Coronavirus Job Retention Scheme (CJRS)
As you will have seen in our previous updates, the Coronavirus Job Retention Scheme (CJRS) is changing from 1 July to encourage businesses to bring furloughed staff back into work.
The initial phase of the CJRS was effectively closed to new employees on 10 June 2020. Therefore, if an employee had not been placed on furlough by that date then their employer will not be able make a claim in respect of that employee going forward.
The scheme enters its second phase on 1 July 2020 and covers claims for employees furloughed from 1 July 2020 until the scheme ends on 31 October 2020. This second phase has two key elements:
- it allows furloughed employees to come back to work on a flexible part-time basis with employers covering the costs of the working hours of part-furloughed staff
- employers will contribute towards the cost of the CJRS
The government has now published its guidance on the changes. The details are complex, so please do contact us for assistance and you may also want to check the GOV.UK website which is being updated most days.
A summary of the different rules that apply to each phase are as follows:
1 March 2020 to 30 June 2020
- employees must be fully furloughed and are not permitted to undertake any work for the employer
- the minimum furlough period for each employee is 21 days
- no new employee can be admitted to the scheme after 30 June ie. the last date on which an employee can begin a period of furlough leave for the first time was 10 June. The only exceptions to this is any employee returning from maternity/paternity leave, parental bereavement leave and military reservists after 10 June
The last date for making claims for phase 1 is 31 July 2020.
1 July 2020 to 31 October 2020
- only available to those employers that have used the CJRS during phase 1 and only for employees they have previously furloughed
- employees can be flexibly furloughed, enabling part-time working
- there is no minimum furlough period – it can be as short (even just one hour) or as long as the employer agrees with the employee
- furlough claims must contain details of each employee’s usual hours (based on calendar days) and usual hours worked
- each claim made by employer must be for a week or more
- no claim period can extend across a calendar month end
Claims for phase 2 cannot be made until 1 July.
We have also tried to clarify some of the common points we are being asked about the CJRS.
Flexible furlough: What is it?
Phase 2 of the CJRS allows complete flexibility for employees and employers to adopt whatever working/non-working pattern is agreed between them. The furlough period can vary from day to day, or week to week, but accurate records must be maintained. As mentioned above, these records must be maintained in hours.
As has been the case since launching the CJRS, employment law must continue to be observed. Employers should consider if contracts need to be varied and amended, perhaps on a number of occasions, until the end of the scheme.
Employees must continue be paid their contractual entitlement through the payroll, reported through the Real Time Information (RTI) system. The employer can then choose to apply for a CJRS government grant to offset all or part of this cost.
Phase 2 claims – who is covered?
– an employer must have accessed the scheme under phase 1 to claim under phase 2.
– employers have until 31 July to make all outstanding claims for periods up to 30 June.
– employers can agree any working arrangements with previously furloughed employees from 1 July onwards but employment law must continue to be observed.
– employers can make their first claims under phase 2 from 1 July onwards.
– from 1 July, employers can only furlough employees who are already in the scheme ie. someone who has completed at least one full 21-day furlough period prior to 30 June.
– the qualifying 21-day furlough period does not need to be the last 21 days in June. It can have been any 21-day furlough period claimed during phase 1. Where a phase 1 furlough period spans 30 June, the entire period qualifies for the grant, but any flexibility (part-time working) can only start after the 21 days have elapsed.
Phase 2 claims – how are claims made?
The first thing to know is that claims under Phase 2 will be made in the same way as Phase 1, online via the GOV.UK website.
Number of employees restriction:
There is a new limit to the number of employees who can be claimed for in a single claim. This is set at the maximum number ever claimed for in a single claim for that payroll in Phase 1. This may affect employers who have, for example, been rotating staff on furlough under a shift pattern eg. team A work for three weeks, while team B are furloughed, then team B work for three weeks while team A are furloughed. If claims had been made for both shift teams separately, the maximum limit rule will mean that only half of all total staff ever furloughed can be included in a future single claim. If a claim was made every six weeks listing the entire workforce, this won’t be a problem.
Calendar month restrictions:
From 1 July, claim periods will not be allowed to overlap calendar months. This is necessary because the scheme grant calculations change each month between July and October. Each claim period should normally be for at least one calendar week, although some claim periods could be for longer than a week.
For example, if an employer wishes to make calendar week claims for July. This could be made as:
- five claims 1-4 July (4 days); 5-11 July (7 days); 12-18 July (7 days); 19-25 July (7 days); 26-31 July (6 days)
- or three claims 1-11 July (11 days); 12-18 July (7 days); 19-31 July (13 days)
As long as the basic period rules are observed, a minimum of one week and no claims overlapping each month, the employer will have the choice of making claims when it is most convenient for them.
Where furlough is part-time, the calculation must factor in the cost of hours worked to hours furloughed. This must be calculated for a specified claim period and by reference to calendar days.
How to manage periods overlapping 1 July 2020
An employee who was already being furloughed under phase 1 may be on a period of furlough leave which includes days in the old and new schemes eg. the 21-day period starting on Monday 15 June ends on Sunday 5 July.
In such a situation, flexible furlough (part-time working) cannot start until this 21-day period ends, ie. from Monday 6 July. When claiming, 14 days have to be included in a claim under phase 1 and seven days in a claim under phase 2 rules.
What information is needed to claim?
Claims for flexible furlough will have to include number of hours furloughed, rather than the hours an employee would be expected to work in the claim period.
For example, an employee contracted for a 35-hour week may agree to a flexible furlough to work two days a week: 35 usual hours and 14 working hours would be reported.
As before, to claim for 100 or more furloughed employees, a file will be uploaded containing the following for each employee:
- full name;
- National Insurance number;
- payroll number (optional);
- furlough start date;
- furlough end date (if known); and
- full amount claimed.
For flexibly furloughed employees the following additional information is required:
- hours they actually worked in the claim period; and
- usual hours worked in the claim period.
Claims for fewer than 100 employees will still need each employee to be entered into the government system separately.
Is there a time limit for submission of claims?
We understand there is to be a new time limit for claims. Any claim for a period in a calendar month must be submitted before the end of the following calendar month. We are waiting for this to be confirmed but it is worth highlighting to make you aware that it could be different to phase 1.
What records do I need to keep?
As with any aspect of CJRS, please keep records. The employer will be expected to keep a written agreement confirming the furlough arrangement. Records of these employee agreements must be kept for until 30 June 2025.
Phase 2 claims – how much can be claimed?
The first rule is that the employer must continue to pay an employee in accordance with the employment contract.
CJRS grants under phase are being slowly reduced between 1 July 2020 and 31 October 2020.
- July: the full grant will continue unchanged for fully furloughed staff.
For partially furloughed staff, the grant will only cover the relevant proportion of salary, employers’ NIC and employers’ minimum compulsory pension contribution on the part of salary cost which relates to the furlough period.
- August: employers must pay NI and pension contributions for furloughed staff.
For fully furloughed staff, the CJRS will continue to cover the salary cost ie. the lower of 80% of salary or the cap of £2,500.
For part-time furloughed staff, the CJRS will cover the relevant proportion of salary cost for the furlough period. A claim will be the lower of 80% of salary for the furloughed time or £2,500, reduced pro rata for furloughed time.
- September: employers must pay NI and pension contributions for furloughed staff.
For fully furloughed staff, the CJRS will continue to cover the salary cost but at a lower rate of 70% ie. the lower of 70% of salary or the cap of £2,190.
For partially furloughed staff, the CJRS will cover the relevant proportion of salary cost for the furlough period. A claim will be the lower of 70% of salary for the furloughed time or £2,190 reduced pro rata for furloughed time.
- October: employers must pay NI and pension contributions for furloughed staff.
For fully furloughed staff, the CJRS will continue to cover the salary cost but at a lower rate of 60% ie. the lower of 60% of salary or the cap of £1,875.
For partially furloughed staff, the CJRS will cover the relevant proportion of salary cost for the furlough period. A claim will be the lower of 60% of salary for the furloughed time or £1,875 reduced pro rata for furloughed time.
The Government have provided some guidance on how to calculate wages, NI and pension contributions for CJRS claims, which can be found here. There is also an online calculator that can be used to work out claims ending on or before 30 June and what you will be able to claim for claim periods starting on or after 1 July and ending on or before 31 July.
The detail is complex and if you have any concerns or questions about CJRS please get in touch and we will be happy to help. If you are a payroll client of GWA, you have that extra peace of mind as we will be able to make claims on your behalf and ensure all the regulatory requirements are met.
Self-Employment Income Support Scheme (SEISS)
We updated you recently on the announcement made by the Chancellor confirming that a second and final grant is being made available through SEISS. It will cover June, July and August, with applications opening in August.
- Who can claim: Self-employed individuals or a member of a partnership (as long as certain criteria are met). Limited companies and trusts are not entitled to claim.
- How much can be claimed: In the first grant 80% of trading profits up to a maximum of £7,500 for the three month period. In the second grant 70% of trading profits up to a maximum of £6,570 for the three month period.
- How long does the scheme run: The first grant covers March, April and May, and the second grant covers June, July and August.
- When can claims be made: For the first grant the application portal opened in phases between 13 and 18 May and will close on 13 July 2020. Applications for the second grant can be made in August. If eligible, you are able to make a claim for the second grant even if you did not claim for the first grant. We still don’t know exactly when the online portal will open for the second SEISS grants.
While the eligibility for the second SEISS grant is the same as the first, it is a completely separate claim and anyone claiming will have to confirm their business has been “adversely affected” by COVID-19 on or after 14 July 2020.
To confirm, if your business is “adversely affected” in the period up to 13 July 2020 you can claim the first grant. If your business is “adversely affected” in in the period from 14 July 2020 you can claim the second grant.
When the Chancellor announced the scheme, he referred to the first grant as covering March to May 2020 but the position has subsequently changed. The grants are for nominal three-month periods and their entitlement is based on whether your business is “adversely affected” in the period to 13 July 2020 or after that date. So, if you were “adversely affected” in June, but back to normal in July (unlikely but possible) you won’t qualify for the support for June.
It is of course equally possible not to have qualified for the first round of funding because you were not “adversely affected”, but to still qualify for the second round because you have subsequently been “adversely affected”. For example, becoming unwell with COVID-19 in July and being unable to trade as a consequence.
HMRC have tried to clarify this further by providing some examples of when the “adversely affected” criteria is met for the first grant and/or the second grant. The full HMRC guidance on who and how to claim can be found here on the GOV.UK website.
We are unable to claim SEISS grants on behalf of our clients, but if you have any questions regarding the grants or want to understand if you have been “adversely affected” please do get in touch. We appreciate that as the government support continues, it is becoming more difficult to understand.
We also want to remind everyone that the SEISS grant is taxable income for 2020/21, so the tax will be payable by 31 January 2022. If you want to understand how the grant may affect you and your business from a tax point of view, again please do not hesitate to contact us.
Information correct as of 16 June 2020