The Coronavirus Job Retention Scheme ("CJRS") has been extended until September 2021.
Which employers are eligible to claim under the CJRS extension?
Employers across the UK can claim, whether the businesses are open or closed and irrespective of whether they have previously used the CJRS. However, the government expects that publicly funded organisations will not use the scheme, as has already been the case for CJRS, but partially publicly funded organisations may be eligible where their private revenues have been disrupted.
Which employees can be claimed for?
Employers can claim for employees who were employed and on their PAYE payroll on 30 October 2020. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. As under the current CJRS rules, employees can be on any type of employment contract.
Employees do not need to have been previously furloughed to be eligible for the CJRS extension. Consequently, and unlike the previous CJRS, there is no maximum number of employees that employers can claim for.
Is "flexible furlough" still possible?
Yes. Employers will have the flexibility to use the scheme for employees for any amount of time or shift pattern, furloughing employees on either a full-time or part-time basis. Employers will be able to vary the hours worked in agreement with the employee.
Employers also retain the option of fully furloughing employees if they wish.
Can claims be made for employees who have not previously been furloughed?
Yes. Employees do not need to have been furloughed under the CJRS previously.
What is the Government contribution to the scheme?
Until June 2021 the Government contribution will cover 80% of employees' usual salary for hours not worked, up to a maximum of £2,500 per month. The £2,500 cap is proportional to the hours not worked. Employers will require to cover National Insurance and employer pension contributions for unworked hours. In July employers will be required to contribute 10% of wages for unworked hours, increasing to 20% in July and August.
Employers will have to pay the employee’s wages for the hours they work as normal, as well as employer National Insurance and employer pension contributions.
Employers can top up employee wages above the maximum salary threshold at their own expense but are not required to do so.
The table below shows the level of UK Government contribution between May and September and the required employer contribution where the employee is furloughed 100% of the time and therefore in receipt of 80% of wages subject to the £2,500 cap. Where employers are flexibly furloughed the wage caps are proportional to the hours not worked.
UK Government contribution to wages for unworked hours
80% up to £2,500
80% up to £2,500
70% up to £2,187.50
60% up to £1,875
60% up to £1,875
Employer contribution to wages for unworked hours
10% up to £312.50
20% up to £625
20% up to £625
How will reference pay and usual hours be calculated?
For employees that meet the eligibility criteria, and were previously furloughed, employers must use the same calculations for calculating reference pay and usual hours as they did under the original CJRS.
For an employee who meets the criteria of the extended scheme but was not previously furloughed, alternative calculations of reference pay and usual hours must be used:-
- For an employee on a fixed salary, 80% of wages must be calculated by reference to the wages payable in the last pay period ending on or before 30 October 2020;
- Usual hours for an employee who is contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work, will be the contracted hours worked in the last pay period ending on or before 30 October 2020;
- For employees whose pay varies 80% of wages must be calculated by reference to the average wages payable between (these dates are inclusive) the start of their employment or 6 April 2020 (whichever is later) and the day before their CJRS extension furlough period begins; and
- For an employee who works variable hours, the usual hours will be the average hours worked between (these dates are inclusive) the start date of the 2020 to 2021 tax year, (for example, 6 April 2020) and the day before their CJRS extension furlough periods begins.
The Sixth Treasury Direction makes clear that:-
- For claims arising in March and April 2021 the reference salary to be used for employees other than fixed rate employees is modified to refer to March and April 2019 rather than March and April 2020. That is to prevent those who were furloughed in March/April 2020 having their lower furlough pay used as reference salary;
- The calendar look-back method for determining "usual hours" for claim periods occurring in March and April 2021 is similarly modified with the "relevant reference month" being March and April 2019 respectively;
Can employees who are unwell or have caring responsibilities be furloughed?
Yes. While CJRS is not intended for short term sickness absences, employees who are unable to work because they are shielding in line with public health guidance (or need to stay at home with someone who is) can be furloughed as can those with caring responsibilities.
Furloughed employees who become ill must be paid at least SSP and it is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate.
Can employees who have been dismissed be re-employed and furloughed?
Yes. Employees that were employed and on the payroll on 23 September 2020 who were made redundant or stopped working for their employer afterwards can be re-employed and claimed for. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees.
Similarly, an employee who was on a fixed term contract, on payroll on 23 September, and that contract expired after 23 September can be re-employed and claimed for. For employees on fixed term contracts that have not yet expired, those contracts can be renewed and the employee furloughed as long as they were employed on or before 30 October. In both cases the employer must have made a PAYE RTI submission to HMRC between 20 March and 30 October 2020, notifying of earnings for that employee.
What about employees recently transferred under TUPE?
For claim periods after 1 November 2020, a new employer is eligible to claim in respect of the employees of a previous business transferred if the TUPE or PAYE business succession rules apply to the change in ownership.
To be eligible the employees being claimed for should have been transferred from their old employer to their new employer on or after 1 September 2020, employed by either their old employer or new employer on 30 October 2020 and on a PAYE Real Time Information (RTI) submission to HMRC (by their old or new employer) between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.
Is there a minimum period of furlough?
No, flexible furlough agreements can last any amount of time and employees can enter into a flexible furlough agreement more than once.
As previously, unless otherwise specified there is a minimum claim period of 7 consecutive calendar days.
Have the rules on what employees can do while on furloughed changed?
No. Employees cannot do any work for their employer that makes money or provides services for their employer or any organisation linked or associated with their employer while furloughed. They can however take part in training, volunteer for another employer or organisation or work for another employer (if contractually allowed).
What about furlough/flexible furlough agreements
As under the previous CJRS, employers should discuss with their staff and make any changes to the employment contract by agreement. To be eligible for the grant, employers must have confirmed to their employee (or reached collective agreement with a trade union) in writing that they have been furloughed or flexibly furloughed. The employee does not have to provide a written response and employers do not need to place all of their employees on furlough.
Any agreement must be consistent with employment, equality and discrimination laws and the employer should keep a written record of it for 5 years. The employer should also keep records of how many hours their employees work and the number of hours they are furloughed for 6 years.
Where consistent with employment law, any flexible furlough or furlough agreement made retrospectively that has effect from 1 November 2020 will be valid for the purposes of a CJRS claim as long as it is made according to the conditions above. Only retrospective agreements put in place up to and including the 13 November 2020 may be relied on for the purposes of a CJRS claim.
How can an employer claim under the CJRS extension?
The extended CJRS will operate as the previous scheme did with employers reporting and claiming for a minimum period of 7 consecutive days. Employers will need to report the actual hours worked and the usual hours an employee would be expected to work in a claim period. As with the previous CJRS the claim period must start and end within the same calendar month.
An employer can make a claim in anticipation of an imminent payroll run, at the point they run their payroll or after they have run their payroll. There will be a short period when the legal terms of the scheme and system are updated. Businesses will need to claim in arrears for this period. There will be no gap in eligibility of support between the previously announced end-date of CJRS on 31 October 2020 and the extension starting 1 November 2020.
When can claims be made under the CJRS extension?
Employers will be able to claim from 8am on Wednesday 11 November 2020. Claims relating to each subsequent month must be submitted by 11.59pm 14 calendar days after the month claimed for. If this time falls on the weekend then claims should be submitted on the next working day.
The remaining "deadline days" (the last day that claims can be made relating to each calendar month in which the claim period occurs) are:-
- 15 February 2021 in relation to January 2021;
- 15 March 2021 in relation to February 2021;
- 14 April 2021 in relation to March 2021; and
- 14 May 2021 in relation to April 2021.
HMRC may accept a claim made after the relevant deadline if the employer had a reasonable excuse for failing to make a claim in time and the employer then claimed without delay after the excuse no longer applied.
A request to amend a CJRS claim to increase the amount claimed at the time when the claim was made may be accepted by HMRC provided the amendment is not made after the CJRS claim amendment deadline day relating to the calendar month in which the CJRS claim period of the claim occurs. The remaining "amendment deadline days" are:-
- 1 March 2021in relation to January 2021;
- 29 March 2021 in relation to February 2021;
- 28 April 2021 in relation to March 2021; and
- 28 May 2021 in relation to April 2021.
The closing date for claims under the previous CJRS up to and including 31 October was 30 November 2020.
Grant payments are anticipated 6 working days after the first claims.
Can employees serving their notice period be claimed for?
For claim periods relating to November 2020, employers can continue to claim for a furloughed employee who is serving a notice period. However, in a change from the previous CJRS scheme, for claim periods starting on or after 1 December 2020, employers cannot claim for any days on or after 1 December 2020 during which employees are serving a contractual or statutory notice period (this includes people serving notice of retirement or resignation). As under the previous CJRS, grants cannot be used to substitute redundancy payments.
For claim periods starting on or after 1 December 2020 employers will need to move employees out of the scheme once they start their notice periods, which would ordinarily mean they would revert to the pay to which they were entitled before they went on furlough. If an employee subsequently starts a contractual or statutory notice period on a day covered by a previously submitted claim, employers will need to correct the claim.
The grant can also not be claimed for employees on unpaid leave or sabbatical between 1 November 2020 and 30 April 2021.
What else should employers know about using the scheme?
From February 2021, HMRC will publish the names of companies and Limited Liability Partnerships (LLPs) who have made claims under the scheme for the month of December onwards. This may be an attempt to address fraudulent claims which have reportedly been a problem under the previous CJRS.
Where can employers access the guidance?
Links to the guidance are available below:-
- Fifth Treasury Direction
- Sixth Treasury Direction
- Check if you can claim for your employees' wages through the CJRS
- Check which employees you can put on furlough.
- Other types of employees you can claim for
- Steps to take before calculating your claim.
- Calculate how much you should claim.
- Claim for your wages through the CJRS
- Reporting employees' wages to HMRC when you've claimed through the CJRS
- Examples of how to calculate your employee's wages, NICs and pension contributions
- Full examples of how to calculate the amount you should claim for an employee who is flexibly furloughed
- Holiday entitlement and pay during coronavirus
- Pay CJRS grants back
For more advice on this please contact Innes Clark on email@example.com.
The content of this Q&A are for information only and is not intended to be construed as legal advice. You should take advice on specific circumstances.
The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Morton Fraser LLP accepts no responsibility for the content of any third party website to which this webpage refers. Morton Fraser LLP is authorised and regulated by the Financial Conduct Authority.