Coronavirus Job Retention Scheme (CJRS)

What does the CJRS offer?

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers until at least the end of June that is designed to support employers whose operations have been severely affected by coronavirus (COVID-19).

Employers can use the HMRC portal to claim for 80 per cent of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

Is my business eligible?

Any UK organisation with employees can apply for the scheme including:

  • businesses
  • charities
  • recruitment agencies (agency workers paid through PAYE)
  • public authorities.

However, you must have created and started a PAYE payroll scheme on or before 19 March 2020 and have a UK bank account to access the scheme. Click here to find out more.

Which employees can benefit from the scheme?

The scheme applies to employees on a leave of absence, referred to as furloughed workers. These are generally employees who are on the payroll, but who might normally be laid off or made redundant due to a lack of work.

To be eligible for the scheme, an employee must have been on the employer’s PAYE payroll on or before 19 March 2020 and HM Revenue & Customs (HMRC) must have been notified of a payment through Real Time Information (RTI) by that date.

To be eligible for the subsidy, an employee must not undertake work for or on behalf of the organisation until the end of June. This includes providing services or generating any revenue.

From the start of July some furloughed employees may be allowed to return to work part-time and still receive subsidised pay via the scheme.

When will the scheme end?

When launched in March the scheme was initially only due to run for a month or so, but the Government has now extended the scheme until the 31 October 2020.

What contributions am I required to make when the scheme ends in October?

October will see the value of CJRS grants fall to 60 per cent of furloughed employees’ usual wages, with employers having to contribute the remaining 20 per cent.

Will HMRC help me calculate my contributions to the scheme?

Employers are responsible for calculating the correct amounts to claim from the scheme, with HMRC expected to take a hard line on errors that are not corrected quickly.

HMRC’s guidance walks employers through the various calculations needed to work out the amounts they need to claim in respect of furloughed employees in different circumstances over the remaining months of the scheme.

This includes information about:

  • Calculating flexible furlough claims;
  • calculating employer NICs and pension contributions on hours worked and furlough hours;
  • dealing with considerations around the National Living Wage (NLW) and National Minimum Wage (NMW);
  • employees returning from parental leave;
  • employees returning from Statutory Sick Pay (SSP) and
  • the reduction in the value of the main grant in September and October.

To help employers deal with the potentially wide range of permutations, HMRC has published example calculations in the guidance dealing with different situations. To read the latest guidance, please click here.

What happens if I overclaim for the CJRS?

Where employers find that they have overclaimed, they can report this as part of their next claim, which will be adjusted down to take the previous overpayment into account. HMRC says it is working on a mechanism to deal with circumstances where an employer has overclaimed but does not wish to make further claims. In the event of underclaims, employers should contact HMRC directly.

What happens if I receive an overpayment?

If an employer received an overpayment and was making further claims, it could offset the overpayment against the amount of its next claim.

HMRC also confirmed arrangements for employers that were no longer claiming grants from the scheme but which need to repay an overpayment.

In these circumstances, an employer needed to contact HMRC by 20 October to report the error or overpayment. If you haven’t yet reported this you need to seek professional assistance to discuss how you make a disclosure to minimise potential penalties.

How is the scheme applied to someone whose pay varies monthly?

If the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:

  • the same month’s earning from the previous year
  • average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work. Those who started in February should have their pay calculate pro-rata.

As an employer, it is your responsibility to calculate how much of an employee’s salary you can claim for, including the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to.

Are employees returning from parental leave eligible?

Employees returning from statutory maternity and paternity leave in the next few months will remain eligible for furlough through the Coronavirus Job Retention Scheme (CJRS).

Since 10 June, it has no longer been possible to furlough an employee for the first time, with the Government set to introduce part-time furlough from 1 July onwards. To facilitate this, the scheme will only be available to employers that are using the CJRS and employees that have previously been furloughed.

Because workers must complete 21 days of furlough to be eligible for part-time furlough, this means that the cut-off date for employees to be placed on furlough leave was Wednesday 10 June.

However, employees returning from parental leave will be eligible for the CJRS as they return to work, with further details set to be announced by the Government imminently.

Does the scheme apply to directors?

Yes, directors of a company can be furloughed. The guidance provides an exemption for company directors who are also furloughed employees to carry out duties “relating to the filing of company accounts or provision of other information relating to the administration of the director’s company…”. This may include Companies House submissions and other statutory duties.

During this period directors should be careful to avoid anything that could be mistaken for work, including posting promotional material on their social media feeds.

We operate in the public sector, how does the CJRS apply to IR35?

It may be appropriate to furlough IR35 contractors deemed employees “in a small number of cases”.

Public sector organisations have to confirm this with both a contractor’s Personal Service Company (PSC) and the fee-payer and agree between the parties that the contractor will not carry out work for the organisation during the period of furlough.

The fee-payer – usually the agency that pays the PSC – will have to apply for a furlough payment of 80 per cent of the monthly contract up to the £2,500 cap and the employer National Insurance Contributions (NICS).

The fee-payer will then need to pay the furlough payment in respect of wages to the PSC via PAYE and make the necessary tax and NIC deductions.

The PSC will have to report the payment to the contractor as deemed employment income via PAYE using box 58A on the PAYE Real Time Information return.

If a contractor opts to furlough themselves as an employee or director of their PSC, and they are still receiving an income from a public sector organisation, including through the CJRS, they must deduct this income from their reference pay for the CJRS.

An employee has indicated that they need to care for another and has asked to be furloughed, can they claim?

Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed.

How does the CJRS work with those employees on Statutory Sick Pay?

If your employee is on sick leave or self-isolating as a result of Coronavirus, they can claim Statutory Sick Pay. The CJRS is not intended for short-term absences from work due to sickness, and there is a three-week minimum furlough period. However, if an employer wants to furlough employees for business reasons and they are currently sick or self-isolating, they are eligible to do so, but these employees should no longer receive sick pay and would be classified as a furloughed employee.

How should I inform employees that they are being furloughed?

HM Revenue & Customs (HMRC) has now made it clear in their latest guidance that employers must confirm in writing to their employee that they have been furloughed.

If this is done in a way that is consistent with employment law, that consent is valid for claiming the CJRS.

There needs to be a written record, but the employee does not have to provide a written response. This written record must be kept for at least five years to evidence a claim.

Can apprentices continue to train and be furloughed?

The CJRS allows staff members to undertake volunteer work outside of the business and take part in training courses, as long as the activity doesn’t generate income for the company. Apprentices can be furloughed like any other member of staff.

I am intending to furlough more than 20 employees, are there any special considerations, as with redundancy?

Collective consultation requirements may need to be considered. This broadly means that where 20 or more employees are to be put on furlough leave and would be dismissed if they do not agree to the resulting change in terms of employment, they should be consulted collectively.

How do I select who to furlough?

The CJRS is intended for those employees who would otherwise be made redundant and it should, therefore, be offered to those whose roles are not critical to the business. Businesses must follow existing employment law so as not to discriminate against employees.

If a person hasn’t been furloughed for the minimum period (three weeks) by 30th June they cannot be furloughed.

I only want to furlough my staff for one or two weeks; can I do this?

Originally employees could only be furloughed for a minimum period of three consecutive weeks. Employees can be furloughed multiple times, but each separate instance should have been for a minimum period of three consecutive weeks.

From 1 July employers will be able to make new flexible furlough agreements with employees that enable them to return to work on a part-time basis, while the employer will still be able to claim a CJRS grant for the hours not worked. Only employees who have been furloughed for a full three-week period up to this point will still be eligible to be furloughed.

How is performance pay, such as tips and bonuses, calculated under the scheme?

The CJRS does not cover performance-related pay, but employers can voluntarily top up pay to reflect this if they wish to.

Can agency staff and those on zero-hours contracts be furloughed?

Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts to be eligible for the Coronavirus Job Retention Scheme. Depending on the arrangement with the employment agency, it may be down to them to furlough the member of staff.

How does the CJRS apply to maternity pay and shared parental leave?

Those who are contractually obliged to enhanced maternity, adoption or shared parental pay are eligible for the scheme, but not those on statutory maternity pay. They will be paid in the same way and cannot be additionally furloughed.

I have had to reduce the hours of some staff members – can I use the scheme to make up the difference?

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.

Can staff who have undergone TUPE be furloughed?

New employers since 19 March 2020 can claim under the CJRS if either the TUPE or PAYE Business Succession Rules apply to the change of ownership of the business. Groups of companies that have consolidated their payrolls into a new PAYE scheme after 19 March 2020 can also furlough employees and claim under CJRS.

We have decided to reduce the hours of our workers, can we claim for the difference?

If an employee is working, but on reduced hours or reduced pay, they will not be eligible for the CJRS.

If employees rely on salary sacrifice for employer pension contributions, will HMRC pay the full amount of the employer pension contribution for which the pay is sacrificed?

The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Benefits provided through salary sacrifice schemes that reduce an employee’s taxable pay should so not be included in the reference salary.

An employee has refused to be furloughed, what can I do?

In the majority of cases, it will be in the employees’ interest to accept an offer of furlough as it means that their role would otherwise be made redundant. Employers have a variety of options open to them including reducing their working hours, reducing their pay, short-time working and layoffs and in some cases redundancy. Remember that existing employment rules continue to apply so you must consider whether your actions could lead to a claim for unfair dismissal or discrimination.

How does the CJRS affect holiday pay?

Employees can take holiday whilst on furlough and they should be paid as normal. The Working Time Regulations (WTR) obligates employers to pay time taken as annual leave at the normal rate of pay or, where their rate of pay varies, calculated based on the average pay they received in the preceding 12 weeks.

The CJRS guidance confirms you can make a grant for an annual leave furlough day in the same way as any normal working day. This would still be paid at 80 per cent of normal rates (capped at £2,500 per month) as you are in effect ‘topping up’ for those annual leave days by paying the difference between that and their normal pay to your employees

Although furloughed employees are not working, they continue to accrue annual leave, as per the terms of their employment contract.

How are bank holidays accounted for?

Where staff are furloughed over a bank holiday period, and they usually take bank holidays as part of their holiday allowance, employers must pay them on top of their furlough for this. If staff usually work bank holidays this does not apply.

What records need to be kept?

The written agreement that the furloughed employee will, under the current terms of the scheme, cease all work must be retained until 30 June 2025 and:

  • State the main terms and conditions;
  • Be incorporated either expressly or implicitly in the contract of employment; and
  • Be either made or confirmed in writing.

It is widely expected that HMRC will audit use of the scheme retrospectively over the coming months and years, with potentially hefty penalties for those found to have acted improperly.

Is the CJRS taxable?

Grants from the various Government schemes to provide support during the Coronavirus outbreak are taxable in the same way as other income. Payments made under the CJRS are considered to be taxable income.

The position had been set out in the various guidance documents for the schemes but has now been underscored by a series of Government amendments to the Finance Bill 2020.