Guidance on the Coronavirus Job Retention Scheme (CJRS) has been published by HMRC. Employers will be able to claim back 80% of the wages (up to £2,500 per month) of employees who have been “furloughed” (put on a leave of absence) because of the COVID-19 pandemic. The guidance provides information on which businesses and employees will be covered, what counts as ‘furloughing’ for this purpose and how employees’ wages will be calculated. HMRC expects the scheme to be up and running by the end of April.
The CJRS was announced on 20 March 2020. The new HMRC guidance is the first detailed summary of how it will work in practice. It confirms the CJRS will be in place for at least 3 months from 1 March 2020. HMRC will establish an online portal through which employers will be able to reclaim wage costs plus the employer’s NI contributions and the minimum automatic enrolment employer pension contributions on that wage. The scheme will be open to all UK employers so long as they have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
HMRC guidance on employee eligibility states that the CJRS will cover employees who have been on the payroll since 28 February 2020 on any type of contract, including full-time and part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts. Importantly, employees who have been made redundant since 28 February can be furloughed if they are rehired. An employee is considered furloughed for the purpose of this scheme only if he or she does no work for the employer. The scheme does not cover the wages of employees whose hours are reduced. The guidance recommends that employers discuss furloughing with their staff and make any changes to the employment contract by agreement. Employers should then write to their employees confirming that they have been furloughed and keep a record of this communication.
During the period of furlough, the employer should pay the employee at least the lower of 80% of salary or £2,500. The guidance notes the employer may choose to top up wages to 100% but is not obliged to do so. For full time and part time salaried employees, the employee’s actual salary, before tax, as at 28 February 2020 should be used to calculate the 80%. The guidance also notes that fees, commission and bonuses should not be included. As for employees whose pay varies, in the case of employees who have been employed for at least a year, the employer will be able to claim for the higher of the employee’s earnings in the same month the previous year or the employee’s average monthly earnings in the 2019/20 tax year. In the case of an employee who has been employed for less than a year, the employer will be able to claim for an average of the employee’s monthly earnings since they started work. In the case of an employee who only started in February 2020, the employer will be required to pro-rate the employee’s earnings so far.
HMRC guidance: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
BEIS guidance for employees: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-guidance-for-employees#furloughed-workers
Tom Redfern
