CORONAVIRUS JOB RETENTION SCHEME: UPDATE FOR BUSINESSES

Last weekend, the government issued fresh guidance surrounding the Coronavirus Job Retention Scheme (CJRS). Speaking from Downing Street, the Chancellor, Rishi Sunak, outlined how the scheme will operate – and evolve – over the next few months.

Here’s a brief summary of the very latest developments impacting our small business clients:
  • The CJRS will continue in its current format until the end of July, with the government subsidising 80% of pay for those eligible.
  • The scheme will close to all new entrants at the end of June (30th). From then on, employers will only be able to claim the CJRS for employees who have been furloughed for a minimum three week period prior to June 30th.
  • From July 1st, employers have the flexibility to bring furloughed employees back into work part-time AND claim 80% of their employees’ wages for any ‘regular hours’ they do not work. Employers can decide the hours and shift patterns of their staff but are responsible for paying them for any hours they do work. Otherwise, employees can remain furloughed for the remainder of the scheme.
  • In August, the government will continue to subsidise 80% of employee pay. Employers, though, will be required to pay pension contributions and Employer’s National Insurance Contributions (Er NICs).
  • As well as pension contributions and Er NICs, from September, employers will also be required to contribute 10% of their furloughed workers’ pay (the government will cover the remaining 70% of any hours an employee doesn’t work – up to a cap of £2,187.50).
  • This will double to 20% at the beginning of October, on top of the usual pension and Er NI contributions. At this stage, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee has not worked.
  • The CJRS will then close in November 2020.

What is the Coronavirus Job Retention Scheme?

The government launched the CJRS back in March, in an unprecedented attempt to help businesses – and their employees – affected by the financial fallout of COVID-19 (Coronavirus). The scheme ‘reimburses’ 80% of a furloughed workers’ regular wage costs, up to a maximum of £2,500 per month.

To register, “you must have created and started a PAYE payroll scheme on or before 19th March 2020 and have a UK bank account”.

Am I eligible for the Coronavirus Job Retention Scheme?

The qualifying conditions for the CJRS are as follows:
  1. Your PAYE scheme must have been active on or before 19th March 2020.
  2. Your Director and/or Employee must have been on the payroll on or before 19th March 2020.
  3. Your Director and/or Employee must be formally ‘furloughed’ as a result of COVID-19 (Coronavirus).
Qualifying organisations include:
  • UK businesses
  • UK charities
  • UK recruitment agencies
and
  • Other UK public authorities
It must be remembered, though, that the central purpose of the CJRS is to provide emergency support to employers whose operations have been severely affected by COVID-19 (Coronavirus). It aims to enable them to retain employees who would otherwise be made redundant as a result of the pandemic’s economic impact. It’s an essential lifeline for businesses in need. Therefore, a business is only expected to make a claim for the CJRS if they have suffered a reduction in trading income due to COVID-19 (Coronavirus).

Ultimately, the decision to make a claim rests with yourself. If you choose to go ahead we’re, of course, here to assist you.

However, we must make it clear that, as HMRC have indicated, all claims will be audited in the future. So, should your claim later be rejected, you will be liable for any repayments to HMRC. A reminder, then, that the scheme is completely voluntary.

How much can I claim?

The amount you’re entitled to claim for this grant is dependent on whether your Director / Employee is paid a fixed salary, or receives variable pay.

Where a fixed monthly salary is paid, the grant will amount to 80% of the payroll for February 2020, or £2,500, whichever is lower.

If the amount of pay differs month-by-month, as is the case for many seasonal workers, the calculation is dependent on the length of time the employee has worked for you and is based on average earnings. If applicable, this can be calculated for you when submitting your claim.

Please note, if your Director / Employee is furloughed part way through the month, your grant will be pro-rated accordingly. And, while you’ll still need to pay Employer’s National Insurance and pension contributions on behalf of your furloughed employees (from August onwards), you can also make a claim for these too.

What does it mean to be ‘furloughed’ as a Director?

To ‘furlough’ someone is to temporarily grant them a leave of absence. The term has been adopted by the government to apply to employees being laid off as a result of COVID-19 (Coronavirus).

For a Director, the statutory duties required under the Companies Act 2016 override furlough rules. So, on that basis, a Director is able to continue with their statutory duties whilst under furlough. These duties include aspects relating to: company accounts, paying creditors and collecting overdue funds.

However, until at least the end of July, this does not extend to undertaking ‘income generating’ work, as well as marketing, business plans, etc. This is an important distinction for a Director to consider before deciding whether or not to furlough themselves.

How can I make a CJRS claim?

HMRC have created a secure online portal to enable claims for this scheme to be submitted. Your PAYE agent should be able to make the claim for you. So, if Danbro are currently enrolled as your agent for PAYE, we can make the claim on your behalf.

In readiness for your claim, HMRC have provided a list of required information. This includes:
  1. The bank account number and sort code you’d like to use.
  2. Your Self-Assessment UTR (Unique Tax Reference), Company UTR or CRN (Company Registration Number).
  3. The name, employee number and National Insurance number for each of your furloughed employees.
  4. The total amount being claimed for all employees.
  5. The furlough period in total.
Once your claim is submitted, you should receive the funds into your nominated bank account within six working days.

However, given the volumes HMRC are currently dealing with, it may take slightly longer.

Note too, that smaller employers should have some or all of their Employer’s NIC bills covered by the Employment Allowance.

In the meantime, from everyone at Danbro, we hope you and your family are keeping safe and well during these testing and unfamiliar times.

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