Following the announcement from the Chancellor today, 5th November 2020, the Coronavirus Job Retention Scheme, commonly known as the furlough scheme, has now been extended until the 31st March 2021. Furloughed employees will be eligible to receive 80% of their current salary for hours not worked throughout the next 5 months.
The extended Coronavirus Job Retention Scheme
All employers, charitable or non-profit, irrelevant of the size of the organisation, are eligible for the extended Coronavirus Job Retention Scheme (CJRS) which will continue until the end of March 2021.
Employers will have the option to bring furloughed employees back to work on a part time basis (flexible furlough) or furlough them full-time. The employer will only be asked to cover National Insurance and employers pension contributions which, for the average claim, accounts for just 5% of total employment costs. This will be reviewed by the government in January to see if they believe economic conditions warrant asking employers to increase contributions to the cost of the scheme.
The Job Support Scheme, which was scheduled to begin on Sunday 1st November, has been postponed until the furlough scheme ends. Additionally, the Job Retention Bonus that had been announced as being paid in February will now not be going ahead. The government said it will "redeploy a retention incentive at the appropriate time".
Key Facts
The CJRS is being extended until 31 March 2021. During this period, the grant will mirror the amounts which were available under the CJRS in August 2020.
The government, therefore, will pay 80% of wages up to a cap of £2,500 and employers will pay employer National Insurance Contributions (NICs) and pension contributions only for the hours the employee does not work.
As under the current CJRS, either flexible furloughing or, full-time furloughing will be permitted.
Further details, including how to claim this extended support through an updated claims service, will be communicated shortly.
Following a short period while the government update the system and the legal terms of the scheme; the extended CJRS will operate as the previous scheme did, with businesses being paid upfront to cover the cost of furloughed employees wages. However, during the short period whilst the system is being updated, businesses will be paid in arrears for that period.
The Job Support Scheme which was scheduled to begin on 01 November 2020 has been postponed.
Employers will continue to pay Employers NI and employers pension contributions. This will be reviewed in January to see if employer contributions to the scheme will be increased.
Who is eligible?
Employers
All employers with a UK bank account and UK PAYE schemes can claim the grant.
Neither the employer nor the employee needs to have previously used the CJRS.
The government expects that publicly funded organisations will not use the scheme, as has already been the case for CJRS, however, partially publicly funded organisations may be eligible where their private revenues have been disrupted.
The employer must keep a copy of the written communication informing employees they are furloughed for 5 years
Employees
Employees eligible to be claimed for under this extension must be on an employer’s PAYE payroll by 30th October 2020.
A Real Time Information (RTI) submission notifying HMRC that a payment has been made for that employee must have been made on or before 30th October 2020.
Employees can be on any type of contract, including zero hours and temporary contracts
Employers can claim the grant for the hours their employees are not working, calculations will follow the same approach as under the previous CJRS.
When claiming the CJRS grant for hours not worked, employers will need to report and claim for a minimum period of 7 consecutive calendar days.
Both the hours actually worked and the hours the employee would usually have worked during the period being claimed for will need to be reported.
For worked hours, employees will be paid by their employer subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts.
Employees that were employed and on the payroll on 23 September 2020 (the day before the Job Support Scheme announcement) who were made redundant or stopped working afterwards can be re-employed and claimed for. The employer must have made an RTI submission to HMRC from 20 March 2020 to 23 September 2020 notifying a payment of earnings for those employees.
Support the government is providing, and costs to the employer:
For hours not worked by the employee, the government will pay 80% of wages up to a cap of £2,500. The grant must be paid to the employee in full.
Employers will pay employer NICs and pension contributions, as well as wages for hours worked as per usual.
As with the current CJRS, employers have the option to top up employee wages above the scheme grant at their own expense if they wish to do so.
When claims can first be made in respect of employee wage costs during November 2020, will be confirmed in due course, however, there will be no gap in eligibility for support between the end of the previous CJRS and this extension.
Calculating Monthly Earnings
Full or part time employees on a salary
Claim for the 80% of the employee’s salary before tax.
Employees whose pay varies
If the employee has been employed for 12 months or more, you can claim the highest of either the:
same month’s earning from the previous year
average monthly earnings for the 2019-2020 tax year
If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.
If the employee has recently started work, calculate a pro-rata for their earnings so far, and claim for 80%.
Business Grants
Businesses required to close in England due to local or national restrictions will be eligible for the following:
For properties with a rateable value of £15k or under, grants to be £1,334 per month, or £667 per two weeks;
For properties with a rateable value of between £15k-£51k grants to be £2,000 per month, or £1,000 per two weeks;
For properties with a rateable value of £51k or over grants to be £3,000 per month, or £1,500 per two weeks.
We're here to help
As we have done since March, we have support and resources in place to help employers navigate these changes.
Our Coronavirus Job Retention Scheme Support Package is here to help employers manage their staffing issues during the Coronavirus Pandemic. It's specifically designed to help make sense of the extension and changes to the furlough scheme, provide employers with the legally correct documents/ letters and advice to manage staff correctly when placing on furlough.
The package includes:
Legally compliant letters for arranging employees' furlough leave
Checking your current employment contracts and advising you of legal options
Up to 3 hours telephone and email advice and guidance on operating the scheme
Updates and information on legal changes as they occur
Click here to find out more and to purchase. It's just £199 + VAT. If you are a retainer client this service is free of charge.
Contact the team directly on 01722 325833 or email hr@hjssolutions.co.uk.
Alternatively click here to see our resources which are instantly downloadable.