitting a particular claim. We have had mixed experience so far. It is simple to use and only a total amount of your claim is required, not the total for each employee as we expected. On occasion the system has crashed, and we have been required to reload the data, other claims have gone through without incident.
There is a calculator to work out the claim amount for employees who are paid the same amount each period. For employees who do not meet those criteria there is guidance and examples on how to calculate the claim. Useful points of note are:
You can claim for 80 % of:
- regular wages you pay to employees
- non-discretionary overtime
- non-discretionary fees
- non-discretionary commission payments
- piece rate payments
You cannot claim for:
- additional National Insurance or pension contributions you make because you choose to top up your employee’s wages. Note, if you are eligible for NI Employment Allowance you should deduct this first before claiming any NI under the scheme.
- any pension contributions you make that are above the mandatory employer contribution.
- payments made at the discretion of the employer or a client – where the employer or client was under no contractual obligation to pay, including:
- discretionary bonuses
- discretionary commission payments
- non-cash payments
- non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay
Proportioning pay where part of the pay period is furloughed
If the length of time you are claiming is not one week or one month you will need to calculate the daily wage. Surprisingly the guidance uses a full month, being 31 days in March rather than 22 working days, to calculate the maximum daily claim for March of £80.65. (2500/31). The maximum for April is £83.34 and May £80.65 per day.
There are a number of examples in the guidance.
The employee continues to accrue holiday pay as per their contract. There is a section in the guidance covering holiday pay but, of note, the recent bank holidays will need to be addressed. If the employee would usually take the bank holidays as leave, then the employer would either need to top up the pay to the usual level or give the employee a day of holiday in lieu.
Interestingly the guidance states that the policy on holiday pay during furlough remains under review.
National Minimum Wage
Individuals are only entitled to the National Living Wage, National Minimum Wage or Apprentices Minimum Wage for the hours they are working or treated as working under minimum wage rules.
This means that furloughed workers who are not working can be paid the lower of 80% of their wages or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage.
However, time spent training is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage, taking into account the increase in minimum wage rates from 1 April 2020.
Find out more
The latest guidance on CJRS can be found on GOV.UK by searching for ‘Coronavirus Job Retention Scheme.
We trust that you are all safe and well and we would like to reiterate that we are here to support you. Please do not hesitate to contact us should you wish to discuss anything at all. We are very happy to help you even if just as a sounding board.
With best wishes from all the team at Geens. Stay safe.