We have some clarity now on the processes required for claiming and operating the new Coronavirus Job Retention Scheme (CJRS2) from 1st July, which now allows for “flexible furlough”. My previous bulletin gives details of the closure of the old scheme CJRS1 and the structure of CJRS2 including the tapering down of the payments required to be made by you. The guidance contained below is based on the best information we have to date.
What you can claim
|Government contribution: employer NICs and pension contributions||Yes||No|
|Government contribution: wages||80% up to £2,500||70% up to £2,187.50||60% up to £1,875|
|Employer contribution: employer NICs and pension contributions||No||Yes|
|Employer contribution: wages||–||10% up to £312.50||20% up to £625|
|Employee receives||80% up to £2,500 per month|
Previous Coronavirus Job Retention Scheme (CJRS1)
- CJRS1 closes on 30th June 2020
- If you have furloughed an employee for the first time in June, in order to claim the grant for these employees they must have been furloughed on or prior to 10th June 2020 so, they have achieved a three-week minimum furlough period
- Any claim under CJRS1 can only apply up to the end of June 2020 and no claims under this scheme will be accepted or processed after this date
- You have until 31st July 2020 to make any claims for the period up to closure of CJRS1
New Coronavirus Job Retention Scheme (CJRS2)
- CJRS2 operates from 1st July 2020 to 31st October 2020 when this scheme will close
- You may now engage employees on a Part-Work/Part-Furlough (PWPF) basis
- They can work any shift pattern so long as it is notified to them reasonably in advance
- When working employees must be paid by you at 100% of normal wages
- When on furlough they can be paid at 80% (up to £2,500 per month) unless you choose to top this up to 100%
There is an exception to the 10th June deadline for anyone returning from maternity, adoption, paternity, shared parental or parental bereavement leave and these employees will be eligible for the scheme even if they had not been previously furloughed by 10th June, provided the employer has used the scheme for other eligible employees by that date.
Please note any employee furloughed before 1 July must still be furloughed for at least three weeks i.e. if an employee was previously furloughed for a minimum of three weeks in May but returned for a few weeks and then furloughed again on the 20th June, they must still be furloughed for three weeks from the 20th June to enable you to claim for the June period. This could be a common mistake made as the two schemes cross over so if you are unsure please do check with someone in the know.
- You can only claim for employees on CJRS2 who had been eligible for CJRS1
- You can only claim a maximum of four times in one month from the 1st July and these cannot overlap
- Claims must be for a minimum of seven days
- The maximum number of employees you can claim for in any single claim period starting from 1st July cannot exceed the maximum number of employees you claimed for under any claim ending by 30th June. For example, if you previously submitted three claims between 1st March 2020 and 30th June, in which the total number employees furloughed in each respective claim was 30, 20 and 50 employees, then the maximum number of employees you could furlough in any single claim starting on or after 1st July would be 50.
Where you are returning employees back to work in the same way as prior to the lockdown, then you should anticipate them returning on the same terms and conditions as previously. In other words:
- A full-time or part-time employee on fixed hours per week should expect to return on their normal contracted hours and days of work
- An employee on variable hours however will require you to refer back to the average hours per week they were working prior to 19th March 2020, as these should be treated as their normal scheduled hours
- for the purpose of furlough – variable hours workers should have their average weekly hours calculated across the previous 52 weeks that they carried out any work for you
- where there are weeks that they did not carry out work, you can go back as far as 104 weeks for the calculation, or
- if they have not worked for you for that long, average their hours over the number of weeks they did carry out work for you
It is strongly recommended that you communicate with your employees and ensure that the requirements of them returning to work full-time or on a part-work/part-furlough basis is agreed with them, in writing. You can download an example template to use for this purpose – this is an essential action to undertake.
You may however operate with a normal return to work or operate on a PWPF basis. You may also bring employees back to work and at a later date realise that this is not sustainable so can return them to furlough (or PWPF)
- It is not essential to have the employee attend work for full days, i.e. 40 hours @ 8 hours each day Monday to Friday
- This means they may work five days per week but can be engaged for four hours each day Monday to Friday at 20 hours per week, or two days and on furlough for the other three days
- These hours of work must be paid by you at 100% and you are also required to pay the National Insurance and Pension contributions for these hours
- The remainder of their normal scheduled hours are eligible for furlough for which you may apply to HMRC grant at the relevant amount
- Let us consider an employee who works part-time hours; perhaps 15 hours per week, three days per week for five hours each day Monday, Wednesday and Friday
- Again, you can require then to return to work during the CJRS2 period on any shift pattern with any hours not worked being on furlough
- For example, you may only need the employee to work three hours on Monday and Friday each week
- Therefore, your claim for the week would be for six hours paid at 100%
- The remaining nine hours would be on furlough and eligible for payment at 80% (up to £2,500 per month)
- The normal scheduled hours i.e. the employee’s average working week should be based on the calculation of
- the average hours per week over the previous 52 weeks of work prior to 19th March 2020, or
- the average earnings of the total earnings in the Tax Year 2019 to 2020,or
- the average earnings in the same month of the previous year i.e. for July 2020, use the earnings across the month of July 2019
- once you have determined which method you use, do not vary this from one month to the next
- These are now the normal scheduled hours you need for determining what the employee should be working and upon which they should be paid, and how you calculate your claim
- So, if the employee’s normal scheduled hours are 36 per week and you require them to work 23 of these, then they are paid at 100% of their normal wages for the 23 hours and the remaining 13 hours can be claimed through the furlough grant
Making a claim
It is strongly recommended that you review this guidance from the UK Government when calculating your claim as how this is done is important. You must retain all calculations to show how you have reached your claim amount (your Accountant or Payroll Provider should have this if they carry out the calculation for you).
In particular please review how the Employer National Insurance Contributions (NIC’s) are calculated as this requires two calculations starting with the secondary NIC threshold before calculating the amount of Employer NIC’s that can be claimed.
Please also note that this element of the claim is only available during July 2020 and this along with claims for minimum Pension Contribution end on 31st July and becomes payable by you, as appropriate.
Note: HMRC use the term “Pay Reference Amount” and calculate all claims and furlough payments based on the actual number of days in each month, which varies, and not on the number of days used in employment regulations for calculating “a days’ pay”. This is an important distinction as this means that 1 week = 7 days. When carrying out any calculations under CJRS2, you must include all days worked, e.g. July 2020 has 31 days in the month and for a full time employee working Monday to Friday, this equals 23 days.
As guidance is updated and analysed, there are some elements that are different to that previously provided and so clarity on these is below:
- You must have agreement to furlough an employee under the CJRS2
- The minimum amount of claim under CJRS2 for an employee is seven days
- ALL monies from the grant in respect of wages i.e. 80% must be passed on to the employee as money, not in benefits or withheld
- You cannot use any grant money to cover redundancy payments, however notice pay and holiday pay up to 80% (to maximum amounts) may be claimed, provided you have topped up their wages to 100% for those days
- Under CJRS2, the Treasury has now issued a Directive which overrides previous guidance – any calculation of an employee’s average wages must not include any payments which are conditional in any respect – which means any discretionary overtime, bonuses or commissions, tips, and non-cash payments should not be included
- National Minimum and Living Wage (NMW/NLW) do not apply in respect of the furlough claim as the employee is not working when furloughed
- when an employee on furlough is carrying out training then NMW/NLW does apply and must be paid at 100% for any time spent on this
- an employee who is PWPF under CJRS2 must be paid at 100% of wages for any hours worked – this will include if any NMW/NLW increases apply
- holidays may be taken by employees on furlough but must be paid at 100% for any time spent on holiday
- where an employee is on furlough part-time or otherwise, then they must not carry out any work – this include remote working
- Holiday continues to accrue as normal even for employees who are on furlough
- You can require employees to take holidays whilst on furlough but must provide twice the notice to the days they are asked to take i.e. two weeks’ notice for one weeks’ holiday
- It is expected that they are not contacted or required to work during any holiday period
- You must pay the employee at 100% of their normal wages for the days they are on holiday
- This means that you can claim 80% of this money back via the HMRC grant, so long as you top up the rest to 100%
HMRC have stated they intend to investigate furlough claims, hence the need for you to ensure you have all relevant documentation, including calculations for your claims. In respect of CJRS2 it is strongly recommended that you also retain any records relating to specific shift patterns. Note all relevant documentation must be retained for at least six years.
HMRC have indicated at the moment that they will not apply any fines or seek reimbursement of grant money if you have inadvertently claimed incorrectly, provided you have carried out your calculations in a reasonable manner and can justify your reasoning. Whether this remains the case or not will have to be seen.
HMRC have however also stated that if you think you have claimed too much money or you have claimed for employees who were then taken off furlough (it is assumed such as; after you have claimed for a period you thought they would remain on furlough), then you should recalculate. A means of amending and adjusting any claim will be made available at a later date.
Covid-19 letter templates
There are currently many templates available from us and available upon request for any employee situations related to Covid-19 should you require them. We have not issued all templates due to the risk of overwhelming you and incorrect ones being used. Please do contact us if you require one for a particular situation so we can ensure the correct ones are used.
How to carry out redundancies when an employee has been furloughed
- Before dismissing employees for redundancy, consider carefully whether or not they can instead be retained under the CJRS.
- Ensure that furloughed staff are consulted as part of any redundancy exercise. Face to face is not always an option under the current situation therefore, using online platforms or other forms of electronic communication when appropriate is fine.
- Construct a pool for selection based on the future needs of the business and do not penalise employees who have been furloughed.
- Do not use the fact that an employee has been furloughed as a reason for selecting them for redundancy.
- Be aware of the potential for discrimination in selecting for redundancy employees whose vulnerability to coronavirus makes it harder for them to return to work.
- Avoid penalising employees whose difficulties with childcare affect their attendance at work.
- Consider if a furloughed employee given notice of redundancy should have their pay topped up to normal pay for the duration of the statutory notice period, taking into account the potential complexity of this question. To avoid any potential claim whilst this remains a grey area with the govt we recommend that notice pay equals no less than 100% of normal pay rate.
- Avoid dismissing a furloughed employee without notice as the Coronavirus Job Retention Scheme will not cover a payment in lieu of notice. An employee may remain furloughed during a notice period which then enables employers to claim the relevant CJRS % based upon the month of notice being undertaken which can make a big difference for employers financially.
- Before asking an employee to return to work during the notice period, consider whether or not the terms of their furlough indicated that they would be away from work for a set period.
- Calculate a redundancy payment on the basis of the employee’s normal week’s pay rather than their pay while on furlough (unless the employee has no normal working hours).
We highly recommend that guidance is sought from an HR professional before undertaking any redundancy process.
This advice is being reviewed and updated regularly and is currently in line with HMRC, UK Government and ACAS guidance as updated 22nd June 2020. You can download this news as a PDF here.