Changes to the furlough scheme
10 June is deadline day for private doctors’ Coronavirus Job Retention Scheme decisions. Vanessa Sanders reports
Changes will take place to the Coronavirus Job Retention Scheme (CJRS) to take effect from 1 July in order to encourage those who were placed on furlough leave to return to work.
The proposed changes include:
- Allowing employees on furlough leave to return to work on a part-time basis;
- Employers covering the costs of the working hours of flexibly-furloughed staff.
To make a claim under the revised CJRS, employers must have submitted claims using the existing scheme prior to 1 July. Only those employees included in claims prior to this date will be eligible for continuing furlough under the revised CJRS.
This means any employees an employer wishes to continue or start on furlough leave must be placed on furlough by 10 June.
From 1 July, there will be a maximum number of employees who are eligible for a claim – the maximum number on any single claim under CJRS prior to the revised version.
This means you cannot increase the number placed on furlough leave after 10 June and continue to make claims.
Details of the proposals
Who can make a claim: Any employer operating a UK PAYE scheme and a UK bank account.
What can be claimed: Currently, a grant of 80% of pay up to a maximum of £2,500 per month of those employees on furlough leave, plus employers’ National Insurance Contributions (NICs), which are to be paid on those staff members and their statutory pension contributions under the workplace pension obligations.
For employees on regularised salaries, the grant is calculated by reference to the employee’s gross salary in the last pay period before 19 March 2020 (salary as at 28 February 2020 may be used). If the employee has not been paid for a full pay period up to 19 March 2020, the earnings should be pro-rated to establish the base pay level.
For employees on variable pay who have been employed for more than 12 months, the base level of pay is the higher of the same month’s earnings from the previous year and the average monthly earnings for the tax year 2019-20.
If the employee has been employed for less than 12 months, the base level pay is the average monthly earnings since they started work. Discretionary payments, where there is no contractual obligation, should not be included when calculating the grant.
How long the scheme will run: From 1 March 2020 until 31 October 2020 – but the scheme will change after 31 July.
From 1 August, employers currently claiming from the scheme will have increased flexibility to assist with the return to work part-time while continuing to receive some support from the scheme.
This revised scheme is planned to run for three months from 1 August to 31 October 2020. Employers will have to contribute a percentage of the salaries of their furloughed staff. These employer payments will substitute at least the contribution currently being made to ensure staff continue to receive 80% of their salary, up to the maximum of £2,500 a month.
What is to be changed: With effect from August, the following will change:
From 1 July, claim periods will no longer be able to overlap months, employers who previously submitted claims with periods that overlapped calendar months will no longer be able to do this. This is necessary to reflect the forthcoming changes to the scheme.
The grant will be based on the same premise as now, so the employee must be paid the lesser of 80% of reference salary and £2,500 per month.
The Government contribution to the 80% of reference salary is being reduced as the scheme progresses as follows:
August – the CJRS will continue to pay 80% of wages.
September – the CJRS will pay 70% of wages (capped at £2,187.50) while employers will take on the other 10%.
October – the CJRS will pay 60% of wages (capped at £1,875.00) while employers will take on the other 20%.
From 1 August onwards, the scheme will no longer cover the cost of employers’ National Insurance nor pension contributions applicable to the grant.
The new calculation will apply from 1 July to factor in the cost of hours worked to hours furloughed ratio.
Employers can claim the grant for the hours their employees are not working calculated by reference to their usual hours worked in a claim period.
Employers will need to report hours worked and the usual hours an employee would be expected to work, in a claim period.
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.
Which employees can be included
Employees who were on the payroll – that is to say, on an ‘Real Time Information’ report – as of 19 March 2020 and have been placed on furlough leave.
Such employees may include: domestic employees such as nannies, company directors, agency workers, employees on fixed-term or zero-hours contracts, foreign nationals (on any type of visa), contingent employees in the public sector and members of limited liability partnerships.
Furlough leave
Employees on furlough leave can do no work for the organisation. The further Treasury Direction under Sections 71 and 76 of the Coronavirus Act 2020 published on 22 May emphasises that the training activities an employee can undertake while on furlough must not provide a service to the employer, nor can they contribute to the business activities or generate income or profit for the employer.
They must, however, be relevant to the employee’s employment. Employees can continue – or start – to work or to volunteer for unconnected organisations.
Employee entitlement
The employee must be paid in accordance with their employment contract – which may be amended by mutual agreement – and will retain their usual rights at work. The employee must be paid at least the gross pay element of the grant received from HM Revenue and Customs (HMRC), but the grant is based on pay in the base period and so may not necessarily match the employee’s gross pay.
Minimum wage rules do not apply when an employee is on furlough other than in respect of hours when they are undertaking training.
When grants will be paid
Within six working days of a claim being submitted.
Deadlines for claims
There is currently no deadline for claims, but it is advisable to make claims promptly, as the scheme is changing with effect from 1 August.
How long do staff have to be on furlough leave?
Three weeks as a minimum, although this can be extended. While staff may be interlinked and rotated on furlough leave, it is not yet clear whether or not this practice can continue.
To ensure you have the appropriate employees returning to work, the employer will need to ensure those for whom they wish to continue to make claims are placed on furlough leave prior to the date specified as the date of eligibility, which appears to be 10 June.
HMRC will be publishing further guidance as the revisions to the CJRS become imminent.
Vanessa Sanders (right) is a partner with Stanbridge Associates, accountancy, finance and tax advisory medical specialists