On 20th March 2020, the Prime Minister Boris Johnson announced the Coronavirus Job Retention Scheme (CJRS). The CJR scheme has been introduced to support employers during the COVID-19 crisis, with the government agreeing to refund 80% of employee’s wage costs.
Employers must negotiate with employees to be furloughed, gaining their agreement, and providing written notification using for example this letter template produced by payroll software provider Brightpay.
New details are constantly being released and we cover further the main confirmed points below:
- Businesses with a PAYE scheme in place on 28th February 2020
- The scheme applies to full time and part time employees, agency workers and those on flexible or zero hours contracts as well as employees made redundant after 28th February 2020, if they are rehired
- The scheme applies to Directors on the PAYE scheme, also based on their pay as at 28th February 2020
- Employees must be furloughed in line with their contract of employment and relevant employment law, for a minimum of three weeks.
- If employees’ contracts do not cover furlough, employers must negotiate and gain agreement from employees to be furloughed and paid a reduced wage (80% of normal pay)
- You can choose who to furlough and do not have to furlough all employees however equality laws must be taken into consideration when making selections
- Employees must not complete any work for the employer who is furloughing them, however they can volunteer and continue to work for other employers if they have a second job
- The 80% grant will be calculated using the gross pay (before tax) received by the employee on 28th Feb 2020
- Where pay varies, a 12 month average will be used or the pay received last year on 28th Feb 2019
- Statutory Maternity, Paternity and Shared Leave will be calculated in the normal way, as will Statutory Sick Pay
- Furlough workers are not entitled to the National Minimum Wage/Living Wage – so the increase will not be applied whilst they are furloughed
- Furlough pay does not include bonuses, commission or overtime except in the case where this is regular and is classed as ‘normal’ pay
- Grant claims can be made via HMRC every 3 weeks but the system is not yet operational, it is expected to be ready by 30th April 20
- The grant will cover 80% of an employee’s gross wage (before tax) plus employers national insurance and employers minimum pension contribution costs (3%, currently £512 rising to £520 on 6th April onwards)
- Claims will be paid directly into a UK bank account
- The grant will be classed as income and liable to normal tax and national insurance however all payroll costs are tax deductible
Employees need to be aware that they are expected to continue and calculate employee pay in the normal way. The grant is aimed at being a refund of costs with businesses encouraged to make use of the Coronavirus Business Interruption Loan Scheme by approaching their current high street bank. The below Financial Times infographic provides insight into how the scheme is expected to work:
Claims for the scheme are expected to be submitted during normal payroll processing, we recommend the use of a payroll professional to assist with this process.
- the Coronavirus Business Interruption Loan Scheme (CBILS);
- deferment of VAT payments for the next quarter;
- Business Rate Relief Grants from local authorities.