Overnight details emerged of how the Coronavirus Job Retention Scheme (CJRS) will work. We have given a brief summary of the measures below.
The scheme is a reimbursement to Employers for the cost of paying employees, whilst they have no work from them. As such, the employees wage should be administered in the normal way through the payroll. The amounts are then returned to the employer by HMRC.
Who Can Claim
Any UK organisation with employees can apply, including:
- recruitment agencies (agency workers paid through PAYE)
- public authorities
You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account. Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme.
Employees You Can Claim For
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:
- full-time employees & part-time employees
- employees on agency contracts
- employees on flexible or zero-hour contracts
- The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
This scheme is only for employees on agency contracts who are not working.
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
Employees You Cannot Claim For
- Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
Amounts You Can Claim
- You can claim a grant from HMRC to cover wages for a furloughed employee, equal to the lower of 80% of an employee’s regular salary or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.
- For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.
- For people whose pay varies, it will be average earnings from specific periods.
- Specific rules around employees on Maternity, unpaid leave, job share, more than one job etc
National Living Wage/National Minimum Wage
- Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.
- Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.
- The calculation! – we have no view on whether the reimbursement is pro-rated from the moment you put them on Furlough. We would assume this is the case as the scheme is designed to help people who cannot work.
- The website – the claim will be by way of online log in and application. You will need the usual payroll data for this claim re employees and your bank etc.
The Company Tax Treatment of the Coronavirus Job Retention Grant
- Payments received by a business under the scheme are made to offset the wages paid. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.
Register for our Zoom meeting
Warren Munson and Chris Downing will be hosting a Zoom meeting today at 3pm, offering further details on CJRS. If you’d like to register your interest, please email [email protected] and we’ll send you an invite with log-in details.
If you do go through this with your team, the number one piece of advice is get HR input! It is extremely easy to see any error in application of the terms being used against an employer later down the line, despite best intentions now. We have a number of contacts who can help with this, so please ask us for a recommendation if needed.
As ever, this email is for awareness and if you would like specific advice please contact us at Inspire and we will be more than happy to support you. Inspire will be offering a fixed price advisory service and a service to provide you with the calculations to make your grant applications. Further details to follow but if you are interested to know more please contact us as usual, or register here: [email protected]