Coronavirus Job Retention Scheme

It’s a scheme open to employers who have furloughed any of their staff due to coronavirus (COVID-19).
Key facts
  • The Job Retention Scheme opened for applications on 20 April 2020. 
  • The scheme is open to employers who have furloughed any of their staff due to coronavirus.
  • The amount employers can claim between 1 November and 30 June 2021 is up to 80% of their employee’s wages, this will start to reduce in July 2021. The amounts in previous months varied.
  • It may be possible to reemploy staff made redundant.

Applying for the scheme

The scheme originally opened for applications on 20 April 2020. This has to be done through HMRC’s website

Currently the scheme is due to end on 30 September 2021 but this is constantly under review.  

From March 2020 until the end of June 2020 to be eligible for the grant, employees couldn’t do any work for or on behalf of the organisation. This included providing services or generating any revenue.

From 1 July 2020, businesses were given the flexibility to bring furloughed employees back part-time. Individual firms decided the hours and shift patterns their employees would work on their return, so they could decide on the best approach for them. Employers are responsible for paying their wages while in work. The grant can continue to be claimed for the normal hours not worked.

HMRC has produced a step by step guide for employers. 

Eligibility

It’s open to any UK organisation with employees, but there are restrictions on certain public sector organisations and those receiving public funding.  HMRC has a site where employers can check which employees they can put on furlough to use the Coronavirus Job Retention Scheme.

Who to include 

Employers 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 employers can furlough employees on all categories of visa.

If an employee had been made redundant or stopped working for the employer or after 23 September 2020 they can be re-employed and put on furlough. This applies as long as the employee was employed and on the employer’s PAYE payroll on or before 23 September 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made between 20 March and 23 September 2020. 

Under the original scheme an employer could include any employees who were on the employer’s PAYE payroll:

  • on or before 19 March 2020, and
  • were notified to HMRC on a PAYE RTI submission on or before 19 March 2020

Under the extended scheme up to the end of April 2021 an employer can include any employees who were on the employer’s PAYE payroll:

  • between the 20 March 2020 and 30 October 2020, and
  • were notified to HMRC on a PAYE RTI submission on or before 30 October 2020

A PAYE RTI submission notifying HMRC that payment has been made for an employee must have been made between 20 March and 30 October 2020, notifying a payment of earnings for that employee.

For periods starting on or after 1 May 2021, employers can claim for employees who were employed on 2 March 2021, as long as they have made a PAYE RTI submission to HMRC between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee. Employers do not need to have previously claimed for an employee before the 2 March 2021 to claim for periods from starting on or after 1 May 2021. 

Neither the employer nor the employee needs to have previously used the scheme.

Employee communications

To be eligible for the grant, employers had to write to the employee confirming they’d been furloughed and keep a record of this communication. They also had to discuss this with their employees and make any changes to their employment contract by agreement.

When the scheme changed in July 2020 and employers started to bring their employees back to work, to be eligible for the grant, employers had to agree with their employees any new flexible furloughing arrangement and confirm that agreement in writing. 

They may need to a start group consultation processes to get agreement and change the terms of employment. This includes considering any changes to pension contributions or rights.

When employers are making decisions in relation to the process equality and discrimination laws will apply in the usual way. So, some employers may also want to get legal advice.

Employers don’t need to place all their employees on furlough.

They can have a mix of those on furlough who cannot do any work, some on reduced hours and pay and some still being paid in full. However, they can only claim for those designated as furloughed.

Furlough pay

HMRC has a calculator to help employers work out the figures they needed when they completed a claim through the scheme. It also gives a detailed breakdown of calculations for each pay period.

Employers can choose to top up an employee’s salary on top of the furlough pay, but there is no obligation on them to do this as part of the scheme. They need to pay the employee all the grant they received for their gross pay. They can’t charge any fees from the grant or allow any salary sacrifice agreement to reduce the level of grant received.

March 2020 to July 2020 

  • As a minimum, employers had to pay their employee the lower of 80% of their regular wage or £2,500 per month.
  • The employer could claim an amount for the employer National Insurance Contributions and minimum automatic enrolment employer pension contributions on that wage.  

The grant covered the lower of either 80% of an employee’s regular earnings or £2,500 per month, plus the associated employer National Insurance contributions and minimum automatic enrolment employer pension contributions on any subsidised earnings.

Employers had to calculate the 80% using the employee’s actual earnings before tax, as of their last pay period prior to 19 March 2020 and they couldn’t include any discretionary fees, commission or bonuses. Any regular payments the employer is obliged to pay including past overtime, fees and compulsory commission payments could be included.

For the majority of employers with full-time or part-time employees on a set salary, employers have to work out the following for the claim period:

  1. The total amount being paid to furloughed employees (employers can claim for 80% of the employee’s wages – up to a maximum of £2,500 a month per employee).
  2. The total employer National Insurance contributions.
  3. The total employer pension contributions (up to 3% of qualifying earnings).

From 1 July 2020, employers were able to agree any working arrangements with previously furloughed employees. Flexible furlough agreements can last any amount of time. Employees can enter into a flexible furlough agreement more than once. Employers were still able to claim the furlough grant for the hours their flexibly furloughed employees didn’t work, compared to the hours they would normally have worked in that period.

August 2020

  • The employer could claim the lower of either 80% of an employee’s regular earnings or £2,500 a month.
  • The employer couldn’t claim for employer National Insurance contributions or employer pension contributions.

September 2020 and October 2020

  • The employer could claim the lower of either 70% of an employee’s regular earnings or £2,187.50 a month.
  • The employer had to pay 10% of the employee’s regular earnings up to a maximum of £312.50 a month.
  • The employer couldn’t claim for employer National Insurance contributions or employer pension contributions.

Between November 2020 and June 2021

  • The employer can claim lower of either 80% of an employee’s regular earnings or £2,500 a month.
  • The employer can’t claim for employer National Insurance contributions or employer pension contributions.

July 2021

  • The employer can claim lower of either 70% of an employee’s regular earnings or £2,187.50 a month.
  • The employer must pay 10% of the employee’s regular earnings up to a maximum of £312.50 a month.
  • The employer can’t claim for employer National Insurance contributions or employer pension contributions.

Between August 2021 and October 2021

  • The employer can claim lower of either 60% of an employee’s regular earnings or £1,875 a month.
  • The employer must pay 20% of the employee’s regular earnings up to a maximum of £625 a month.
  • The employer can’t claim for employer National Insurance contributions or employer pension contributions. 

Summary

Contributions March 2020 to 
July 2020
August 2020 & 
November 2020
to 
June 2021
September 2020 &
July 20201
October 2020,
August 2021 &
September 2021
Government contribution:
  • employer National Insurance contributions
  • pension contributions
Yes No No No
Employer contribution:
  • employer National Insurance contributions
  • pension contributions
No Yes Yes Yes
Employer contribution:
  • wages
Nil Nil 10% up to £312.50 a month 20% up to £625 a month
Employee receives  80% up to £2,500 a month 80% up to £2,500 a month 80% up to £2,500 a month 80% up to £2,500 a month

Working out how much to claim

HMRC has examples of how to calculate employee’s earnings.

Tax

While on furlough, the employee’s earnings will be subject to usual income tax and other deductions. And all employers are still responsible for the associated employer National Insurance contributions.

 

Note

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.

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