Coronavirus Job Retention Scheme

From 1 July 2020 the Coronavirus Job Retention Scheme (CJRS) will change and claims under the old scheme must be made by 31 July 2020. The scheme will be closed to new entrants on 30 June 2020.

Only those employees (widely defined) previously furloughed for a minimum of three weeks prior to 30 June 2020 can use the new scheme - other than those employees on maternity, shared parental, adoption, paternity or parental bereavement leave or on active military service as a reservist before 10 June and who returned after 10 June, provided that an RTI submission had been made in respect of them by 19 March 2020 and the employer had furloughed other employees.

This means that the last date on which a previously unfurloughed employee could be furloughed was 10 June 2020. 

The new scheme defines flexible furloughing as those who are required to do no work at all as well as those who are doing some work for their employer. Therefore it still allows 'full' furloughing of previously furloughed employees but also provides flexibility to agree with employees to work part time for any period of time from 1 July and still claim under the scheme for unworked hours. There is also a reduction in the grant an employer can claim for from 1 August 2020 together with an obligation to top up the employee's monthly salary to 80% capped at £2,500 from 1 September. 

Sources of guidance on CJRS for employers

It is important to remember that the HMRC guidance is just that - guidance. However, the directions issued by the Treasury appear to have some form of statutory authority although the nature of this is unclear. There continue to be some discrepancies but a written response to a question in the House of Lords indicates that in those circumstances HMRC will apply its guidance. HMRC has also confirmed that the scheme does not, in its opinion, amount to state aid.

Q: What are the basics of the CJRS?

A: There were HMRC qualification requirements when the scheme first started but as the scheme is closed to new entrants and starts to wind down the requirements are:

  • An employee must have been furloughed for at least three weeks before 30 June 2020.The exception to this is those employees on maternity, shared parental, adoption, paternity or parental bereavement leave or military reservists on active duty before 10 June and who returned after 10 June, provided that an RTI submission had been made in respect of them by 19 March 2020 and the employer had furloughed other employees.
  • Employees must be notified in writing that they have been furloughed and from 1 July 2020 any flexible furlough agreement reached must be in place before the employee starts working on a flexible furlough arrangement.
  • Until 1 July 2020 employees must be furloughed on each occasion for a minimum of three weeks. From 1 July 2020 it can be for any period provided the employee has agreed.
  • Claims for the period 1 March 2020 to 30 June 2020 must have been made by 31 July 2020.
  • From 1 July 2020 there is a minimum claim period of one week and claims cannot straddle months. There is an exception for period of less than seven days at the start or end of the month which are called 'orphan periods'.
  • Until 1 July 2020 the employee cannot do any work for the employer that has furloughed them but can volunteer for another organisation or work for someone else if contractually allowed. From 1 July 2020 they can enter into 'flexible furlough' agreements with their employer either not to work oat all or to work a percentage of their normal contractual hours for any period of time and the employer will pay them their normal wages when they work and the employer will claim a CJRS grant for when the employee is not working the remainder of their normal contracted hours, subject to the cap.
  • The employee can do training when furloughed provided they receive minimum wage when doing so.
  • Up until 31 July 2020 an employer can claim 80% of wages up to a maximum of £2,500 per month per furloughed employee plus employers’ NICs and 3% pension contributions. From 1 August 2020 the employer will no longer be able to reclaim employers’ NICs or 3% pension but can still claim 80% of wages capped at £2,500 per month. From 1 September the employer can only reclaim 70% of wages capped at £2,187.50 per month and must pay to the employee 10% of wages to make it up to 80% up to a cap of £2,500 per month. From 1 October the employer can reclaim 60% of wages capped at £1,875 per month and the employer must pay 20% of wages to make it up to 80% up to a cap of £2,500 per month. The scheme closes on 31 October 2020.
  • The employer can only make one claim for every claim period which is a minimum of three weeks until 1 July 2020 but then changes to a minimum period of one week.
  • An employer can claim up to 14 days ahead of a scheduled payroll run.
  • If the employer overclaims in one claim period they can deduct this from the next claim period, if they do not make a subsequent claim then HMRC have produced a portal to allow repayments to be made but it necessitates calling HMRC for a reference number and it is currently difficult to get through to HMRC on the phone!

Q: What can an employer claim?

A:  Up until 31 July 2020 an employer can apply for a grant of 80% of an employee’s wages (see below) capped at £2,500 per month all of which must be paid to the employee, together with employer NICs on that sum (unless they are in receipt of the Employment Allowance) and 3% pension contributions which the employer can keep. From 1 August 2020 the employer will no longer be able to reclaim employer's NICs or 3% pension but can still claim 80% of wages capped at £2,500 per month. From 1 September the employer can only reclaim 70% of wages capped at £2,187.50 per month and must pay to the employee 10% of wages to make it up to 80% up to a cap of £2,500 per month. From 1 October the employer can reclaim 60% of wages capped at £1,875 per month and the employer must pay 20% of wages to make it up to 80% up to a cap of £2,500 per month. The scheme closes on 31 October 2020.

If the employer has entered into a flexible furlough arrangement then they can claim for those hours not worked, subject to the above restrictions. So if an employee works half of their contracted hours the maximum an employer can claim is £1,250 a month.

Q: How long will the CJRS last?

A: The scheme closes on 31 October 2020 but claims for the period to 30 June 2020 must be made by 31 July 2020. Only one claim per claim period can be made. No new entrants to the scheme will be accepted after 30 June 2020 and after that date only those who have previously been furloughed for at least three weeks will be eligible (other than those employees on maternity, shared parental, adoption, paternity or parental bereavement leave or on active military service as a reservist before 10 June and who returned after 10 June, provided that an RTI submission had been made in respect of them by 19 March 2020 and the employer had furloughed other employees).

Q: Who can an employer claim for?

A: Employees (which is widely defined, see below) who were:

  • hired before 19 March 2020 and
  • which were notified to HMRC on an RTI (Real Time Information) submission on or before 19 March 2020 and
  • where an RTI submission notifying payment of that employee to HMRC was made on or before 19 March 2020 and
  • are furloughed for at least three weeks

After 1 July 2020 an employer can only claim for those employees who have previously been furloughed for a minimum of 3 weeks prior to 30 June 2020 (other than those employees on maternity, shared parental, adoption, paternity or parental bereavement leave or on active duty as a military reservist before 10 June and who returned after 10 June, provided that an RTI submission had been made in respect of them by 19 March 2020 and the employer had furloughed other employees).

After 1 July 2020 employers are limited in terms of numbers of employees they can claim for in a claim period to the maximum number of employees they claimed for under any previous claim under the CJRS scheme between 1 March 2020 and 31 July 2020. So if they furloughed 20 in the first month, 30 in the second month and 50 in the third month, the maximum they can claim for is 50. There are exceptions to this:

  • TUPE situations where employees furloughed for at least three weeks prior to 30 June who have been transferred under TUPE can be counted in addition to the transferee's other furloughed employees,
  • those transferring from a company in liquidation where TUPE would otherwise have applied
  • those employees on maternity, shared parental, adoption, paternity or parental bereavement leave or on active duty as a military reservist before 10 June and who returned after 10 June, provided that an RTI submission had been made in respect of them by 19 March 2020 and the employer had furloughed other employees

Q: Which employers qualify for the CJRS?

A: If an employer has not made a claim for employees furloughed for at least three weeks by 30 June 2020 then they will not be eligible.

Q: In what circumstances can an employer furlough an employee?

A: Assuming they qualify as above, then the 3rd Treasury Direction, in a subtle shift in wording says 'integral to the purpose of the CJRS is that amounts paid to an employer pursuant to a CJRS claim are used by the employer to continue the employment of employees in respect of whom the CJRS claim is made whose employment activities have been adversely affected by the coronavirus disease or measures taken to prevent or limit its further transmission.'

This raised a question as to whether an employer can still claim a grant for those who have been given notice.  However, on 10 July HMRC changed their guidance to make it clear that the grant could still be claimed if a furloughed employee is serving 'statutory notice' and on 17 July clarified again that this covers statutory as well contractual notice periods. 

An employer must return any grant to HMRC if they are unwilling or unable to use the grant for the purpose of the CJRS and the guidance cautions against fraud and provides a notification portal for employees to report fraud.

Q: Who can be furloughed?

A: Employers, directors and workers who have been furloughed for at least three weeks by 30 June 2020 (subject to the exceptions set out above).

Company directors who are furloughed can only undertake work that they are obligated to do by an Act of Parliament in relation to the filing of their accounts or the provision of information in relation to the administration of the company, they can pay their employees and make a claim under the CJRS.

It is possible to still be a pension trustee and be furloughed providing they are not an independent trustee or an organisation whose business is supplying pension trustees.

Q: Is there a minimum period of furlough?

A: Until 30 June an employee must be furloughed for a minimum period of three weeks. From 1 July employers can place an employee on flexible furlough for any period of time - from them doing no work at all through to them working a small proportion of their contracted hours  for any period of time - so they can work part time hours/shifts and the employer can still claim a grant under the CJRS for the part of their normal contractual hours that they don't work. There is a minimum claim period of seven days with an exception for periods of less than seven days at the start and end of a month ('orphan periods'). An employer can claim for these orphan periods if they are at the end of a previous claim for the previous month or the start of a new claim at the beginning of a month.

Q: What date do we claim from?

A: Up until 30 June 2020 the employer must claim from the date the employee was sent home and NOT the date the decision was made or the date they were written to. Claims for the period 1 March to 30 June 2020 must be made by 31 July 2020. After 1 July 2020 any flexible furlough agreement must be reached before the employee is place on flexible furlough and the employer must write to the employee confirming this and keep a copy for five years.

Q: How do we apply for the CJRS?

A: The online portal opened on Monday 20 April and employers have to self-certify that they have furloughed employees. See the guidance on how to calculate the 80%. Claims for the current scheme must be made by 31 July 2020. Claims under the new scheme will be open from 1 July 2020 and employers cannot make claims that overlap months - this is because the amount that can be claimed under the scheme is changing month by month.

Q: What is covered under ‘wages’ and does this include overtime or commission?

A: For employees whose pay does not vary, this is their ‘regular’ salary before tax including non discretionary fees, commission payments and overtime in their last pay period before 19 March 2020 but excluding discretionary bonuses (including tips), commission and non-cash payments. 

For those whose pay varies it is the earnings in the same pay period in the previous year; or the average earnings in the 2019-20 tax year (or fewer if they have worked for less time than this, including a part-month calculation if they were taken in February) whichever is the higher. This will be subject to deductions for income tax and employee NICs in the usual way.

In its guide to calculating the grant HMRC says that employers will not be penalised for using the wrong method of calculation provided there is ‘a reasonable choice of approach’.

HMRC are calculating this based on calendar days and not working days and gives worked examples as to how to calculate the claim. Therefore although the employee only works Monday to Friday the three week claim for April will be 21 calendar days x £83.34. From 1 July 2020 claims will be made for a minimum period of a week but can be for more and claims cannot be made for overlapping months.

There is guidance giving many more examples of how to calculate the claim here.

Q: What evidence of furlough is needed?

A: From 1 July 2020 the employer must confirm in writing to the employee the furlough arrangements and if the employee is returning to do some work, the agreement for them to return to work some hours/shifts/days and the employer will be responsible for paying them their normal wages for the time worked and then claiming a prorated amount under the CJRS for the days not worked. They must keep written records of hours worked.

A collective agreement reached between the employer and the trade union is sufficient evidence for a claim.

It must be remembered however that reference to agreement in the guidance is only in respect of an ability to claim under the scheme. If an employee's wages have been reduced and there is no lay off clause in the contract then failure to obtain written consent may lead to claims for breach of contract or unlawful deduction from wages. There is also advice from accountants that HMRC will continue to tax the employee on their full salary if there is no signed agreement prior to the first payment being made although in a written answer to a question in Parliament it was confirmed that HMRC will tax the salary at the reduced salary.

Q: What about employees on fixed-term contracts?

A: Fixed-term employees can be furloughed and their contracts can be renewed or extended during the furlough period. There is no minimum period left to run but they must not have ended on or before 19 March 2020. 

Q: Can employees employed by individuals be furloughed?

A: Provided that they were paid through PAYE and were employed on the relevant dates as above then they can. This can apply to nannies, gardeners, etc. However, to qualify under the scheme from 1 July 2020 they must have already been furloughed for a minimum period of three weeks on or before 30 June 2020.

Q: Do I have to furlough all my staff?

A: No, the decision to furlough is yours alone.  Until 1 July 2020 those you do furlough cannot do any work for you including work which generates income or provides a service to you either directly or indirectly or any linked or associated organisation. In the guidance for employees there is a portal for employees to report employers who are attempting to abuse the system.

Q: Do employers have to top up the 80% to 100%?

A: No. The employer must pay the employee the grant it receives under the scheme (less normal deductions) but they do not have to top it up, although employers may want to. After 1 September any employer claiming under the scheme will have to top up the HMRC payment by 10% and from 1 October they will have to top it up by 20%.

Q: Do employers still have to pay 13.8% NICs?

A: Yes. Until 1 August 2020 they will be able to claim this on the 80% capped at £2,500 per month. However, if the employer is a small employer and has claimed the Employment Allowance (which is £4,000 per year to offset against employer's NI costs) for that individual then they should not also claim 13.8% on the furlough pay. Statistics show that only 40% of employers are currently claiming for employers' NICs and they have until 31 July to correct this.

Q: Do employers still have to make pension contributions?

A: Yes, although they may agree with the employee to have a pension break so that the employee is not making their contribution and neither is the employer. Up to 1 August 2020 minimum auto-enrolment employer contributions of 3% can be claimed back by the employer provided these are actually paid into the pension by the employer.

Q: What if the employee has sacrificed salary for a benefit?

A: HMRC has confirmed that it regards the current crisis as a ‘life event’ and will allow employers and employees to agree to reverse these agreements provided this is done in accordance with their contract. However, subject to further guidance being given, then unless HMRC will allow any salary sacrifice to be backdated, the employer will only be able to recover 80% of the reduced salary before the sacrifice was reversed. HMRC has updated its salary sacrifice guidance.

Q: What if the 80% brings the employee down below the minimum wage?

A: If they are not carrying out work for the employer then this is not a problem. However, if the employee is carrying out training for the employer whilst furloughed then they must receive minimum wage. If an employee is brought back to work flexibly from 1 July 2020 they must be paid their normal hourly/daily rate for the time worked.

Q: Can the employee work for someone else whilst furloughed?

A: Employees can volunteer whilst they are furloughed but not for their employer either directly or indirectly or for any linked or associated organisation. The employer can try and find employees volunteer or new work with other organisations provided it is in line with public health guidance. HMRC has confirmed that provided the employee is contractually able to work for someone else they can. Most contracts will not allow this unless the consent of the employer is given so it will be a decision for each employer. However, all employers taking on new staff have to complete a new starter checklist and Statement C must be completed to say if the employee has another job. 

Q: Can the employee do training whilst furloughed?

A: Yes they can and must be paid the minimum wage when training. The Treasury Direction of 22 May makes it clear that the employee can do training which improves the employee's effectiveness in the business or the businesses effectiveness but must not provide goods or services to the employer or on behalf of the employer to someone else.  

Q: Can we furlough employees multiple times?

A: Yes, provided each period of furlough is for a minimum of 3 weeks up to 1 July. Employees brought back off furlough must then be notified again of their furlough. However, an existing furlough period can be extended. From 1 July an employer can fully or flexibly furlough an employee for any period of time but the minimum claim period is one week.

Q: Do we need the employee’s agreement to furlough?

A: Yes unless you have a clause in the contract which allows you to send home employees without pay if you do not have enough work. These are called ‘lay off’ clauses and are generally only found in employment contracts in industries such as manufacturing where they have peaks and troughs.

Q: What if the employee does not agree to be furloughed?

A: If the employee does not agree then if necessary, you will have to proceed with a redundancy process if that is your only option, obviously considering all alternatives to redundancy before making a final decision. Remember that if there are 20 or more employees in one establishment then it is important to go through collective consultation which means consulting with a union or elected representatives if there is no union for a 30-day period (20-99 employees) or 45-day period (100 or more) and filing an HR1 form (failure to do this is a criminal offence).

Q: Can the employee still do some work for us?

A: Up until 30 June 2020 the answer is no -  the employee must do no work for you and this includes work which generates income or provides a service to you directly or indirectly or any linked or associated organisation. There is an on-line portal for employees to report fraud. You can help them find other work or volunteer roles (not for you, a linked or associated organisation) provided this is in line with public health guidance. So you could not reduce their hours or working days or alter their duties or ask them to work for another company in the group and claim money under this scheme.

You are permitted to allocate business-critical tasks to non-furloughed employees. Employees are permitted to work elsewhere if their contract allows this - most contracts do not or ask that the employer’s consent is obtained. However, you may allow them train during this period, provided they are not providing a service to or generating income for you or any linked or associated organisation. If they are doing on-line training, they must be paid the minimum wage.

From 1 July 2020 workers who have been furloughed for a minimum of 3 weeks prior to 30 June 2020 (plus those qualifying employees returning rom family leave and military reservists returning from active duty as above) will be able to return to work part time on whatever hours or shifts are agreed with their employer. The employer will be responsible for paying the employee their normal wages for the week and reclaiming from HMRC under the scheme for the hours/shifts not worked in the week (up to the cap). These agreed changes should be in writing and notified to the employee by the employer.

Q: If we have a lay-off clause in our contract do we have to seek agreement to furlough employees?

A: As you have a contractual term allowing you to send them home or pay them less then there is no question of a breach of contract or unlawful deductions claim and so although you do not need to get their consent you will still have to write to them telling them they have been furloughed and setting out the terms and conditions of them staying away.

Q: Do we have to have started a redundancy process to be able to claim?

A: No. The scheme is about trying to keep employees in employment. 

Q: Can we furlough those employees who are shielding?

A: The guidance makes clear that those who are shielding in line with guidance from Public Health England can still be furloughed, as well as those living with them. However, as of 1 August those who are shielding are able to return to work if it is not possible for them to work from home.

Q: Can we furlough those who are off sick?

A: Furloughing is not to be used for short-term absences for sick leave (and is only available to those who have been previously furloughed for three weeks minimum as of 30 June 2020). The Treasury directions made it clear that if at the time the instruction to furlough is given employees are or should be on SSP then that period must come to an end first and this termination of sick leave should be by agreement between the employer and employee. SSP and the furlough grant cannot be claimed for the same period of absence.

The HMRC guidance also confirms that those on long-term sick can be furloughed but it also makes a point of saying those coming back from sick leave should be paid 80% based on their usual salary, the implication being that those on long term sick leave who are furloughed get paid 80% of what they would normally get on sick leave.

If a furloughed employee becomes ill then it is up to the employer whether they place them on SSP or leave them as furloughed. As it is likely that most employees will be much better off as furloughed it is difficult to see a situation when employers would do so.

Q: What about my employee who has to be away from work because they have caring responsibilities including their children who are off school?

A: Yes, these employees may be furloughed although there is no obligation to do so. From 1 July 2020 they could perhaps be brought back a couple of days a week to allow them to share childcare with their partner.

Q: We have employees on unpaid leave - can we furlough them?

A: No. 

Q: Can a foreign national be furloughed?

A: Yes, as the scheme is not considered to be ‘access to public funds’ and employees on all types of visa can be furloughed.

Q: Can an apprentice be furloughed?

A: Yes they can and they can continue to train provided that they are paid minimum wage while they are training. This means that the employer might have to top up the 80% for periods of training. Additional guidance on apprentices has been issued and can be found here.

Q: What about student loans and the apprenticeship levy?

A: These must be deducted in the usual way.

Q: If an employee has two jobs can they be furloughed from both?

A: Yes. Equally they can be furloughed from one and not the other. It depends on the needs of the different businesses. However, if a worker has multiple employers but only works for one at a time, if a worker is laid off from the current employer, they cannot go to a previous employer to be furloughed.

Q: Can we ask employees to take holiday during furloughing?

A: The government has confirmed that holiday will accrue during furlough and can be taken and that an employer can force an employee to take holiday during a furlough period.

Although legislation was introduced to allow employees to carry over holiday for up to two years if they have been prevented from taking it due to the pandemic, the guidance makes it clear that those on furlough are expected to take their holiday unless their employer cannot afford to pay them their full wages because f their financial situation.

Those on sick leave and maternity/adoption/shared parental/paternity leave cannot be asked to take holiday.

Q: How much should an employee be paid on holiday?

A:  Government guidance has also confirmed that employees must receive their normal pay when on holiday which can include overtime and commission provided it is regular and averaged out over the previous 12 months (from 6 April 2020). However, this is only for the 20 days of ‘European’ holiday and not for the additional 8 days for full-time workers which is a statutory requirement in the UK, or the additional contractual days over 28 given in employees’ contracts. Therefore employers with employees who earn significant commission may want to specify that the holiday is used up in a certain order so that the surplus over the 20 days ‘European’ holiday is used up first and commission does not have to be paid and then the 20 days ‘European holiday’ when it does.

In relation to pay for bank holidays, check contracts to see exactly how holiday is expressed and whether it is just 28 days or 28 days plus bank and public holidays or inclusive of them.

Although the HMRC employee guidance says ‘you can agree with your employer to vary holiday pay entitlement as part of furlough’ we believe this to be a typo as in the document showing how to work out your 80% it says ‘an employer and an employee can agree to vary holiday entitlement as part of furlough’.

Q: How do we select those to be furloughed?

A: If you have a group of employees who would all qualify to be furloughed after 1 July 2020 who all do the same job and only need half of them, then you will have to apply fair and objective selection criteria in deciding who stays and who is ‘furloughed’. This would have to be carried out quickly and probably based on what skills you will need in the short term. So, for instance, if you need some of the sales force you are going to select your best sellers to stay as they have the best chance of making sales. Bear in mind that decisions must not be discriminatory. 

Q: When making this selection, can we take into account individual circumstances such as the ability to work from home?

A: This would be a reasonable consideration but do not make stereotypical assumptions, e.g. all women with children cannot work from home as this may end up in a discrimination claim.

Q: Can we bring employees back temporarily off furlough and then furlough them again if we are not busy?

A: Up until 30 June 2020 furloughing must be for a minimum of three weeks and you can furlough staff multiple times - however each furlough period must be for a minimum of three weeks to be able to claim the grant.  After 30 June 2020 qualifying employees can be brought back multiple times or enter into flexible arrangements with their employer to come back part time.

Q: If we go ahead and make an employee redundant anyway, without considering furloughing, is this likely to be an unfair dismissal?

A: Yes. We anticipate that while the scheme is cost neutral to an employer (up until 31 July 2020) a tribunal taking the view that the employer has not done everything possible to avoid redundancies and so those with over two years’ service may successfully claim unfair dismissal, subject to there being extenuating circumstances and many unions have a standard letter that they are sending to employers making this point. However, once the scheme is no longer cost neutral then this argument is much weaker.

Q: What about employees on statutory leave such as maternity/adoption/paternity/shared parental leave?

A: If a pregnant woman is furloughed then calculation of her maternity pay at 90% for six weeks will usually be calculated based on her earnings in the ‘relevant period’ and so if these earnings were reduced due to furloughing then this may affect the 90%. However, as of 24 April, a statutory instrument confirms that the calculation must be made as if the employee was not on furlough and receiving her full pay.

If the employer pays contractual maternity pay which enhances statutory maternity pay, then if the employee has previously been furloughed for 3 weeks or more by 30 June then she can be furloughed while on maternity leave and the employer can claim back 80% of the enhancement (capped at £2,500 per month) under the CJRS but not 80% of the statutory maternity pay element as this can already be claimed back from the government.

If the employer does not pay enhanced maternity leave but tries to furlough an employee on maternity leave on 80% of her normal wages,  this will bring her maternity leave to an end. Therefore there is little point furloughing a woman on maternity leave if she is only receiving statutory maternity pay. It is not currently possible to pay less than the statutory minimum for statutory maternity pay. 

If a woman wants to return from maternity leave early she must give eight weeks notice to do so. However, if the employer has not written to her telling her when her maternity leave ends, there is no obligation to give eight week's notice to return. In a written answer to a Parliamentary question the Government confirmed that except for a woman on maternity leave in receipt of maternity allowance, a woman can agree with her employer to return early from maternity leave and the employer can claim a CJRS grant for her if she is furloughed.  

Employees cannot be asked to take holiday during maternity leave.

When an employee returns from statutory leave then their normal salary should be the one used to calculate their furlough leave, not the salary whilst on statutory leave.

After 1 July 2020, women returning from maternity leave can still be furloughed providing they were on maternity leave prior to 10 June 2020, returned after that date, an RTI submission was made for them prior to 19 March 2020 and their employer has furloughed other employees.

Q:  What about those on active duty as a military reservist?

A: Those employees on active duty as a military reservist before 10 June and who returned after 10 June, provided that an RTI submission had been made in respect of them by 19 March 2020 and the employer had furloughed other employees.

Q: Can we make employees who are furloughed redundant?

A: There is nothing to prevent an employee being made redundant whilst on furlough as a business may conclude that it will not recover or not recover within the timescales of the CJRS, but the guidance warns that ‘grants cannot be used to substitute redundancy payments’ and that HMRC will be closely monitoring this once the scheme has closed. Both the employee guidance makes it clear that you can still be made redundant while of furlough, or afterwards and that normal redundancy rules apply to furloughed employees. The 30 April guidance makes it clear that union and non-union representatives can collectively or individually consult with workers while on furlough provided they are not providing services to the employer or generating revenue for them.

Q: What if the employee has two jobs?

A: They can be furloughed from both jobs and the cap applies to both. Or the employee can be furloughed from one and not the other. However, if a worker has multiple employers but only works for one at a time, if a worker is laid off from the current employer they cannot go to a previous employer to be furloughed.

Q: What if the employee was TUPE'd in after 28 February 2020?

A: The guidance now confirms that those TUPE’d after 28 February 2020 and also situations where the PAYE payroll succession rules apply or where payrolls have been consolidated, qualify to be furloughed.

It also confirms that the transferor can claim the grant for the period up to the transfer date, even if this is less than three weeks.

Where furloughed employees have TUPE'd across to a new business, that new business can add the number of furloughed employees to the maximum number of employees that they claimed for up to 30 June 2020, so that the combined figure is the maximum they can claim for from 1 July.

Q: If we are making 20 or more employees redundant in a 90-day period at one establishment, could we rely on the ‘special circumstances’ argument so that we did not have to collectively consult?

A: Based on current case law it is highly unlikely that any such argument would be successful, but the country has never before faced such a crisis as this and therefore it may be successful if argued now - see Covid-19 and collective redundancy consultation.

Q: What should be in a furloughing agreement?

A: Up to 30 June 2020 a furloughing agreement should include:

  • The employee’s agreement to be furloughed.
  • Confirmation of when that starts or started and that the employer may bring them back off furlough for periods of time and then re-furlough them.
  • If they have been made redundant then agreement that the redundancy has been withdrawn or the termination date varied and whether you require repayment of any redundancy payments or pay in lieu of notice which has already been made.
  • Confirmation of how the employer can bring the furlough leave to an end.
  • Confirmation that the employee will not be required or allowed to carry out any work directly or indirectly for the employer or any connected or associated business during the furlough period other than volunteering for third parties or training. If they are doing training they must receive the minimum wage.
  • Confirmation as to whether you will allow them to work for others during a furlough period.
  • What the employee will be paid and, if relevant, agreement by the employee to accept less than their contractual pay (less income tax and NICs).
  • If applicable, agreement that they may be asked to take statutory and contractual holiday entitlement during the furlough period (see above).
  • If there are any applicable statutory rights, e.g. maternity, shared parental or adoption leave and pay, confirmation that these will continue and if they were receiving enhanced contractual payments, agreement to reduce these to 80% of their contractual level, capped at £2,500 per month.
  • Asking the employee to ensure that the employer has up-to-date contact details for the employee and asking the employee to remain contactable.
  • Reserving the right for the employer to make unilateral changes to the scheme and telling them how any such changes will be advised to them.
  • Confirmation that all other express and implied terms of the contract of employment remain in force so remember to check if there are other terms that need to be varied.

After 30 June 2020 the agreement in writing should be provided by the employer before the period of furlough begins and if agreement is reached with the employee to bring them back to work on a part-time basis then the details of this should be confirmed in writing to the employee and a copy kept until 30 June 2020.

Q: What do we need to make a CJRS claim?

A: You will need the following:

  • your ePAYE reference number
  • the number of employees being furloughed
  • National insurance and names of employees being furloughed
  • the payroll reference number of those being furloughed
  • your self-assessment or corporation tax unique taxpayer reference or company registration number
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 weeks)
  • your bank account number and sort code
  • your contact name
  • your phone number

You can currently only claim every three weeks and this can straddle months and be made in anticipation of an imminent payroll and the money will be paid via BACS. You must pay the whole of the grants received to the employee, less deductions for income tax and NICs without deducting any kind of admin fee. Further details on claiming can be found here. Calculations are based on calendar days and not working days. From 1 July 2020 claims can be for a minimum period of straddle although they can be longer and claims cannot straddle a month. This causes problems with periods of less then seven days at the beginning or end of a month ('orphan periods') but there is special exemptions for employers claiming for less than seven days in these circumstances, provided that these periods are either the end of a longer period in the previous month or the start of a longer period in the following month. Claims can still be made in anticipation of an imminent payroll and the number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the current CJRS.

Q: How do we treat the CJRS grant for tax purposes?

A: Payments received by you under the scheme are made to offset these deductible revenue costs. It must therefore be included as income in your calculation of taxable profits for income tax and corporation tax purposes, in accordance with normal principles. You can deduct employment costs as normal when calculating taxable profits for income tax and corporation tax purposes.

Remember that if you have made a claim under the scheme and then paid this to the employee, you will still need to notify HMRC of this.

Q: What if we’ve overclaimed under the scheme?

A: HMRC has published guidance on repaying grants under the CJRS and what penalties they will impose and how.

  • HMRC has made it very clear that innocent errors in calculation or situations where you were not aware of an overclaim will not lead to a penalty – which will be welcome relief to many employers who have struggled through the detailed and overly complex system of claiming. It is very important to keep as much documentation as possible so that if you have made a claim for an employee and no-one has told you they have left, then keep the email trail of when you were told.
  • If you are still claiming grants, then it is much easier to repay any overclaim. If you are not claiming further grants, then it is more difficult as you must contact HMRC first and their telephones are busy.
  • Company directors can be personally liable if a company becomes insolvent having overclaimed and partners are jointly and severally liable for any overpayment. HMRC has also made it clear they will be naming and shaming offenders.
  • See also ‘Penalties for misuse of the Coronavirus Job Retention Scheme'.