Coronavirus: Job Retention Scheme update

Employers using the Coronavirus Job Retention Scheme (CJRS), which has seen some £25.5bn in claims so far, will start paying more towards salaries of furloughed staff from next week.

What’s changing?

From 1 September 2020, the government will pay 70% of wages up to a cap of £2,187.50. Employers must contribute 10% of wages for furloughed staff to make up 80% in total, up to a cap of £2500. This is in addition to the ER NICs and pension contributions that employers have been paying since August.

This change was expected and is part of the phased reduction of grant support as more businesses open and staff return to work.

October payments

Ahead of the scheme ending on 31 October 2020, employers’ contributions are set to increase again from 1 October 2020. The government will pay 60% of wages up to a cap of £1,875, whilst employers will pay ER NICs and pension contributions, plus 20% of wages to make up the 80% total, up to a cap of £2,500.

Full details of the scheme (as of today) and how you can claim, can be found here: https://www.gov.uk/guidance/calculate-how-much-you-can-claim-using-the-coronavirus-job-retention-scheme

OTHER KEY POINTS

Our thanks to Sean McDonough, Partner and Head of Employment & HR team at Mogers, for his help in compiling the following information.

This latest phase of the Coronavirus Job Retention Scheme (CJRS) has given businesses the flexibility to bring furloughed employees back to work part-time from 1 July, for any amount of time and any shift pattern, while still being able to claim a grant for the hours not worked.

Employees who are furloughed during this period must continue to receive 80% of their salary covering the time they are unable to work and on furlough. For example, it includes those who perhaps have been brought back to part-time work/part-time furlough. So, the employer must decide whether it can afford to fund the balance that the government is no longer paying.

Employees can remain fully furloughed until 31 October 2020, but they cannot undertake any work for you during the time that you record them as being on furlough leave.

Only those employees who have been furloughed for at least three consecutive weeks between 1 March and 30 June 2020 are eligible for the latest phase of the scheme. The 10th June was the last date for an employer to furlough an employee for the first time, unless an employee was coming back from maternity or paternity leave.

HR and compliance

  • The number of employees you can claim for in any period starting from 1 July cannot exceed the maximum number of employees you previously claimed for up until the 30 June 2020. We can provide more detail and examples on this point if required.
  • You will need to speak to your employees and confirm the hours of work, with a new written agreement and if the hours of work change from that which you initially agree, you will need a new agreement to reflect each change. You will need to keep a copy of these agreements and all previous arrangements for a period of five years. If you already have a written furlough agreement with your existing furloughed employees and you move them to flexible furlough, you will need this new agreement.
  • You will need to keep records of how many hours your employees work and how many hours they are furloughed. You must keep a copy of these records for six years, (one version of the guidance says five years) together with a record of the amount claimed, your claim reference number and your calculations in case HMRC need more information about your claims in the future.
  • Employees continue to accrue leave during furlough (whether they are on full furlough or flexible furlough) and take leave during furlough (so long as you top the grant up to full pay for any days taken as holiday). You can continue to restrict when leave can be taken if there is a business need and the correct notice period is given.

Claim periods and timings

  • When claiming for employees who are flexibly furloughed, it is vital that you don’t claim until you are sure of the exact hours that they will work to ensure you don’t have to pay some of the grant back to HMRC at a later date.
  • After 1 July, claim periods must start and end within the same calendar month and must be for a minimum of seven days. The crucial point is that you cannot make claims that cross calendar months and so claims for periods ending on or before 31 August 2020 must be made by 31 August 2020.
  • The only exception to the seven-day rule is 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.

Calculating your claim

From 1 July you are effectively claiming a pro rata’d amount of 80% of the salary of any employees you have on CJRS. Your claim will be for the proportion of hours not worked out of the employee’s normal working hours (i.e. their “usual” hours).
There are two ways to calculate an employee’s usual hours, and we can run through the detail with you if required or refer you to the above link to the Government guidance.

What if you make a mistake?

You need to be careful that the claims you make are correct. Employers have 30-days to self-declare a mistaken CJRS application and pay the money back to HMRC without incurring any penalties.

The Finance Bill was amended in July so HMRC can now pursue employers who break the CJRS rules. If HMRC suspects that an employer has made a fraudulent claim, it can impose a 100% tax rate on the payments. Furthermore, HMRC can prosecute employers which fail to pay tax demands.

Beyond CJRS

When CJRS ends on 31 October, employers will be liable to cover all associated employment costs of their employees. Therefore, employers must determine whether they can afford for employees to return to their normal hours from 1 November and if not, decide if they need to reduce hours or consider redundancy. Employers don’t have to wait until the end of the CJRS to make these decisions and can reduce hours or make redundancies at any time.

Job Retention Bonus

Under the Chancellor’s Job Retention Bonus, which was announced in July, employers will receive a one-off £1,000 payment for eligible staff who were furloughed under CJRS, if they remain continuously employed until the end of January 2021. We will update you with further details when they are published in September.

How we can help

Please contact us now about any concerns you have regarding staffing requirements, as we can point you in the direction of our trusted employment law contacts for guidance and advice.

Some clients may need to act quickly to make decisions on staff, especially as there are statutory notice periods that might come into play under employment law that you need to adhere to, depending on your current thought process. If needed, our team can also assist you with cashflow projections or sensitivity analysis; for example, by modelling different turnover and staff cost scenarios.

For further information or advice on any of the issues raised, or for help with services like bookkeeping, cash flow management or payroll during the Coronavirus pandemic, please call us on 01225 325580, email info@richardsonswift.co.uk, or contact your usual client director.

Please note that this is only a summary of the main issues and should not be construed as advice. Every effort has been made to ensure factual accuracy at the time of publication (27 August 2020), however, the government response to the Coronavirus situation is changing 24-7, so it should not be relied upon completely.