Coronavirus Job Retention Scheme
The online claim portal for the Coronavirus Job Retention Scheme (CJRS) went live on 20 April 2020, allowing employers who have furloughed staff as a result of the COVID-19 pandemic to claim grants from the Government equal to 80% of the employee’s wages (capped at £2,500 per month). Employers can also claim the associated employer’s National Insurance contributions and the minimum employer pension contributions required under auto-enrolment. More than 67,000 employers made a claim under the scheme within the first half hour of the portal opening.
Who can claim?
The CJRS aims to help employers affected by the COVID-19 pandemic to maintain their workforce rather than lay-off staff. It is open to any employer with a UK payroll as long as they:
- had a UK payroll in existence as at 19 March 2020 in respect of which RTI submissions had been made by that date;
- are enrolled for PAYE online (employers not enrolled for PAYE online as at 19 March can do so after that date); and
- have a UK bank account.
What employees are covered?
Claims can only be made in respect of employees who have been furloughed – i.e. laid off from work temporarily. Employers must confirm in writing to the employee that they have been furloughed and make any necessary changes to the employee’s contract of employment. An employee must be furloughed for a minimum of three weeks for a claim to be made.
The employee must have been on the employer’s payroll on 19 March 2020 and the employer must have made an RTI submission in respect of the employee by that date. This may mean that employees who were taken on after the February payroll or who missed the February payroll cut-off date fall outside the scheme, even if they had done some work for the employer prior to 19 March. Claims can, however, be made in respect of employees who were on the payroll as at 28 February 2020 and who were made redundant or stopped working for the employer before 20 March 2020 if the employer puts them back on the payroll and furloughs them. This can be done after 19 March 2020. To qualify, an RTI submission must have been made in respect of the employee by 28 February 2020.
It does not matter what type of contract the employee has – the scheme applies to full-time workers, part-time workers and to those on flexible or zero-hours contracts. Claims can also be made by directors of personal and family companies (but only in respect of their PAYE income).
However, furloughed employees cannot do any work for the employer that generates income while furloughed. This means that claims cannot be made for workers who are on reduced pay or reduced hours. Company directors can, however, continue to fulfil their statutory duties. Apprentices can also be furloughed under the scheme and can continue to train whilst furloughed.
What can be claimed?
Employers can claim 80% of a furloughed worker’s wages, plus the associated employer’s National Insurance and the minimum pension contributions that the employer is required to make under auto-enrolment. Amounts claimed in respect of an employee’s wages must be paid over to the employee in full. Employers can, if they so choose, top up the employee’s wages above the 80% covered by the grant. Grants are pro-rated where the employee is only furloughed for part of the pay period and should be made from the date that the employee starts furlough.
For the purposes of the scheme, wages are the regular payments that the employer is obliged to make to the employee and include:
- regular wages payable to the employee;
- non-discretionary overtime;
- non-discretionary fees;
- non-discretionary commission payments; and
- piece rate payments.
However, the following payments should not be included as wages for the purposes of a claim:
- payments made at the discretion of the employer or a client where there was no contractual obligation to pay, such as tips, discretionary bonuses or discretionary commission payments;
- non-cash payments;
- non-monetary benefits, such as benefits in kind (for example, company cars and private medical insurance).
Calculating the wage claim
For full and part-time employees on a salary, the employer can claim 80% of their salary for the last pay period to 19 March, capped at £2,500 per month (proportionately reduced where the employee was not furloughed for the whole period).
Where an employee’s pay varies and the employee has been employed for at least 12 months, the claim cam be made either by reference to the same pay period in 2019 or by reference to the employee’s average monthly earnings for 2019/20. If the employee has worked for less than 12 months, their average monthly earnings since they started work should form the basis of the claim.
Claiming employer’s National Insurance
Grant payments paid to employees are liable to PAYE tax and National Insurance (employee’s and employer’s) as for normal payments of wages and salary. However, employers can claim the employer’s National Insurance due on grant payments from HMRC. The guidance on the Gov.uk website explains how this is calculated.
Claims cannot be made for employer’s National Insurance covered by the employment allowance. While there is no obligation to claim the allowance from the start of the tax year, it is possible that HMRC may regard delaying claiming the allowance until after the end of the scheme as tax avoidance.
Claiming pension contributions
Where the furloughed employee is within auto-enrolment, the employer will need to pay pension contributions at the minimum level of 3% on earnings above £520 per month (2020/21).
How to make a claim
Claims can be made online.
The claim can be made by the employer or by an agent authorised to act for the employer for PAYE purposes. However, claims cannot be made by agents who are only authorised to file RTI returns on the employer’s behalf.
When making a claim, the following information is required:
- UK bank account and sort code;
- employer PAYE scheme reference number;
- the number of employee’s being furloughed;
- the National Insurance number for each furloughed employee;
- the employee’s payroll number (although this is optional);
- the start and end date of the claim;
- the full amount of the claim, including employer National Insurance contributions and pension contributions;
- contact name and phone number;
- the employer’s corporation tax unique tax reference, self-assessment unique tax reference (as appropriate) or the company registration number.
Claims can be backdated to 1 March 2020. The money should be paid into the employer’s bank account within six working days of the date on which the claim was made. Claims can be made prior to the payroll date so that the employer has the money available to pay furloughed employees.
It should be noted that HMRC will undertake checks for fraudulent claims.
Speak to use to find out whether you are eligible to make a claim and for help in working out what you can claim. Read more about the scheme on the Gov.uk website.