Scheme from 1 March 2020 to 30 June 2020

Any business which, due to coronavirus, has suffered severe downturn in operations and is unable to maintain their current workforce as usual.

Which employers qualify?

Any employer who has a Real Time Information (RTI) PAYE payroll registration with HMRC and has a UK bank account.

Employers will need to check employment contracts to see if they have the right to furlough workers. If not, the contracts need to be varied (changed in agreement with the employee) before workers can be furloughed. Employers are advised to have written furlough agreements in place.

See the ACAS website for further guidance on employment contracts and templates for furlough agreements.

Which employees qualify? Employees who were on the payroll on or before 19 March 2020 and were part of the RTI submission to HMRC will qualify. Employees can be on any type of contract: full time, part time, zero hours, apprentices. Agency workers, office holders of companies and salaried members of LLPs also qualify.

Employees whose hours have already been reduced do not qualify.

How much is paid and to whom?

A grant of the lower of 80% of regular wages or £2500 is paid to the employer along with the related Employer NIC and auto enrolment pensions. The employer must pay the Employer NIC element of the grant to HMRC and the balance to the employee in full. The employer also pays the PAYE due on the payment to the employee.

Regular wages is defined as non-discretionary gross pay as at the last pay date before 19 March 2020. It excludes benefits in kind, commissions, tips, discretionary bonuses.

The employer can choose to pay the element of the salary/wages that has not been covered by CJRS to the employee. The employer would then also need to pay the related PAYE and NIC to HMRC.

Employees may have pay that is less than the minimum wage. If employees are apprentices or are in training, then the minimum wage must be paid.

This example has been adapted from the House of Commons Briefing Paper:

  • An employer (“E”) can claim a “grant” equal to the lower of 80% of ‘regular wages’ (gross) and £2,500 per furloughed worker (“W”).
  • W’s annual gross pay: £42,000 = £3,500 per month
  • Normally W is paid £2,675 net under PAYE. E pays employers’ NIC of £383.
  • E can claim £2,500 which is lower than 80% of £3,500 = £2,800, plus employers’ NIC of £245, on the £2,500.
  • The £2,500 paid to W must be net under PAYE, so E must operate PAYE in the normal way and account for income tax and NIC to HMRC.

Note that the grant is taxable income under corporation tax and income tax. For employers, there will not be additional business tax to pay as the payment of the grant to employees is a deductible cost.

The employer does not have to pay the remaining 20% of salary.

What does it mean to be furloughed?

Employees must be furloughed for a minimum of 3 weeks. They can then work and then be re-furloughed for a minimum of 3 weeks.

This must be communicated in writing by the employer and this letter must be kept for 5 years.

During furlough, employees must not perform any work for their employer. They can however volunteer for other organisations or take paid temporary work with other organisations.

Employees can undertake training for their employers as long as this does not generate revenue.

A whistleblower service has been launched to tackle instances where employers have asked employees to work during furlough or have not paid over the grants to their employees.

How to apply?

All claims for the period to 30 June 2020 must be made by 31 July 2020.

Claims for less than 100 employees need to be made on an employee by employee basis.

Claims for 100 or more employees are made by file upload of employee details.

It takes 6 working days for claims to be paid. The online portal for claims was launched on 20 April.

HMRC have a step by step guide for employers. See the link below:

Applications are made via the website

Agents authorised by clients to act on their behalf for PAYE online will be able to make the claims for their clients.

Changes to the scheme from 1 July 2020

Employers and employees can agree to any work arrangements so that the employee works any length of time. There is no minimum furlough period.

Employers must pay the wages for the actual hours worked including employer NIC and auto enrolment pensions.

The furloughed period will be the usual hours worked less any actual hours worked.

Employers will have to submit the data on how the usual hours was worked out.

The CJRS claim will be for the lower of 80% of the wages for the furloughed period or £2,500 reduced pro-rata plus the related employer NIC and auto enrolment pensions.

Employers can only claim for those employees who had been furloughed for 3 consecutive weeks before 30 June 2020, except for those who are now returning to work after parental leave.

The maximum number of employees in each claim must not exceed the number claimed for prior to 30 June 2020.

Claim periods cannot overlap calendar months.

Changes from 1 August 2020

Employers now have to pay all the employer NIC and auto enrolment pensions

Changes from 1 September 2020

The CJRS grant will be reduced to the lower of 70% of furlough period wages or £2187.50 reduced pro-rata per month. The employee must receive 80% of their wages or £2500 per month.