Coronavirus Job Retention Scheme (CJRS) FAQs

Keeping you updated as the government announce more measures for businesses (updated 31 March 2020)

Here is our update with regards to the typical questions we are receiving and answers, to the extent possible. Please note that the below is based on guidance we have received and is our understanding of the current intent. It should not be relied on for advice at this stage. There will be further guidance issued and therefore, this page will be updated periodically.

Q: How much will the government pay?

A: HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. Employers can top up the 20% (or more) but are not obliged to. To the extent that employers do decide to top up on a selective basis, it is recommended that they are mindful of anti-discrimination rules. The reimbursement is currently set for a period of 3 months and can be backdated to 1 March 2020.

Whilst the scheme can be backdated to 1 March 2020, employers will only be eligible to claim the grant from the date that employees have agreed to be furloughed and stopped working for the employer, subject to employment law as usual.

 

Q: Do I need to repay the amounts claimed under the scheme?

A: It is a grant not a loan, accordingly no repayment should be required.

 

Q: Am I eligible?

A: The government has stated that all UK businesses are eligible.

We believe that eligibility includes single director companies. However, our view is that it will be hard for single director businesses to demonstrate the director has been furloughed if they are still involved in administering business affairs. We await further guidance on the application to such entities.

Q: How do I get it?

A: HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers. It is anticipated that it will be at least a few weeks before the system is operational and the current guidance is that it will be available no later than the end of April.

 

Q: Does it apply to all my employees?

A: It applies to all those employees that have been ‘furloughed’, are on PAYE, were on the payroll on 28 February 2020 and have a UK bank account. The intent for the scheme is to provide support for employers to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. Individuals will continue to be employees but will not be working for the employer. Self-employed workers are not covered by this scheme, but may be covered under the separate Self-Employment Income Support Scheme and the enhanced benefit system through changes to universal credit. CJRS covers the following employees as long as they have been on the payroll on 28 February 2020:

  • full-time employees
  • part-time employees
  • employees on agency contracts
  • employees on flexible or zero-hour contracts
  • Employees must be furloughed for a minimum of 3 weeks

 

Q: Is the £2,500 per month based on gross or net Salary? 

A: The grant will be calculated with reference to the lower of 80% of the employee’s regular gross salary or £2,500 per month, plus the Employer National Insurance Contributions and minimum auto enrolment employer pension contributions associated with those wages.

 

Q: Can I just tell my employees they are being ‘furloughed’?

A: Existing employment law still applies and you will need to check employment contracts carefully for your rights. It is likely that you will need to obtain employee consent to being ‘furloughed’ and it is recommended that you obtain employment legal advice.

 

Q: If employees do not agree to be furloughed can we dismiss by reason of redundancy?

A: Yes, employees can be dismissed by reason of redundancy by the employer if the employee does not agree to be furloughed. In this case the employer must make sure the redundancy definition is met and the proper process followed. If employers feel furlough is likely to be followed by redundancies it may help to select employees for furlough using a process similar to the redundancy selection process.

 

Q: Can employees work for the employer when furloughed?

A: No, employees must not undertake any work for the employer while furloughed to qualify for the scheme. The grants do not cover the wages of employees working reduced hours due to the virus. The employees must not work for the employer at all during the furlough period.

coronavirus impact on busienss FAQs

Q: How do I pay furloughed staff?

A: Employers pay staff through payroll as usual and will be able to claim back the costs (subject to the limits detailed above) through the new CJRS portal being set up.

 

Q: I am an owner managed business and I take my drawings principally through dividends, can that be included in the calculation?

A: No, the scheme only extends to salary and excludes dividends from the calculation.

 

Q: We have some employees salary is fixed and some salary is variable, how do we calculate the amount of grant available?

A: For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80% amount. Fees, commission and bonuses should not be included.

Employees whose pay varies

If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim based on the higher of either:

  • the same month’s earning from the previous year
  • average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, you can claim based on an average of their monthly earnings since they started work.

If the employee only started in February 2020, use a pro-rata of their earnings so far to claim.

Once you have worked out how much of an employee’s salary you can claim, you must then work out the amount of Employer National Insurance Contributions and minimum auto enrolment employer pension contributions you are entitled to claim.

 

Other useful guidance

If your employee is on unpaid leave

Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.

 If your employee is on Statutory Sick Pay

Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.

Employees who are shielding in line with public health guidance can be placed on furlough.

 If your employee has more than one job

If your employee has more than one employer, they can be furloughed for each job. Each job is separate and the cap applies to each employer individually.

If your employee does volunteer work or training

A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the National Living Wage (“NLW”) and National Minimum Wage (“NMW”) for the time spent training, even if this is more than the 80% of their gross wages that will be subsidised.

 If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay

Individuals who are on, or plan to take, Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.

If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.

If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.

Employees who qualify for SMP will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week rising to £151.20 a week from April 2020.

If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the CJRS.

The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.

Employees rights

Employees that have been furloughed have the same rights as they did previously. These include Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

Once the CJRS has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.

Income tax and Employee National Insurance

Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay auto enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.

Employers will be liable to pay Employer National Insurance Contributions on wages paid, as well as auto enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.

For more information

For more FAQs on Coronavirus business measures, or please contact us on:

01483 416232