Coronavirus Job Retention Scheme: practical guidance

29th May 2020

UPDATED FOR THE CHANCELLOR'S STATEMENT ON 29 MAY 2020. 

NOTE: It is now too late to put somebody on furlough for the first time, as 10 June was the last day.  But if someone is or has previously been on furlough, they are eligible to continue until the scheme closes on 31 October 2020. However, the 10 June cut-off date does not apply to those who are returning to work after paternity or maternity leave.

The Coronavirus Job Retention Scheme (CJRS) is a temporary scheme open to all UK employers starting from 1 March 2020. The scheme has been extended to 31 October.

Employers can claim for 80% of furloughed employees’ (employees on a leave of absence) 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.

Key changes from 1 July (see also our separate article - Flexible Furlough Scheme)

From 1 July, employers can bring back to work employees that have previously been furloughed for any amount of time and any shift pattern, while still being able to claim the CJRS grant for their normal hours not worked. When claiming the CJRS grant for furloughed hours; employers will need to report and claim for a minimum period of a week (reduced from the minimum period of three consecutive weeks.that applied up to 30 June).

The final date by which an employer can furlough an employee for the first time was 10 June, in order for the current 3 week 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.

See our separate article and FAQs about the extension from August to October.

NOTE: In addition to the guidance below, HMRC has also published a step by step guide for employers.

HMRC has confirmed that Coronavirus Job Retention Scheme grants are not classed as state aid.

The scheme was originally announced as open to all UK employers that had created and started a PAYE payroll scheme on or before 28 February 2020, but the cut off date was extended to 19 March 2020.

Cash in the bank

Jim Harra, Chief Executive of HMRC, told the Treasury Committee of MPs on 8 April 2020 that claims will take about 4 to 6 working days to process.

At the same evidence session, HMRC also highlighted that claims could be made up to 14 days in advance of running payroll – thus putting an employer in funds to make a payment to their employees. We are awaiting further guidance to confirm this statement (or otherwise).

Claims rejected due to tax debts? You can reapply

On 30 April HMRC apologised for the distress it may have caused by the rejection of some employers for grants under the CJRS, and has urged them to reapply.

HMRC has confirmed that employers with tax arrears should not have been rejected for support and it has updated its guidance and advised its staff to “ensure that there’s no repeat of the situation”.

Online "whistle-blower" service

HMRC has set up an online whistle-blower service so that employees can report employers who abuse the scheme. There is concern that some employers will ask their staff to carry on working, even though they have been placed on furlough, or will claim the grant and not pass it over to the worker.

Who can claim

Any UK organisation with employees can apply, including:

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

A PAYE payroll scheme must have been started on or before 19 March 2020 and the employer must have a UK bank account.

Public sector organisations (including schools and academies)

The government expects that the scheme will not be used by many public sector organisations, as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak.

Where employers receive public funding for staff costs, and that funding is continuing, the government expects those employers to use that money to continue to pay staff in the usual fashion, and correspondingly not furlough them.

This also applies to non-public sector employers who receive public funding for staff costs.

Organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff.

In a small number of cases, for example where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff.

There is further guidance below on contingent workers in the public sector.

Individuals

Individuals can furlough employees, such as nannies, provided they pay them through PAYE and they were on their payroll on or before 19 March 2020.

Administrators

Where a company is being taken under the management of an administrator, the administrator can access the CJRS. However, it is expected that an administrator would only access the scheme if there is a reasonable likelihood of rehiring the workers. For instance, this could be as a result of an administration and pursuit of a sale of the business.

Employees you can claim for

You can only claim for furloughed employees that were employed on 19 March 2020 and who were on your PAYE payroll on or before 19 March 2020.

This means a Real Time Information (RTI) submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.

If you had employees that were employed on 28 February 2020 but not on 19 March 2020, see the section below on employees who were made redundant or stopped working for you after 28 February 2020.

Was the employee employed with you as of this date? Date RTI submission notifying payment was made to HMRC Eligible for CJRS?
28 February 2020 On or before 28 February 2020 Yes
28 February 2020 On or before 19 March 2020 Yes
28 February 2020 On or after 20 March 2020 No
19 March 2020 On or before 19 March 2020 Yes
19 March 2020 On or after 20 March 2020 No
On or after 20 March 2020 On or after 20 March 2020 No

Employees made redundant or they stopped working for you after 28 February

If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages from the date on which you furloughed them, even if you do not re-employ them until after 19 March 2020.

This applies as long as the employee was on the PAYE payroll as at 28 February 2020, which means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020.

If your employee stopped working for you and was on a fixed term contract, you should also refer to the section ‘If your employee is on a fixed term contract’ below.

If you made employees redundant or they stopped working for you after 19 March 2020

If you made employees redundant, or they stopped working for you on or after 19 March 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme from the date on which you furloughed them.

This applies as long as the employee was employed on 19 March 2020 and was on your PAYE payroll on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020. If your employee stopped working for you and was on a fixed term contract, you should also refer to the section ‘If your employee is on a fixed term contract’ below.

If your employee is on a fixed term contract

An employee on a fixed term contract can be re-employed, furloughed and claimed for if either:

  • their contract expired after 28 February 2020 and an RTI payment submission for the employee was notified to HMRC on or before 28 February 2020
  • their contract expired after 19 March 2020 and an RTI payment submission for the employee was notified to HMRC on or before 19 March 2020

If the employee’s fixed term contract has not already expired, it can be extended, or renewed. You can claim for them if an RTI payment submission for the employee was notified to HMRC on or before 19 March 2020.

Employees that started and ended the same contract between 28 February 2020 and 19 March 2020 will not qualify for this scheme. This is not specific to employees on fixed-term contracts, the same would apply to employees on all other contracts.

If your employee had multiple employers over the last year

If an employee has had multiple employers over the past year, has only worked for one of them at any one time, and is being furloughed by their current employer, their former employer/s should not re-employ them, put them on furlough and claim for their wages through the scheme.

Employees working reduced hours

Employees working reduced hours, or for reduced pay, are not eligible for this scheme.

If your employee has more than one job

If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.

Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.

If your employee does volunteer work

A furloughed employee can take part in volunteer work, if it does not provide services to or generate revenue for, or on behalf of your organisation or a linked or associated organisation.

You cannot furlough your employee and then ask them to volunteer for you in the same or a different role.

If your employee does training

Furloughed employees can engage in training, as long as in undertaking the training the employee does not provide services to, or generate revenue for, or on behalf of their organisation or a linked or associated organisation. 

Where training is undertaken by furloughed employees, at the request of their employer, they are entitled to be paid at least their appropriate national minimum wage for this time. In most cases, the furlough payment of 80% of an employee’s regular wage, up to the value of £2,500, will provide sufficient monies to cover these training hours.

However, where the time spent training attracts a minimum wage entitlement in excess of the furlough payment, employers will need to pay the additional wages (see National Minimum Wage Section for more details).

Furloughed employees working as union or non-union representatives

Whilst on furlough, employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers. However in doing this, they must not provide services to or generate revenue for, or on behalf of your organisation or a linked or associated organisation.

If your employee’s health has been affected by coronavirus (COVID-19)

If your employee is shielding

Employees who are unable to work because they are shielding in line with public health guidance (or need to stay home with someone who is shielding) can be furloughed.

If your employee has caring responsibilities

Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children can be furloughed.

If your employee becomes sick while furloughed

Furloughed employee retain their statutory rights, including their right to Statutory Sick Pay. This means that furloughed employees who become ill must be paid at least Statutory Sick Pay. It is up to employers to decide whether to move these employees onto Statutory Sick Pay or to keep them on furlough, at their furloughed rate.

If a furloughed employee who becomes sick is moved onto SSP, employers can no longer claim for the furloughed salary. Employers are required to pay SSP themselves, although may qualify for a rebate for up to 2 weeks of SSP. If employers keep the sick furloughed employee on the furloughed rate, they remain eligible to claim for these costs through the furloughed scheme.

See our separate article on this issue.

If your employee is on leave

If your employee is on unpaid leave

If an employee started unpaid leave after 28 February 2020, you can put them on furlough instead. If you put them on furlough then you should pay them at least 80% of their regular wages, up to the monthly cap of £2500.

If an employee went on unpaid leave on or before 28 February, you cannot furlough them until the date on which it was agreed they would return from unpaid leave.

If your employee is self-isolating or on sick leave

If your employee is on sick leave or self-isolating as a result of Coronavirus, they’ll be able to get Statutory Sick Pay, subject to other eligibility conditions applying. The Coronavirus Job Retention Scheme is not intended for short-term absences from work due to sickness, and there is a 3 week minimum furlough period.

Short term illness/self-isolation should not be a consideration in deciding whether to furlough an employee. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee.

Employers are also entitled to furlough employees who are being shielded or off on long-term sick leave. It is up to employers to decide whether to furlough these employees. You can claim back from both the Coronavirus Job Retention Scheme and the SSP rebate scheme for the same employee but not for the same period of time. When an employee is on furlough, you can only reclaim expenditure through the Coronavirus Job Retention Scheme, and not the SSP rebate scheme. If a non-furloughed employee becomes ill, needs to self-isolate or be shielded, then you might qualify for the SSP rebate scheme, enabling you to claim up to two weeks of SSP per employee.

The scheme appears to give the employer and employee great flexibility over the ending of SSP and placing an employee on furlough and claiming the grant, even if the employee is still eligible for SSP.  

If your employee is on maternity leave, adoption leave, paternity leave, shared parental leave or parental bereavement leave

The normal rules for maternity and other forms of parental leave and pay apply.

Although, you may need to calculate your employee’s average weekly earnings differently, if your employee was furloughed and then started leave on or after 25 April 2020 for:

You can claim through the scheme for enhanced (earnings related) contractual pay for employees who qualify for either:

  • maternity pay
  • adoption pay
  • paternity pay
  • shared parental pay
  • parental bereavement pay

If your employee gets Maternity Allowance

If your employee is getting Maternity Allowance while they’re on maternity leave, they should not get furlough pay at the same time.

If your employee has agreed to be put on furlough, tell them to contact Jobcentre Plus to stop their Maternity Allowance payments.

If your employee agrees to be put on furlough and end their maternity leave early, they will need to give you at least 8 weeks’ notice and they will not be eligible for furlough pay until the end of the 8 weeks.

Holiday pay

HMRC has provided separate guidance on holiday pay and bank holidays whilst an employee is furloughed.

Whilst furloughed an employee will continue to accrue leave as per the employment contract. The parties can agree to vary the holiday pay entitlement as part of the furlough agreement, but almost all workers are entitled to 5.6 weeks of statutory paid holiday each year.

Holiday can be taken whilst on furlough. The Working Time Regulations (WTR) require holiday pay to be paid at the normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received in the previous 52 working weeks.

Therefore, if an employee takes holiday while on furlough, the employer should pay him/her the usual holiday pay in accordance with the WTR. Employers are obliged to pay the additional amounts over the grant, though have the flexibility to restrict when leave can be taken if there is a business need. This applies for both the furlough period and the recovery period.

Where an employee usually works on bank holidays, the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave, then the employer would either have to top up their pay to the usual holiday pay, or give a day off in lieu.

HMRC says it is keeping its policy on holiday pay during furlough under review, so there could be further changes on this.

Can employers require employees to take their holiday leave whilst on furlough?

Initially, HMRC did not express a view about this, though legal opinion showed that employers can require employees to take their holiday.

The Working Time Regulations 1998 reg 15 says an employer can insist on an employee taking annual leave on particular dates, as long as they give twice the number of days’ notice that they want the employee to take as holiday. So, say, two weeks’ notice for one week’s annual leave.

This could result in an employer furloughing an employee for three weeks, for example, but informing them at the start that the third week will be annual leave.

HMRC has now confirmed the above understanding, together with other points about holidays.

Eligible individuals who are not employees

As well as employees, the grant can be claimed for any of the following groups, if they are paid via PAYE: * office holders (including company directors) * salaried members of Limited Liability Partnerships (LLPs) * agency workers (including those employed by umbrella companies) * limb (b) workers

The guidance below sets out specific considerations for those individuals who are paid via PAYE, but who are not necessarily employees in employment law. Unless explicitly set out below, all other guidance is applicable to these cases, and should be followed.

Office Holders

Office holders can be furloughed and receive support through this scheme. The furlough, and any ongoing payment during furlough, will need to be agreed between the office holder and the party who operates PAYE on the income they receive for holding their office.

Where the office holder is a company director or member of a Limited Liability Partnership (LLP), the furlough arrangements should be adopted formally as a decision of the company or LLP.

Company Directors

As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme.

Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed.

Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

Statutory obligations means fulfilling a duty or other obligation arising from an Act of Parliament relating to the filing of company's accounts or provision of other information relating to the administration of the director's company

This also applies to salaried individuals who are directors of their own personal service company (PSC).

See our separate article on whether directors can furlough themselves.

Company directors with an annual pay period

Those paid annually are eligible to claim, as long as they meet the relevant conditions. This includes being notified to HMRC on an RTI submission on or before 19 March 2020, which relates to a payment of earnings in the 19/20 tax year. The requirement for there to be payment of earnings in the 19/20 tax year applies for any employee being claimed for under the scheme, irrespective of how frequently they are paid (e.g. weekly, fortnightly or monthly). This will be relevant for those on an annual pay period if the last payment notified to RTI was before 5 April 2019 and no further payments were notified until after 19 March 2020.

An employer can make their claim in anticipation of an imminent payroll run, at the point they run their payroll or after they have run their payroll.

Salaried Members of Limited Liability Partnerships (LLPs)

Members of LLPs who are designated as employees for tax purposes (‘salaried members’) under the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 are eligible to be furloughed and receive support through this scheme.

The rights and duties of a member of an LLP are set out in an LLP agreement, and in the absence of an agreement, default provisions in the LLP Act 2000, based upon company and partnership law. Such an agreement may include separate agreement between the LLP and an individual member setting out the terms applicable to that member’s relationship with the LLP.

To furlough a member, the terms of the LLP agreement (or any such agreement between the LLP and the member) may need to be varied by a formal decision of the LLP,

for example, to reflect the fact that the member will perform no work in the LLP for the period of furlough, and the effect of this on their remuneration from the LLP.

For an LLP member who is treated as being employed by the LLP (in accordance with s863A of ITTOIA 2005), the reference salary for this scheme is the LLP member’s profit allocation, excluding any amounts which are determined by the LLP member’s performance, or the overall performance of the LLP.

Agency Workers (including those employed by umbrella companies)

Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies.

Furlough should be agreed between the agency, as the deemed employer, and the worker, though it would be advised to discuss the need to furlough with any end clients involved. As with employees, agency workers should perform no work for, through or on behalf of the agency that has furloughed them while they are furloughed, including for the agency’s clients.

Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.

Limb (b) Workers

Limb (b) workers are dependent contractors who are registered as self-employed, but provide a service as part of someone else's business. They generally must carry out the work personally, rather than being able to send someone in their place.

Where Limb (b) Workers are paid through PAYE, they can be furloughed and receive support through this scheme.

Those who pay tax on their trading profits through Income Tax Self-Assessment, may instead be eligible for the Self-Employed Income Support Scheme (SEISS),

Read more information on the Self-Employed Income Support Scheme, including eligibility criteria and how to claim.

Contingent workers in the public sector

The Cabinet Office has issued guidance on how payments to suppliers of contingent workers impacted by COVID-19 should be dealt with where the party receiving the contingent worker’s services is a Central Government Department, an Executive Agency of a Central Government Department or a Non-Departmental Public Body.

Read more information on contingent workers impacted by COVID-19. This guidance applies to agency workers paid through PAYE, as well as those paid through umbrella companies on PAYE and off-payroll workers supplying their services through a Personal Service Company (PSC).

We have written more about this in a separate article.

Contractors with public sector engagements in scope of IR35 off-payroll working rules (IR35)

Public sector bodies will follow the Crown Commercial Services guidance in the vast majority of cases. In a small number of cases, for example where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, it may be appropriate to claim under the CJRS.

Contractors who are deemed employees according to the off-payroll working rules might be eligible for this scheme.

In this scenario, if the public sector organisation wished to furlough a contractor, they would have to confirm this with both the contractor’s Personal Service Company (PSC) and the fee-payer (as set out in the off-payroll working rules, usually the agency paying the contractor’s PSC).

It should be formally agreed between these parties that the contractor is to do no work for the public sector organisation during their period of furlough. The fee-payer would be able to apply for the furlough payment of 80% of the monthly contract value, up to a maximum of £2,500, as well as the employer NICs on that subsidised wage.

The fee-payer would then pay at least the amount of wage-grant received to the PSC, and report the payment via PAYE using the contractor’s details, making the usual tax and National Insurance contributions (NICs) deductions for contracts in scope of the off-payroll rules. The PSC would then be required to report the amount it pays to the contractor as deemed employment income via PAYE using box 58A on the PAYE Real Time Information return.

Where a contractor is continuing to receive payments from a public sector client (including through the CJRS or other any other scheme), income from this client should be excluded from any calculation of the reference pay for the purposes of the CJRS if the contractor also decides to furlough themselves as an employee or director of their own company.

Employee transfers under TUPE and on a change in ownership

A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 28 February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.

Read more guidance on TUPE rules.

Read more guidance on business succession.

Payroll Consolidation

Where a group of companies have multiple PAYE schemes and there is a transfer of all employees from these schemes into a new consolidated PAYE scheme after 28 February 2020, the new scheme will be eligible to furlough those employees and claim the grants available under the CJRS.

Agreeing to furlough employees in writing

Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws apply in the usual way.

To be eligible for the grant, employers and employees must have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment.

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

Collective agreement reached between an employer and a trade union is also acceptable for the purpose of such a claim. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years until at least 30 June 2025.

On 23 April 2020, HMRC further clarified to employment barrister, Daniel Barnett:

"Put simply, the employer and the employee must reach an agreement and an auditable written record of this agreement must be retained. It does not necessarily follow that the employee will have provided written confirmation that such an agreement was reached in all cases."

Not all employees need to be placed on furlough, but those that are cannot undertake any work for the employer.

How much can be claimed

HMRC has provided a calculator to assist in how much to claim. It has also provided separate guidance with examples of the calculation. 

The employer can claim for:

  • 80% of the employees’ wages (even for employee’s on National Minimum Wage) - up to a maximum of £2,500 per month. Do not claim for the worker’s previous salary.
  • Employer National Insurance contributions that are paid on the subsidised furlough pay.

Employer pension contributions that are paid on the subsidised furlough pay, up to the level of the minimum automatic enrolment employer contribution.The maximum level of grant for employer pension contributions on subsidised furlough pay is set in line with the minimum automatic enrolment employer contribution of 3% on qualifying earnings. Grants for pension contributions can be claimed up to this cap provided the employer pays the whole amount claimed to a pension scheme for the employee as an employer contribution.

You can choose to top up your employee’s salary, but you do not have to. Employees must not work or provide any services for the business while furloughed, even if they receive a top-up salary.

Grants are be pro-rated if an employee is only furloughed for part of a pay period.

The employer cannot claim for any salary which is "conditional on any matter".  This may exclude, for example, any salary payments which the parties have agreed are conditional on the scheme paying out.

Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to confirming their furloughed status.

The way you work out your employees’ wages is different depending on what type of contract they’re on, and when they started work. HMRC has provided more detailed guidance on this.

Example

A worker started work for B Ltd in 1997 and is paid a regular monthly salary on the last day of each month. The worker agreed to be placed on furlough from 23 March 2020. The worker was paid £2,400 for the last full monthly pay period before 19 March 2020. There are 9 days between 23 March and 31 March.

  1. Start with £2,400 (employee’s wages)
  2. Divide by 31 (the total number of days in March)
  3. Multiply by 9 (the number of furlough days in March)
  4. Multiply by 80% - which is £557.42

Full or part time employees on a salary

Claim for the 80% of the employee’s salary, as in their last pay period prior to 19 March 2020.

If, based on previous guidance, you have calculated your claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) you can choose to still use this calculation for your first claim.

Employees whose pay varies

If the employee has been employed for 12 months or more, you can claim the highest of either the:

  • same month’s earning from the previous year
  • average monthly earnings for the 2019-2020 tax year

If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.

If the employee only started in February 2020, work out a pro-rata for their earnings so far, and claim for 80%.

Past Overtime, Fees, Commission, Bonuses and non-cash payments

You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory (i.e. contractual) commission payments.

However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.

Benefits in Kind and Salary Sacrifice Schemes

The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind, such as a car.

Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary.

All the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.

Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.

Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.

Employer National Insurance and Pension Contributions

An employer will still need to pay employer National Insurance and pension contributions on behalf of furloughed employees, and the employer can claim for these too.

A claim cannot be made for:

  • additional National Insurance or pension contributions made because the employer chose to top up an employee’s salary
  • any pension contributions made that are above the mandatory employer contribution

Apprenticeship Levy and Student Loans

Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the Job Retention Scheme do not cover these.

National Minimum Wage

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW)/ Apprentices Minimum Wage (AMW) 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 salary 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.

As such, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours.

Where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.

Where a furloughed worker is paid close to minimum wage levels and asked to complete training courses for a substantial majority of their usual working time, employers are recommended to seek independent advice or contact Acas.

Returning from statutory leave

Statutory leave includes maternity leave, paternity leave, shared parental leave, adoption leave, sick leave and parental bereavement leave.

In line with other employees, claims for full or part time employees returning from statutory leave after 28 February 2020 should be calculated against their salary, before tax, not the pay they received whilst on statutory leave.

Claims for those on variable pay, returning from statutory leave should be calculated using either the:

  • same month’s earning from the previous year
  • average monthly earnings for the 2019-2020 tax year.

What you’ll need to make a claim

Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

To claim, you need:

  • your employer PAYE reference number
  • the number of employees being furloughed
  • National Insurance Numbers for the employees you want to furlough
  • Names of the employees you want to furlough
  • Payroll/works number for the employees you want to furlough
  • your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
  • your bank account number and sort code
  • your contact name
  • your phone number

The employer needs to calculate the amount being claimed, and HMRC retains the right to retrospectively audit all aspects of a claim.

If you have fewer than 100 furloughed staff you will be asked to enter details of each employee you are claiming for directly into the system - this will include their name, National Insurance number, claim period and claim amount, and payroll/employee number (optional).

If you have 100 or more furloughed staff you will be asked to upload a file with the information rather than input it directly into the system. HMRC accepts the following file types: .xls .xlsx .csv .ods

The file should include the following information for each furloughed employee: name, National Insurance number, claim period and claim amount, payroll/employee number (optional).

You should retain all records and calculations in respect of your claims.

HMRC cannot provide employees with details of claims made on their behalf, so employers will need to keep employees informed.

Where an employer uses an agent who is authorised to act for PAYE purposes, they will be able to make a claim on the employer's behalf.

If you use a file only agent (who files your RTI return but doesn’t act for you on any other matters) they won’t be authorised to make a claim for you and you will need to make the claim yourself. Your file only agent can assist you in obtaining the information you need to claim (which is listed above).

If an agent makes a claim on your behalf you will need to tell them which bank account you would like the grant to be paid into.

You should make your claim using the amounts in your payroll - either shortly before or during running payroll. Claims can be backdated until the 1 March where employees have already been furloughed.

If appropriate, worker’s wages should be reduced to 80% of their salary within the payroll before they are paid. This adjustment will not be made by HMRC.

Minimum furlough periods

Any employees placed on furlough must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough.

Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.

From 1 July, the minimum furlough period reduces to just one week.

After a claim is made

HMRC will check claims, and if eligible, will pay them to the employer by BACS to a UK bank account.

The employer must pay the employee all the grant received for their gross pay in the form of money.

Furloughed staff must receive no less than 80% of their reference pay (up to the monthly cap of £2,500).

Employers cannot enter into any transaction with the worker which reduces the wages below this amount. This includes any administration charge, fees or other costs in connection with the employment.

When the government ends the scheme

When the government ends the scheme on (currently 30 October), the employer will need to make a decision, depending on the circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).

HMRC will process all claims made before the scheme ends.

There were calls from business groups for the furlough scheme to be extended beyond the original cut off date of 31 May to avoid many permanent job losses in the summer. There was a concern that employment law requires up to 45 days’ consultation on redundancy programmes, meaning some companies would have to commence the process of staff cuts immediately. So the government extended the scheme to 30 June, and has now extended this further to avoid the continuing issue.

However, with employers expected to start sharing in the costs of wages from 1 August, this may focus minds much sooner than October on redundancies.

Notice to pay whilst on furlough

Employers can give notice of termination to workers who are on furlough, and the grants can still be claimed under CJRS despite the employee working their notice.

HMRC chief, Jim Harra, confirmed in evidence to the Public Accounts Committee on 10 June 2020 that there is nothing in the CJRS that prevents an employer from making a furloughed employee redundant.

It is not clear from the rules whether an employee's notice pay should be at 80% or 100%. Legal opinion appears to be that it depends.

When employees are on furlough

The employer cannot ask an employee to do any work that:

  • makes money for the organisation or any organisation linked or associated with it
  • provides services for the organisation or any organisation linked or associated with it

They can take part in volunteer work or training.

Employee taxes

Employees will still pay the taxes they normally pay out of their wages.

This includes pension contributions (both employer contributions and automatic contributions from the employee), unless the employee has opted out or stopped saving into their pension.

Employee rights

Employees still have the same rights at work, including:

  • Statutory Sick Pay
  • maternity and other parental rights
  • rights against unfair dismissal
  • redundancy payments

Grants cannot be used to substitute redundancy payments. HMRC will continue to monitor businesses after the scheme has closed.

Working for a different employer

If contractually allowed, employees are permitted to work for another employer whilst placed on furlough.

For any employer that takes on a new employee, the new employer should ensure they complete the starter checklist form correctly. If the employee is furloughed from another employment, they should complete Statement C.

Tax Treatment of the Coronavirus Job Retention Grant

The Finance Bill will ensure that CJRS grants are taxable.

Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) are not taxable on grants received under the scheme. Domestic staff are subject to Income Tax and National Insurance Contributions on their wages as normal.

R&D Tax Credits

Bishop Fleming has expressed concern that furloughed worker grants would compromise R&D Tax Credit claims. 

The Incentives and Reliefs team at HMRC has confirmed to us that the grants will not compromise R&D Tax Credit claims. This is because the grants are for funding the main trade and not an R&D project, and furloughed employees cannot work and therefore cannot be involved in the project.

Further guidance

For further help, please check our our Coronavirus Knowledge Hub.

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