Helping you prosper

Coronavirus Job Retention Scheme FAQs

We have provided below a fairly lengthy summary of the FAQs asked by our clients.

The below was last updated on 1 October 2020.

Overview of the CJRS

What is it and who is covered?

Essentially CJRS will be a government grant. The idea is to reimburse employers for 80% of a “furloughed worker’s” wages or salary, to a cap of £2,500 per month. Employers may choose to top up the remainder, but they are not required to do so.

The maximum grant is set out below plus, for some of the time, the associated employment costs of employer’s national insurance and employer pension contributions (up to the level of the minimum automatic enrolment employer pension contribution). Full time, part time, employees on agency contracts and employees on flexible or zero hours contracts are eligible.

Maximum grant
Furlough period Salary amount NI & Pension
To 31 July 2020 £2,500.00 Relating to furloughed salary
August 2020 £2,500.00 Not claimable
September 2020 £2,187.50 Not claimable
October 2020 £1,875.00 Not claimable
What is a furloughed worker?

Furloughed workers are “workforce who remain on the payroll but are temporarily not working during the Coronavirus outbreak”. Employers will need to notify employees of this change in their employment status so it will need to be handled carefully by HR specialists. We expect employers may be asked to justify the “furloughed” assessment, the most obvious examples being employees who would ordinarily have extensive contact with the public or those for whom work has dropped off due to lack of orders. You do not have to place all your workers on furlough, if there is work still to do, then you can continue to employ them and pay their wages and furlough those for whom there is not enough work or work has dropped off.

For the second phase of the scheme from 1 July, it will not be possible to make claims in respect of workers who were not furloughed during the initial part of the scheme. There is time until 10 June to furlough any previously unfurloughed employees, as the 3 week limit still applies currently.

Who is eligible for the scheme?

All UK businesses are eligible: small or large, charitable or non-profit will be eligible for the scheme. You must operate a UK PAYE scheme prior to 19 March 2020 and have a UK Bank account.

What about public sector organisations?

The government expects that the scheme will not be used by many public sector organisations, as most 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, HMRC expect 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.

Who is not covered?

Only employees who were employed by you and were on the PAYE payroll on or before 19 March 2020 can be furloughed. This means that the employee must have been notified to HMRC through an RTI submission notifying payment in respect of that employee on or before 19 March 2020. From 1 July, only employees who have been furloughed previously will qualify for government support.

Is it a loan?

No. It is a grant to employers and you will need to pay the worker and process PAYE, NICs and employers costs as normal, you will then make a claim for reimbursement up to the maximum amount. You can only furlough for a minimum of three weeks at a time and you can only submit one claim every three weeks. Claims can be backdated to 1 March.

Is the overall pot limited?

The Chancellor originally stated that  “We will pay grants to support as many jobs as necessary”. Grants can be backdated to 1 March and were initially set to cover a period of 3 months, however, there have been two subsequent extensions to the scheme, with the scheme in its current form extended to run to the end of July and from 1 August to 31 October, employers will be asked to share in the employee costs with part-time returns to work permitted for individuals. For workers on furlough during August, claims will be limited, so that employers will not be able reclaim national insurance contributions or pension contributions in respect of the furloughed payments. Government estimates that this is around 5% of amounts claimed overall. For September, the government contribution to furlough payments will be capped at 70% of salary, with employers expected to make up 10%, as well as the relevant NI and pension contributions. A further reduction will apply to October, with the government contributing 60% and employers making up 20%.

What information do I need to make a claim?
  • The PAYE reference
  • The number of employees being furloughed
  • The claim period
  • The amount claimed (minimum furlough length is three weeks)
  • Your bank account and sort code
  • Your contact name
  • Your phone number
Is the 80% that the government is funding in respect of the gross salary or net salary?

The 80% is in respect of the gross salary plus the associated employment costs of employer’s national insurance and employer pension contributions.

What is considered to be ‘wages or salary’?

The Government has clarified that this will include guaranteed overtime, guaranteed commission , but NOT tips, benefits in kind or non-guaranteed bonuses or commission.

Can I still claim if I have reduced the workers hours/pay, but still have work?

Until 30 June you cannot claim furlough pay and still have the worker engaged in work for you. If they agree to a reduced wage to carry on working, you will be responsible for paying that reduced wage and cannot claim it back. You cannot reduce a worker’s pay and hours without their agreement or a contractual right to do so.

From 1 July flexible furloughing will be introduced, allowing employees to be furloughed for only part of a week or month. For instance, an employee could be asked to work 2 days a week and spend 3 days a week on furlough, receiving full pay for the 2 days and furloughed pay for the 3 days. Government support will still be available for the furloughed pay.

What is the interaction with PAYE and National Insurance?

Furloughed wages will be subject to PAYE and NI deductions as usual. Employees will also pay pension on qualifying earnings if applicable. Employers will be liable for Employers NI and Employers Pension unless the employee has opted out.

Some employers may be eligible for the Employment Allowance. In the 2019 to 2020 tax year the allowance was £3,000 and was available to all employers. From 6 April 2020 the Employment Allowance is £4,000 but is only available to employers whose Employer Secondary National Insurance contributions liability in the previous year was under £100,000.

Employers can use the Employment Allowance to reduce their employer National Insurance contributions bill until the allowance is exhausted or the end of the tax year, whichever comes first. This allowance must be used first before any claim for Employers National Insurance can be made through the CJRS.

Eligible individuals who are not employees

Are directors eligible for the scheme?

The latest guidance says that, as office holders, salaried company directors are eligible to be furloughed, provided they only carry out statutory duties during the period of furlough leave.

Also directors of their own Personal Service Company and salaried partners of a Limited Liability Partnership (LLP) can be furloughed.

For shareholding directors that receive a combination of salary and dividends, the salary part (that is subject to PAYE) of their remuneration will only be relevant for this scheme. Not dividends or share payments.

The furlough arrangements should be adopted formally as a decision of the company or LLP.

Temporary workers, zero hour contracts, irregular hours etc.

Are agency workers eligible for the scheme?

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 performing such work through or on behalf of the agency 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.

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 performing such work through or on behalf of the agency 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.

What if the employee has more than one job?

Whilst employees can be furloughed from jobs that meet the requirements, there is nothing to stop an employee working whilst furloughed in a job that is not connected to the one from which the employee is furloughed, including taking new employment in this period. For instance a furloughed cinema employee could take a short-term job with a supermarket.

How will the scheme work for those employees with irregular earnings?

If the employee has been employed for 12 months prior to being furloughed, you can pay the higher of either the same months earnings from the previous year or the average monthly earnings from the last tax year 2019/20.

What about employees on zero hours contracts?

If they worked for you before 28th February 2020, they would be eligible for furlough leave. You would need to work out the average of their monthly earnings and pay the higher of either the same months earnings from the previous year OR the average month’s earnings from the last tax year 2019/20.

What if an employee is on a fixed term contract?

Employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended before their natural conclusion during the furlough period without breaking the terms of the scheme. There is no minimum period which must be left to run on a fixed term contract to enable it to be renewed or extended, but it must not have ended. The furlough period must be for a minimum period of three consecutive weeks.

Where a fixed term employee’s contract ends because it is not extended or renewed before its natural conclusion you will no longer be able claim a grant for them once the contract ends. Fixed term contracts which ended, without extension or renewal, on or before 19 March 2020 will not qualify for the grant once they have ended.

What about employees on or about to go on maternity, adoption, paternity or shared parental leave?

The employee can be furloughed up to the point they would have gone on maternity leave and then they are entitled to maternity/adoption/paternity/shared parental pay and leave as normal.

What about employees returning from maternity, adoption, paternity or shared parental leave?

If you are looking to furlough any employees returning to work from leave, you are able to claim through the scheme, but the claim should be based on the employee’s salary, rather than the pay they received while on leave.

What about Apprentices?

Apprentices can be furloughed in the same way as other employees and they can continue to train whist furloughed. However, you must pay your Apprentices at least the Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means you must cover any shortfall between the amount you can claim for their wages through this scheme and their appropriate minimum wage.

Can individuals furlough nannies?

Yes, providing they pay them through PAYE, and sent HMRC an RTI submission notifying a payment in respect of the employee on or before 19 March 2020.

Managing furloughed staff

Can employers communicate with workers on furlough?

Yes but not to ask them to do work.

Can employees work for someone else whilst on furlough?

The new updated guidance does not prohibit staff taking another job whilst on furlough leave (if their contract of employment allows for this).

Can employees attend work-based training or study whilst on furlough?

Workers can study while they are being furloughed and they can volunteer but they cannot do work that provides services or generates any revenue for or on behalf of the employer.

If they are completing work-based training whilst they are furloughed, they must be paid at least the National Minimum wage for the time spent training, even if this is more than the 80% subsidy.

Can workers be moved in and out of being furloughed if work becomes available to an employer then ceases again?

An employee can be furloughed multiple times but until 30 June must be for a minimum of three weeks at a time. From 1 July workers can be moved freely in and out of furlough, although claims for CJRS can be made only in respect of workers who have been furloughed prior to 30 June. Whilst employees are carrying out work you are obliged to pay their contractual pay and you cannot make a CJRS claim in respect of this contractual pay.

Can furloughed employees carry out 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. Your organisation can agree to find furloughed employees new work or volunteering opportunities whilst on furlough if this is in line with public health guidance.

Employer requirements

What do employers need to do?

Determine which employees are “furloughed workers” and submit information to HMRC as to who those employees are and their base earnings levels. This will be through a new online portal.

The employer will need to pay the employee through payroll, using the Real Time Information (RTI) as usual. Once HMRC receive a claim and deem it eligible, they will pay it via BACS to your UK bank account.

You must pay the employee all the grant you receive for their gross pay, no fees can be charged for the money that is granted to the payment of furloughed wages.

How do I communicate with workers that I would like to furlough? What is the furlough process?

You will need to contact each employee and set out why you would like to put them on furlough leave. This will need to be followed up in writing and ask them to sign a variation to their contract agreeing to this. You can download templates for this communication and a furlough agreement here:

 HR Service Centre – COVID-19

What if the 80% of wages falls below the National Minimum Wage or London Living Wage?

If the employee is furloughed, they are not working and hence the minimum wages levels do not apply. You must pay at least the NMW for any work-based training they undertake, however.

Does this right to furlough or lay off need to be in the contract of employment?

No, but you do need to get an agreement with each employee that they are agreeing to the furlough status and reduced pay.

Is the decision to furlough an employee a decision that the employee has to agree to? Can they refuse and ask for redundancy instead?

An employee does not have to accept furlough if offered, but the employer could then make the employee redundant or lay them off instead, after following the correct employment law procedure.

Can an employer force someone to become a ‘furloughed worker’?

In most cases the employee needs to accept. If the employer proposes to maintain full normal pay for furloughed workers (whilst claiming the grant from HMRC) then employers will not necessarily need worker consent to designate them as furloughed.

If the employer proposes to reduce pay for furloughed workers to the maximum HMRC grant, then it will need worker consent; reducing an employee’s pay amounts to an unlawful deduction from wages unless there is prior written consent or contractual agreement. Legal advice should be obtained.

It is likely that in most cases the employee is likely to accept. In some instances the alternative might be that they will lose their employment entirely, owing to being at risk of lay-off or redundancy.

What are an employee’s rights whilst on furlough leave?

They continue to remain employed and are eligible for SSP, maternity, parental rights, rights against unfair dismissal and redundancy pay. They will accrue holiday which they can either take when they come back to work, or they can take whilst on furlough leave but this will need to be paid by the employer at 100% rather than 80% of salary.

What if an employee is off sick?

Employees who are sick or who are self-isolating should still get Statutory Sick Pay and then they can be furloughed once their sick leave ends.

If an employee is shielding in line with public guidance (or need to stay at home with someone who is shielding), or they are unable to work because they have are required to care for someone as a result of Covid-19, eg. they need to look after their children, they can be furloughed with their agreement.

 

What if an employee becomes sick while furloughed?

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

Is it possible to bring back workers to the business and place them on furlough where they have already been dismissed owing to a lack of work?

Yes – 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 through the scheme.

This applies to employees that were made redundant or stopped working for you after 28 February, even if you do not re-employ them until after 19 March.

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

How does an employer ensure fair selection when considering furloughing workers if there is some work to be done by some employees?

Obvious candidates are employees who are simply unable to work from home due to their role. Where an employer concludes there is work but only enough for a proportion of the workforce employers may be faced with some tough decisions. Employers may need to consider a process of calling for volunteers, pooling and selection – as with a redundancy process. This could be a complex area so legal advice is recommended to reduce the risk of claims (including discrimination claims).

Making a claim

How do I make a claim?

HMRC launched the new portal on 20 April and have been contacting businesses to advise them on what they need to do. The service is designed to be self-service with guidance in place. HMRC have requested that employers and employees do not contact them unless absolutely necessary – any questions should be directed at your agent (usually your accountant), representative or HMRC web chat service.

As many of our UHY offices provide payroll services to clients, we are able to support you with this claim. Please speak to your usual UHY adviser for further information.

What information do I need to make a claim?
  • Your employer PAYE reference
  • The number of employees being furloughed
  • National Insurance numbers and payroll/works number for the employees you want to furlough
  • Your self-assessment unique tax payer reference or corporation tax unique tax reference or company registration number
  • The claim period (start and end date)
  • The amount claimed (minimum furlough length is three consecutive weeks)
  • Your bank account and sort code
  • Your contact name
  • Your phone number

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

If you have fewer than 100 furloughed employees 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 (the last item is optional). If you have more than 100 furloughed employees then the information can be entered via an upload.

How do I calculate the amount I need to claim?

The ICAEW have provided worked examples, though they have caveated this as only an indication of how the scheme will work:

Example 1:

  • X Ltd employs Mr A at an annual salary of £24,000, so £2,000 per month. Mr A has opted out of auto-enrolment.
  • Each month, Mr A currently receives net pay of £1,655 which is after deducting PAYE of £191 and employees NIC of £154. On this salary, the employer pays employers’ NIC of £177.
  • The available grant for the employer is the lower of (a) 80% of £2,000, and (b) £2,500. Plus employers’ NIC, £122, on this amount
  • So X Ltd claims a grant of £1,600 plus £122 = £1,722.
  • The net amount of cash required by X Ltd to furlough Mr A based on maintaining the existing salary is £2,000 + £177 – £1,722 = £455 per month

Example 2:

  • X Ltd employs Mr B at an annual salary of £42,000, so £3,500 per month. Mr B has opted out of auto-enrolment.
  • Each month, Mr B currently receives net pay of £2,675 which is after deducting PAYE of £492 and employees NIC of £333. On this salary, the employer pays employers’ NIC of £383.
  • The available grant for the employer is the lower of (c) 80% of £3,500 = £2,800, and (d) £2,500. Plus employers NIC, £245, on this amount
  • So X Ltd claims a grant of £2,500 plus £245 = £2,745.
  • The net amount of cash required by X Ltd to furlough Mr A based on maintaining the existing salary is £3,500 + £383 – £2,745 = £1,138 per month.

HMRC have also launched an online calculator on 20 April – this can be found here.

How often can I make a CJRS claim?

Employers can make one claim per pay period, but the claim can be made up to 14 days in advance, so that funds are received in time to pay employees by their usual pay date. From 1 July, claims cannot be made more frequently than one per week, even if, due to the new flexible arrangements, a claim is only for, say, one day’s furlough.

When will employers receive reimbursement under the CJRS?

After you have made your claim, you’ll then receive a claim reference number. HMRC will check that your claim details are correct and pay the claim amount by BACs into your bank account within 6 working days.

What can employers do in the meantime to support cashflow?

Businesses can look to the Coronavirus Business Interruption Loan Scheme and the tax payment deferrals to assist with cashflow.

The next step

At UHY we have a number of advisers who are well used to dealing with the employment taxes part of HMRC, we can assist with communicating the employees you have furloughed, the reasons why, and the earnings on which the reimbursement should be based.

If you would like to discuss the support we can provide for your business during this difficult time, please contact your usual UHY adviser or complete the contact form.