Furlough Scheme (CJRS)
The Coronavirus Job Retention Scheme was announced on 20 March 2020, and opened for applications on 20 April. Under the COVID-19 job retention scheme, HMRC promised to reimburse 80% of 'furloughed workers' wage costs, up to a maximum of £2,500 per month for each furloughed employee. This is a grant that is being offered to employers to alleviate the need to make redundancies during the pandemic, and will not need to be repaid.
The original scheme ran for three months and was subsequently extended until the end of June, before being extended further until the end October, with a series of planned changes to provide a staggered return to work for both employers and employees. *The existing scheme has been extended until 30 April 2021.*
What is the Furlough Scheme?
The original scheme required workers to cease working and follow the government's advice on social distancing and self-isolation by remaining at home. Participants remained employed by their current employer, and received 80% of their salary in the normal way, which the business then claimed back via the online portal set up by HMRC.
Employers could choose to top up their employees' salaries to 100%. Employees could continue to complete any training in order to achieve professional qualifications and maintain CPD whilst on furlough, but could not perform any revenue-generating work for the business. Employees could be brought back to work and re-furloughed at any time, as long as the periods of furlough lasted a minimum of three weeks each. Zero hours workers were also entitled to be furloughed and receive 80% of their average monthly earnings, under the CJRS.
Extension to the Furlough Scheme
The CJRS was initially open for three months from 1 March, before being extended until the end of June, and then again until the end of October, with a staggered reduction in support to help employers gradually return their employees to work. Chancellor Rishi Sunak announced on 12 May that the CJRS would continue until the end of October, with furloughed workers continuing to receive 80% of their income, up to £2,500. From 1 July, new flexibility was introduced, whereby employees could return to work part time, with the time they weren't working still being covered by the scheme. For example, an employee could return to work 2 days a week and be paid by their employer for those days, while still being paid for the remaining 3 days via the furlough scheme. From 1 August, employers were also expected to make a contribution to the 80% salary, starting with NICs and pension contributions.
From 1 September, employers were expected to contribute 10% of furloughed workers' salaries, rising to 20% from 1 October until the scheme was due to end on 31 October. The cut-off date for not-previously furloughed employees to be added to the scheme was 10 June, allowing for the mandatory three week furlough period to be reached before the 30 June deadline. *For the newly extended furlough scheme, employees who were not previously furloughed may be added to the scheme.*
Furlough scheme for directors and owner-managers
Company directors and owner-managers who pay themselves a salary via PAYE can choose to furlough themselves and receive 80% of their PAYE salary from the government's CJRS. Any income that is taken as dividends will, however, not be included, and the director must cease any income-generating work and only perform statutory tasks, such as preparing accounts and tax returns.
Furlough scheme and ex-employees
The government has amended the date at which an employee must have been on the payroll in order to be eligible for the job retention scheme. Any employee who was on the payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before this date can be furloughed and the employer may claim 80% of the employee's salary.In addition, any employee who was on the payroll as of 28 February and has been made redundant or stopped working for the employer between then and 19 March can be re-employed and put onto furlough.
Furlough and volunteering/second jobs
Whilst on furlough, employees are permitted to volunteer, whether by helping the NHS in the fight against coronavirus, or supporting a local charity, for example. They also may take on a second employment in order to supplement their income, if contractually allowed by their primary employer.
Furlough scheme and redundancy
Employees may be made redundant at any time during the scheme, or after it ends. If your employee is eligible for redundancy pay, the calculation is based on the amount they earned before furlough, and furlough pay cannot be used to subsidise redundancy packages.
Applications are now open, click here to go to the Government portal and submit a claim.You can use the government's tool to work out your employees' wages, NI contributions and pension contributions.Confused about how much you need to pay your employees when the flexible furlough scheme begins? Download our handy calculator. If you would like to find out more about our Payroll service, and how we could help you to manage your furlough scheme claims, please get in touch on firstname.lastname@example.org or 0114 274 7576.