HMRC guidance on the Coronavirus Job Retention Scheme was updated on 12 June including information on changes to the Scheme from 1 July 2020, including how flexible furloughing will work and the level of Government support available to employers at each stage of the Scheme.
Firstly there is a new policy paper: Changes to the Coronavirus Job Retention Scheme. Charities should note:
- The Scheme will close on 31 October 2020.
- The first time you will be able to make claims for days in July will be 1 July, you cannot claim for periods in July before this point.
- 31 July is the last day that you can submit claims for periods ending on or before 30 June.
- From 1 July, employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim CJRS grant for the hours not worked
- From 1 August 2020, the level of grant will be reduced each month. To be eligible for the grant employers must pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they are being furloughed.
- There are no changes to grant levels in June.
- For June and July, the government will pay 80% of wages up to a cap of £2,500 for the hours the employee is on furlough, as well as employer National Insurance Contributions (ER NICS) and pension contributions for the hours the employee is on furlough. Employers will have to pay employees for the hours they work.
- For August, the government will pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough and employers will pay ER NICs and pension contributions for the hours the employee is on furlough.
- For September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
- For October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
You can claim for any employees you have furloughed if you have:
- furloughed that employee for at least 3 consecutive weeks between 1 March and 30 June 2020
- a UK PAYE scheme started on or before 19 March 2020
- enrolled for PAYE online
- submitted a report under the Real Time Information (RTI) reporting system for that employee on or before 19 March 2020
- a UK bank account
For employees that meet the criteria above, the number of you claim for in any single claim period starting from 1 July cannot exceed the maximum number of employees you claimed for under any claim ending by 30 June.
For example, an employer had previously submitted three claims between 1 March 2020 and 30 June, in which the total number employees furloughed in each respective claim was 30, 20 and 50 employees. Then the maximum number of employees that employer could furlough in any single claim starting on or after 1 July would be 50.
There are some exceptions explained in this guidance for employees returning from parental leave where this cap may not apply.
Prior to 1 July 2020, employees on furlough cannot undertake any work for you other than training. From 1 July, you will be able to:
- only be able to claim for employees who have previously been furloughed for at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June
- be able to flexibly furlough employees – this means you can bring your employees back to work for any amount of time, and any work pattern
- still be able to claim the furlough grant for the hours your flexibly furloughed employees do not work, compared to the hours they would normally have worked in that period.
If you flexibly furlough employees, you’ll need to agree this with the employee (or reach collective agreement with a trade union) and keep a new written agreement that confirms the new furlough arrangement. You’ll need to:
- make sure that the agreement is consistent with employment, equality and discrimination laws
- keep a written record of the agreement for five years
- keep records of how many hours your employees work and the number of hours they are furloughed (i.e. not working).
You do not need to place all your employees on furlough and you can continue to fully furlough employees if you wish. Employees cannot undertake any work for you during time that you record as them being on furlough.
From 1 July, agreed flexible furlough agreements can last any amount of time. Employees can enter into a flexible furlough agreement more than once.
Where a previously furloughed employee starts a new furlough period before 1 July this furlough period must be for a minimum of 3 consecutive weeks. This is the case regardless of whether the 3 consecutive week minimum period ends before or after 1 July.
For example, a previously furloughed employee can start a new furlough period on 22 June which would have to continue for at least 3 consecutive weeks ending on or after 12 July. After this the employee can they can then be flexibly furloughed for any period. However, after 1 July, employers cannot make claims that cross calendar months, so the employer will need to make a seperate claim for the period up to 30 June.
Although flexible furlough agreements can last any amount of time, unless otherwise specified the period that you claim for must be for a minimum claim period of 7 calendar days.
Your employees will still pay the taxes they normally pay out of their wages. This should be done through PAYE using the normal rules. 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. Until 31 July you can continue to claim for these costs for the hours the employee is on furlough. From 1 August employers will be required to pay all employer NICs and pension contributions.
From 1 July, only employees that you have successfully claimed a previous Coronavirus Job Retention Scheme grant for will be eligible for further grants under the scheme. This means they must have previously been furloughed for at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June. The last day an employee could have started furlough for the first time was 10 June. Employers will have until 31 July to make any claims for claim periods up to 30 June.
The number of employees you can claim for in any claim period starting from 1 July 2020 cannot exceed the maximum number of employees you claimed for under any claim ending by 30 June 2020. This may differ where you have an employee returning from statutory parental leave.
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. Such an employee can continue to be furloughed from 1 July so long as you have previously submitted a claim for them in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June.
If your employee has caring responsibilities
Employees who are unable to work because they have caring responsibilities resulting from COVID-19 can be furloughed. For example, employees that need to look after children can be furloughed. Such an employee can continue to be furloughed from 1 July so long as you have previously submitted a claim for them in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June.
Calculating Job Retention Scheme payments
Guidance on steps to take before calculating your Job Retention Scheme has been updated: claims for any periods starting before 1 July must end by 30 June. This is the case even where an employee furloughed in June continues to be furloughed full time in July.
Deciding the length of your claim period
Your claim period is made up of the days you are claiming a grant for. The start date of your first claim period is the date your first employee was furloughed. You can backdate your claim to 1 March 2020 where employees have already been furloughed from that date.
There is no maximum length for claim periods that end on or before 30 June. However, claims for any periods starting before 1 July must end on or before 30 June. This is the case even where an employee furloughed in June continues to be furloughed full time in July. Separate claims will need to be submitted to cover the days in June and the days in July that you want to claim for, even if employees are furloughed continuously. This may mean that your claim periods will differ from the pay periods you use.
Claims for periods ending on or before 30 June 2020 must be made by 31 July 2020.
Claim periods starting on or after 1 July must start and end within the same calendar month and must last at least 7 days unless you’re claiming for the first few days or the last few days in a month. You can only claim for a period of fewer than 7 days if the period you are claiming for includes either the first or last day of the calendar month, and you have already claimed for the period ending immediately before it.
You should match your claim period to the dates you process your payroll, if you can. You can only make one claim for any period so you must include all your furloughed or flexibly furloughed employees in one claim even if you pay them at different times. If you make more than one claim, your subsequent claim cannot overlap with any other claim that you make. Where employees have been furloughed or flexibly furloughed continuously (or both), the claim periods must follow on from each other with no gaps in between the dates.
You can claim before, during or after you process your payroll; you can usually make your claim up to 14 days before your claim period end date and do not have to wait until the end of a claim period to make your next claim. Claims for periods after 30 June can be made from 1 July.
When claiming for employees who are flexibly furloughed you should not claim until you are sure of the exact number of hours they will have worked during the claim period. This means that you should claim when you have certainty about the number of hours your employees are working during the claim period. If you claim in advance and your employee works for more hours than you have told us about, then you will have to pay some of the grant back to HMRC. If you make an error in your claim, you can find out how to correct it.
Payments will be made 6 working days after you make your claim.
If the pay period you are claiming for includes days in more than one month
From 1 July, the scheme rules will change each month. This means that claim periods starting on or after 1 July must start and end within the same calendar month.
If your pay period includes days in more than one month, you’ll need to submit separate claims covering the days that fall into each month. You should calculate each of those claims separately. Claim periods cannot overlap, so you will need to make sure you include all of the employees you want to claim for in each claim you make.
Employee has a weekly pay period which ends each Friday. For their pay period 27 June to 3 July 2020 the employer will need to submit two separate claims. The employer can choose how to deal with the two parts:
- 27 to 30 June (which can be a claim on its own or the employer can combine into a single claim with the previous week, claiming for 20 to 30 June)
- 1 to 3 July (which can be a claim on its own because it immediately follows the previous claim ending 30 June, or the employer can combine it into a single claim with the following week, claiming for 1 to 10 July)
Employee has a 4-week pay period which falls 20 July to 16 August. The employer cannot claim for this as a single period so makes two separate claims:
- 20 to 31 July
- 1 to 16 August
Calculating your claim
If your employee is flexibly furloughed, you will need to work out their usual hours and record the actual hours they work as well as their furloughed hours for each claim period. The calculation will depend on whether they work fixed or variable hours
If your employee is flexibly furloughed, you’ll need to work out your employee’s usual hours and record the actual hours they work as well as their furloughed hours for each claim period.
There are two different calculations you can use to work out your employee’s usual hours, depending on whether they work fixed or variable hours.
You should work out usual hours for employees who work variable hours, if either:
- your employee is not contracted to a fixed number of hours
- your employee’s pay depends on the number of hours they work
If neither of these apply, you should work out your employee’s usual hours for an employee who is contracted for a fixed number of hours.
The employee’s working pattern does not have to match their pay period (for example, an employee could be contracted to 40 hours a week, but be paid monthly).
Job Retention Scheme Calculator
HMRC’s Job Retention Scheme calculator can now also be used to work out what you will be able to claim for claim periods 1 July-31 July. If you are claiming for a flexibly furloughed employee, you will need to work out their usual hours first.
Updated guidance on claiming or wages through the Job Retention Scheme notes that HMRC will provide a file upload template to complete for claim periods starting on or after 1 July. Templates will be available in .xls, .xlsx, .csv and .ods formats
This example has been included to illustrate the full sequence of calculation steps that an employer must take when claiming through CJRS. It has been based on a common scenario in which the employee has a fixed monthly salary, fixed working hours, and is flexibly furloughed. This scenario may not be directly relevant to you, though it may be helpful to see an illustrative example of a full calculation.
Employee has worked for F Ltd since 2016, working 40 hours a week for a monthly salary of £3,000, paid calendar monthly. The employee was furloughed on 25 April 2020 and from 1 July 2020 is asked to return to work half-days. Pay has not been topped up and there is no bonus, commission or other additional pay.
As they prepare to pay employees for the end of July, F Ltd also calculate their CJRS claim.
As F Ltd processes payroll on a calendar month it decides to claim for 1 to 31 July.
The employee is flexibly furloughed from 1 July, so F Ltd works out the usual hours. The employee has fixed hours and a salary that doesn’t vary by the number of hours worked so the calculation is:
- The number of hours the employee was contracted for at the end of the last pay period ending on or before 19 March 2020. This was 40 hours per week.
- Divide by the number of calendar days in the repeating working pattern. It is a weekly pattern, so divide by 7
- Multiply by the number of days in the pay period. 31 days in July, so multiply by 31.
- Result is 177.14, rounded up to 178.
Next F Ltd calculates the number of working hours and furloughed hours. The employee will work 23 half days, each of 4 hours, so working hours are 92. Furlough hours are calculated as:
- Number of usual hours, 178
- Subtract the number of actual hours worked, so subtract 92 = 86 furlough hours.
F Ltd calculates the maximum wage amount. As F Ltd will claim for the pay period which is a whole month, the maximum wage amount is £2,500.
F Ltd then works out the 80% of the usual wage.
The employee is furloughed throughout July so there are 31 furlough days.
The employee is on fixed pay, so the calculation is:
- Start with the employee’s wages from their last pay period before 19 March, £3,000. Claim is for a full pay period so skip to step 4.
- Multiply by 80% = £2,400.
Furlough pay for flexibly furloughed employee is the lesser of either: 80% of usual wages (£2,400) or the maximum wage amount (£2,500).
- Here F Ltd uses £2,400.
- Multiply by employee’s furloughed hours, 86
- Divide by the employee’s usual hours, 178 = £1,159.55.
As the claim is for July, F Ltd can claim a wage grant for the whole amount of the minimum furlough pay.
F Ltd then works out how much to claim for employer NICs costs. The company uses the payroll to calculate the actual NICs due but must use the scheme calculation for claims between 1 July and 31 July to work out how much grant it can claim.
First apportion the relevant secondary NICs threshold.
- Start with the relevant secondary NICs threshold for the NICs earnings period. The earnings period is the month, so the threshold is £732.
- Divide by the number of days in the earnings period, 31
- Multiply by the number of days in the claim, 31
- Divide by the number of usual hours in the claim, 178
- Multiply by the number of furlough hours in the claim, 86 = £353.66.
Calculate the employer NICs grant:
- Start with the amount claimed for employee’s wages, £1159.55
- Deduct relevant apportioned secondary threshold, £353.66
- Multiply by 13.8% = £111.21.
F Ltd is not eligible to claim the Employment Allowance and the grant amount is less than the total NICs it will pay in respect of this employee, so £111.21 is the grant amount it can claim.
F Ltd then calculates the pension contribution grant using the calculation for claim periods 1 July to 31 July.
First apportion the relevant lower level of qualifying earnings (LLQE):
- Start with the relevant LLQE for the pay period, £520.
- Divide by the number of days in the pay period, 31
- Multiply by the number of days in the claim, 31
- Divide by the number of usual hours in the claim, 178
- Multiply by the number of furlough hours in the claim, 86 = 251.24
Calculate the pension contribution grant:
- Start with the amount claimed for wages, £1,159.55
- Deduct the apportioned LEL, £251.24
- Multiply by 3% = £27.25.