The scheme opened for applications on 20 April 2020. This must be done through HMRC’s website. The scheme will close to new entrants on 30 June, with the last three-week furloughs before that point commencing on 10 June. This means the final date by which an employer could have furloughed an employee for the first time was the 10 June.
From March until the end of July employers can claim up to 80% of their employee’s wages plus any employer National Insurance contributions (NICs) and pension contributions. To be eligible for the grant, employees can’t do any work for or on behalf of the organisation. This includes providing services or generating any revenue.
If an employee is working, but on reduced hours, or for reduced pay, they’ll not be eligible for this scheme.
From 1 July 2020, businesses will be given the flexibility to bring furloughed employees back part-time. Individual firms will decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them. Employers will be responsible for paying their wages while in work. The grant can continue to be claimed for the normal hours not worked.
From August until the end of October the amount the employer can claim is tapered down.
HMRC has a calculator to help employers work out the figures they’ll need when they complete a claim through the scheme. It also gives a detailed breakdown of calculations for each pay period.
Before an employer can start the process, they must:
HMRC has produced a step by step guide for employers.
The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 19 March 2020, so usually this means they must have had at least one payday.
It’s open to any UK organisation with employees, but there are restrictions on certain public sector organisations and those receiving public funding.
The scheme will close to new entrants from 30 June 2020. From this point onwards, employers will only be able to furlough employees they have furloughed for a full three-week period prior to 30 June 2020. This means the final date by which an employer can furlough an employee for the first time was the 10 June, in order for the current three-week furlough period to be completed by 30 June 2020. Employers will have until 31st July to make any claims in respect of the period to 30 June 2020.
It includes any employees who were on the employer’s PAYE payroll:
A PAYE RTI submission notifying HMRC that payment has been made for an employee must have been made on or before 19 March 2020.
Any employees not included in a PAYE RTI submission on or before 19 March 2020 cannot be furloughed or claimed for as part of this scheme.
If an employee had been on the employer’s payroll as at 28 February and HMRC had been notified through a PAYE RTI submission on or before 28 February 2020 and they are subsequently made redundant, or they stopped working for the employer between:
they can re-employ them, put them on furlough and claim for their wages through the scheme.
This applies to employees that were made redundant or stopped working for the employer after 28 February, even if they weren’t re-employed until after 19 March.
The scheme will close to new entrants from 30 June, with the last three-week furloughs before that point commencing on 10 June.
If an employee was made redundant, or they stopped working for their employer on or after 19 March 2020, their employer can re-employ them, put them on furlough and claim for their wages through the scheme from the date on which they were furloughed.
This applies as long as the employee was:
To be eligible for the grant, employers will need to write to the employee confirming they’ve been furloughed and keep a record of this communication. They’ll also need to discuss this with their employees and make any changes to their employment contract by agreement.
When the scheme changes in July and employers start to bring their employees back to work, to be eligible for the grant, employers must 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, including deciding who to offer furlough, 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 could 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 and doing no work.
As a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month, the employer must also pay the associated employer NICs and minimum automatic enrolment (AE) employer pension contributions on that wage.
Employers can also choose to top up an employee’s salary beyond this, but there’s no obligation on the employer to do this as part of the scheme. They’ll also need to pay the employee all the grant they receive for their gross pay. They can’t charge any fees from the grant or allow any salary sacrifice agreement to reduce to reduce the level of grant received.
From 1 July 2020, employers can bring back to work employees that have previously been furloughed for at least 3 consecutive weeks for any amount of time and any shift pattern, while still being able to claim through the scheme for their normal hours not worked.
From 1 July 2020, employers will be 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 are still able to claim the furlough grant for the hours their flexibly furloughed employees don’t work, compared to the hours they would normally have worked in that period.
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 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 separate 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.
Employers are still able to choose to top up employee wages above the scheme grant at their own expense if they wish.
The government will pay 80% of wages up to a cap of £2,500. Employers will pay the employer NICs and the pension contributions.
The government will pay 70% of wages up to a cap of £2,187.50. Employers will pay employer NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
The government will pay 60% of wages up to a cap of £1,875. Employers will pay employer NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.
|Government contribution: employer NICs and pension contributions||Yes||No||No||No|
|Employer contribution: employer NICs and pension contributions||No||Yes||Yes||Yes|
|Employer contribution: wages||Nil||Nil||10% up to £312.50 p.m.||20% up to £625 p.m.|
|Employee receives||80% up to £2,500 p.m.||80% up to £2,500 p.m.||80% up to £2,500 p.m.||80% up to £2,500 p.m.|
The grant covers whichever is the lowest of either 80% of an employee’s regular earnings or £2,500 per month, plus the associated employer NICs and minimum AE employer pension contributions on any subsidised earnings.
Employers will need 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 can’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 can be included.
For the majority of employers with full-time or part-time employees on a set salary, employers will need to work out the following for the claim period:
The amount the employer can claim for starts to reduce. From August it is not possible to claim for employer NICs or employer pension contributions. In September and October the amount the employer can claim for earnings reduces to 70% in September and 60% in October.
The employee was paid £2,400 in gross salary for February, the last full monthly pay period before 19 March 2020.
So the reference salary for the part of March in which the worker is furloughed is:
Gilbert Ltd can claim 80% of this amount, up to the ‘maximum amount’ for the time on furlough in March:
The maximum amount test is:
Gilbert Ltd claims the lower amount, £681.30, for the employee’s gross pay in March.
The employee’s gross pay at the end of the month is made up of:
The employer NICs due on the total gross pay of £2,229.70 is £208.48 ((£2229.70 - £719) x 13.8%)):
Gilbert Ltd claims £74.03 for employer NICs due on the employee’s March pay.
The monthly lower level of qualifying earnings of £512 (for March 2020) is apportioned based on the number of days in the month to the qualifying furlough days:
The minimum level of auto-enrolment pension contributions on the £681.30 furlough pay is therefore:
This is the lower of £14.99 or the employer pension contributions due on the furlough pay under the terms of the pensions scheme. Gilbert Ltd claims £14.99 for the employer pension contributions for March.
Gilbert Ltd claims a total of £770.32 from the CJRS for the employee in March. This is made up of:
Gilbert Ltd has checked that they are not claiming for more than they are going to pay out.
If the employee has been employed (or engaged by an employment business) for a full 12 months prior to the claim, they can claim for the higher of either:
However, if the employee has been employed for less than a year, they can claim for an average of their monthly earnings since they started work. And if they only started in February 2020, employers can use a pro-rata for their earnings so far to claim.
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 NICs.
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.