How To Benefit From The Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme – also known as Furlough Scheme or CJRS – has been the backbone of the UK Government response to help businesses and workers through the COVID-19 pandemic.
As of 13 December 2020, 9.9m workers had been furloughed at least once, and a total of over £46bn had been claimed.
See the latest guidance from HMRC.
How It Works
The Government will refund 80% of each furloughed employee’s wages for the time they cannot work, as a grant administered by HMRC, up to £2,500 per employee per month.
The grant will cover, per month, whichever is lower between the following two:
- 80% of each furloughed employees’ wages for the hours not worked,
- £2,500 per month.
The grant will not cover employer’s NIC and the minimum automatic enrolment employer pension contributions for claim periods starting from 1 August 2020.
The Scheme has now been extended until 30th September 2021.
The Government will cover all 80% of employee’s regular wages until the end of June. Employers are liable for National Insurance and minimum pension contributions, as well as 10% of their employees’ wages in July, and 20% in August and September
From July 2021, employers will be asked to contribute towards their furloughed employees’ salaries, ensuring that each one continues receiving 80% of their wages, while the Government’s support to cover such percentage is lowered. Employers’ contribution increase gradually until September 2021:
- Until June 2021, employers will be required to pay for the National Insurance and minimum pension contributions for their furloughed employees. The Government will still pay 80% of their wages up to £2,500.
- In July 2021, on top of NI and pension contributions, employers will be required to pay 10% of their furloughed employees’ salaries, with the Government covering the remaining 70% up to a £2,190 cap.
- In August and September 2021, the employers’ contributions to their furloughed workers’ wages will increase to 20%, while the Government will still provide 60%, up to £1,875.
On 20 April 2020, HMRC opened its portal to make a claim under the CJRS. In the video below, we take you through each of the steps of making a claim.
HMRC released their Job Retention Scheme Calculator tool, that we recommend using before making a claim on the portal. You can also read the full HMRC guidance on how to calculate your claim on the Gov.uk website.
For full-time and part-time employees, the full salary before tax must be used for the calculation.
Employees with variable pay
Calculations for workers with variable earnings or on a hourly rate change based on when the employee was originally hired:
For employees who were on payroll as of 19 March 2020
You should calculate 80% of the higher of:
- their average monthly earnings for the 2019/20 tax year; and
- their earnings from the same monthly period in 2019.
For employees who were hired after 20 March 2020
You should calculate 80% of their average wages payable between:
- 6 April 2020 (or their first day of employment, if later), and
- the day before they are furloughed.
If you are having trouble with the calculations, you can see examples of wages calculations on HMRC’s website, or use the furlough grant calculator.
The Job Retention Scheme does not extend to dividends, meaning that owner-managed companies where the directors pay small salaries in favour of dividends should not rely on it for covering a significant part of their normal retribution.
Directors can, however, be furloughed while they only fulfil their statutory duties.
Who Is Eligible
HMRC guidance for the Scheme Extension, published on 10 November, confirms that “Employers across the UK can claim, whether their businesses are open or closed.”
This means businesses don’t have to have used the CJRS previously in order to qualify. The Scheme is open to all UK Businesses in the private sector.
All employees that were on a PAYE payroll as of 23:59 30 October 2020 are eligible for the Scheme, including full-time and part-time employees, agency workers and zero-hour/flexible workers.
This means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made between 20 March 2020 and 30 October 2020.
What is furloughing
“Furloughing” means putting employees on paid leave.
The Scheme is targeted at employees that cannot carry out any work for the company and would therefore be laid off without the Government’s support. This means that these employees have to be designated a ‘furloughed’ in writing and need to stop doing any work for the company in order to be eligible. The furlough has a minimum period of 3 weeks, and is subject to normal employment law.
Furloughed workers can still attend training, but if they do, they must be paid at least their minimum wage entitlement for those hours. If the grants don’t cover this, then the employer will have to top-up.
What You Need To Make A Claim
Claims must be made to HMRC through the Coronavirus Job Retention Scheme portal.
Claims can include multiple employees. They are generally made once a month, detailing working hours and furlough periods from the current month.
What you need to make a claim
In order to make a claim through the portal, you will need to prepare the following information:
- Your employer PAYE reference number
- Your Company Registration Number – if you don’t know this you can find this on the Companies House website
- Your name (or the employer’s name if you’re an agent)
- Your Corporation Tax unique taxpayer reference
- Your Self Assessment unique taxpayer reference
- Your bank account number, sort code and billing address
- Your contact details (name and phone number)
- The number of employees being furloughed
- For each furloughed employees you will need to indicate:
- Their name
- Their National Insurance Number
- Start and end date of their furlough
- The full amount you’re claiming
If you’re claiming for employees that are flexibly furloughed, you’ll also need:
- the number of usual hours your employee would usually work in the claim period
- the number of hours your employee has or will work in the claim period
- you will also need to keep a record of the number of furloughed hours your employee has been furloughed in the claim period
What happens after you claim
After HMRC has reviewed your claim, you’ll receive the grant via BACS within 6 working days.
Make sure to keep your claim reference number and all records and calculations, in case HMRC needs to contact you about them.
Nothing on this page is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. We recommend individuals and companies seek professional advice on their circumstances and matters.