Extension to furlough
On 17 December 2020, the Chancellor announced that the Coronavirus Job Retention Scheme ("CJRS") would be extended until the end of April 2021. The CJRS was originally due to be extended until 2 December 2020 and then further extended until the end of March 2021. The Chancellor has also announced that the Budget will take place on 3 March 2021, which will set out the next phase of the government's plan to tackle the virus and protect jobs.
A further Treasury direction covering the operation of the CJRS from 1 February 2021 onwards is expected later in January 2021 following a government review of the appropriate level of employer salary contributions (if any).
Detailed guidance released for extended Coronavirus Job Retention Scheme
On 23 December 2020, the government updated its previously released guidance on the CJRS. Links to all of the detailed guidance documents can be found at the end of this article. However, we have provided below a high level overview of some of the key points arising from the new guidance.1.
Who can claim?
The scheme is open to all UK employers who have a UK, Channel Island or Isle of Man bank account; have created and started a PAYE payroll scheme on or before 30 October 2020; and are enrolled for PAYE online. Claims for claim periods ending on or before 31 October 2020 can no longer be submitted. Claims can be made for employees who were employed on 30 October 2020, as long as the employer made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. Employers do not need to have previously claimed for an employee before 30 October 2020 in order to claim for periods from 1 November 2020. Claims for furlough days in December 2020 must be made by 14 January 2021.
The new guidance confirms that if an employer's staff costs are publicly funded (even if they are not in the public sector), they should use that money to continue paying staff, rather than furloughing them. Employers can use the CJRS if they are not fully funded by public grants and should contact their sponsor department or respective administration for further guidance. Further, companies in administration can use CJRS, although administrators should only use the scheme if there is a reasonable likelihood of retaining the workers they furlough.
Current government guidance states that the furlough scheme is aimed at those employers who cannot maintain their workforce because their operations have been affected by coronavirus. However, it also confirms that employees who need to shield because they are clinically extremely vulnerable, or who cannot work due to caring responsibilities (including for children who remain at home as a result of school closures) resulting from coronavirus, can be furloughed.
In February 2021, HMRC will begin to publish details of employers and the value of their claims made from 1 December 2020 onwards in an attempt to combat fraudulent claims.
Which employees can an employer claim for?
For periods that runs from 1 November 2020 onwards, the guidance confirms that:
"You can claim for employees on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed. Grants under the scheme are not counted as 'access to public funds', and you can furlough employees on all categories of visa."
Is there any guidance for specific categories of employee?
Employees who have been transferred under the Transfers of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (TUPE) may be eligible to be furloughed by their new employer if they:
- transferred after 1 September 2020;
- were employed by their old or new employer on 30 October 2020; and
- were on the new or old employer's RTI submission to HMRC between 20 March 2020 and 30 October 2020.
Employees who were made redundant on or after 23 September 2020 may be re-employed and placed on furlough, subject to the other eligibility criteria.
Fixed term contracts
If an employee is on a fixed term contract, and they were employed by the employer on or before 30 October 2020, their contract may be extended or renewed and they may be furloughed. If the employee's fixed term contract expired on or after 23 September 2020, they can also be re-employed and placed on furlough.
Apprentices can be furloughed but they must be paid at least the Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage (as appropriate) for any time that they spend training. If they engage in any training while furloughed, the employer will need to make up the difference between the amount claimed under CJRS in respect of their wages and the applicable minimum wage scheme.
Other types of employees
The guidance also refers to other types of employees who can be furloughed, subject to the specific details of the guidance. These are listed below:
- Company office holders;
- Company directors;
- Salaried members of LLPs;
- Agency workers;
- Limb (b) workers who are paid through PAYE (note that those who pay tax on their trading profits through Income Tax Self-Assessment instead may be eligible for the Self-Employed Income Support Scheme ("SEISS"));
- Contingent workers in the public sector;
- Contractors with public sector engagements who are in scope of the IR35 off-payroll working rules;
- Individuals with an annual pay period.
What can an employer claim?
For the period 1 November 2020 to 31 January 2021, employers can claim 80% of their employee's wages for the parts of their usual hours which they have not worked over a period of time ("Claim Period"), excluding pension contributions and NICs. Employees can be either "fully furloughed" (meaning they do no work for the employer during the Claim Period) or "flexibly furloughed" (meaning they work some of their usual hours during the Claim Period). Claim Periods must be at least seven days' long, and start and end within the same calendar month; they will ideally align with the dates on which the employer processes payroll.
When calculating the employee's wages for the purposes of calculating the size of the CJRS grant to claim, only regular payments which an employer is obliged to make should be included, i.e. regular wages, non-discretionary payments for hours worked such as overtime, non-discretionary fees or commissions, and piece rate payments. Discretionary payments such as bonuses and tips, and non-monetary benefits such as benefits in kind or benefits under salary sacrifice schemes should not be included.
It is also necessary to calculate the usual hours that an employee would work during the Claim Period in order to calculate the size of the CJRS grant which may be claimed. Various methods are provided in the detailed guidance to account for different types of working pattern, including employees on variable hours. If an employee is flexibly furloughed, an employer cannot claim a CJRS grant for the parts of their usual hours that they work during the Claim Period, so the employer should keep track of any hours they do work.
A calculator is available on the government's guidance page (see here) to help calculate how much employers can claim.
Note that CJRS grants should not be used to cover the Apprenticeship Levy, and Student Loan deductions should still be made from employee wages.
How to claim
i. Preliminary steps
Correctly calculate the size of the grant to be claimed and check that the employees are eligible.
Employees also need to agree to be placed on furlough and this may require changes to their employment contract. If sufficient numbers of employees are being placed on furlough, collective consultation processes may need to be engaged to reach agreement with them.
ii. Making an application
The application can be made online through Government Gateway. A full list of necessary information can be found in the detailed guidance.
Claims need to be submitted by 11:59 pm, 14 calendar days after the month being claimed for, although HMRC will consider accepting claims after the relevant deadline where the employer had a reasonable excuse for being late. Employers have 28 days from the end of each calendar month to correct their claim if they have not claimed enough.
iii. After the application
HMRC will check the claim is correct and then pay the grant by BACS into the employer's bank account within six working days.
Records need to be kept for six years. Employees also need to be notified that a claim has been made and the full amount the employer has claimed in respect of each employee needs to be paid to that employee through the usual payroll. Payment needs to be made on their contractual payment date so that recipients of Universal Credit are not affected.
Links to Government Guidance
- Check if you can claim for your employees' wages through the Coronavirus Job Retention Scheme
- Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme
- Other types of employees you can claim for
- Steps to take before calculating your claim using the Coronavirus Job Retention Scheme
- Calculate how much you can claim using the Coronavirus Job Retention Scheme
- Claim for wages through the Coronavirus Job Retention Scheme
- Reporting employees' wages to HMRC when you've claimed through the Coronavirus Job Retention Scheme
- Examples of how to calculate your employees' wages
- Full examples of how to calculate the amount you should claim for an employee who is flexibly furloughed
- Check if your employer can use the Coronavirus Job Retention Scheme (aimed at employees)
- Pay Coronavirus Job Retention Scheme grants back
- Holiday entitlement and pay during coronavirus (COVID-19)
- Guidance on shielding and protecting people who are clinically extremely vulnerable from COVID-19 (confirms that shielding individuals may be placed on furlough)
1. Correct as at 8 January 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.