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Salary support for businesses: the Coronavirus Job Retention Scheme

Salary support for businesses: the Coronavirus Job Retention Scheme

Salary support for businesses: the Coronavirus Job Retention Scheme

Furlough scheme extended to 31 March 2021

On 5 November, Rishi Sunak announced that the Coronavirus Job Retention Scheme (“JRS”) is being extended from 31 October 2020 to 31 March 2021, as the UK faces the challenges of a second lockdown. Under the terms of the JRS extension, the government will pay 80% of an employee’s salary (up to a maximum monthly sum of £2,500), while the employer will have to meet the cost of National Insurance payments and pension contributions. This makes the scheme operate on the same terms as it did in August.

The key points of the JRS are outlined below:

Flexible furloughing

  • From 1 July, businesses have had the flexibility to bring previously furloughed employees back to work part-time.  
  • Businesses can decide the hours and shifts which employees will work.  Businesses will be responsible for paying their wages in full whilst they are working.  
  • If employees are unable to return to work, or there is no work for them to do, they can remain on furlough and the JRS grant can be claimed for their full hours under the existing rules.
  • To be eligible for the extended JRS from November, employees must have been on their employer’s PAYE payroll on 30 October.
  • JRS applications for November opened on 11 November and will close on 14 December.
  • It should be noted that HMRC must publish information about businesses which claim the JRS from 1 December 2020. This will include the business’ name (and registered number) and details of the amount claimed, or “an amount that gives a reasonable indication of the claim, rather than the exact amount”. This will be published on the gov.uk website (and anywhere else which HMRC chooses) and can remain in the public domain for up to a year.
  • Further details on the grant calculation are available from HMRC here.

 
Employer contributions

  • To 31 March 2021, the government will continue to pay 80% of wages for any of their normal hours which they do not work.  Employers will need to pay National Insurance and pension contributions.  Note that this may change when the scheme is reassessed at the  end of January 2021. 

 
Closure of scheme

  • The scheme was originally due to close on 31 October and to be replaced by the Job Support Scheme announced in the Winter Economy Plan (see our article on this here).  As noted above, the JRS is currently open until 31 March 2021.  It is unknown whether the  Job Support Scheme will come into force after the end of March when the JRS is planned to close.

 

Job Retention Bonus

  • The government had also introduced a Job Retention Bonus as an incentive to encourage businesses to keep their staff from the planned end of the JRS on 31 October until 31 January 2021. However, since the JRS has now been extended to 31 March 2021, the Job Retention Bonus has been cancelled.  In his statement in the House of Commons on 5 November, the Chancellor said that a new “job retention incentive” will be introduced “at an appropriate time”.

 

A reminder about the key facts of the scheme

The government portal was open from 20 April (see link here), where businesses can apply for the JRS grant. We have summarised below the key facts about the scheme, which we hope will be useful for employers.

The original 80% announced by Rishi Sunak means 80% of a worker's normal gross salary - before deduction of taxes at source and for anything else such as pension contributions. Employers are then left to decide whether to fund any difference between the 80% of pay funded by the government and their normal salary. 

To access the support, businesses will need to classify relevant workers, those that otherwise would have been laid off during this crisis, as ‘furloughed’.

An important factor is workers designated as furloughed should not undertake any work for the business (e.g. responding to emails or phone calls), as this will restrict the available grant.

Businesses should raise the possibility of workers being furloughed at the earliest possible opportunity to keep them informed throughout the process. We would encourage legal advice to be taken to ensure correct implementation. We can put you in contact with employment law specialists, if required.

The JRS is a reimbursement of costs after salary payments have been made from the business to employees, rather than a direct payment from the government to employees. Therefore, in the short term, payments to employees will still need to be made.

HMRC have advised that they require the following details to make a claim (note that this can be undertaken by your PAYE agent):

  • your ePAYE reference number
  • the number of employees being furloughed
  • each employee's National Insurance number 
  • the claim period (start and end date)
  • the full amount you're claiming for, including employer National Insurance contributions and employer minimum pension contributions
  • your bank account number and sort code
  • your contact name
  • your phone number

 
Where more than 100 employees are being furloughed, you will need to upload an Excel (or similar) file containing each employee's full name, National Insurance number, furlough start and end date, and the full amount claimed. 

Once you have claimed, you will receive a claim reference number. HMRC will then check that your claim is correct, and pay the claim amount by BACS into your bank account within six working days. 

For illustrative purposes, we have included below an example which the Institute of Chartered Accountants in England and Wales has produced:

X Ltd employs Mr A at an annual salary of £24,000, so £2,000 per month. Mr A has opted out of auto-enrolment.

Each month, Mr A currently receives net pay of £1,665 which is after deducting PAYE of £191 and employees NIC of £154. On this salary, the employer pays employer’s NIC of £177.

The available grant for the employer is the lower of:
(a) 80% of £2,000, and 

(b) £2,500

Plus employer's NIC on this amount,

So X Ltd claims a grant of £1,600 plus £122 = £1,722.

The net amount of cash required by X Ltd to furlough Mr A based on maintaining the existing salary is £2,000 + £177 - £1,722 = £455 per month. It is a matter for employment law whether the employer is actually required to pay this top up. Employees and employers can agree to a different arrangement during the furlough.

Employers looking to utilise the JRS are also encouraged to consider the other support already available, such as the Coronavirus Business Interruption Loan Scheme, which could help with any immediate cashflow problems by providing loans of up to £5 million, interest-free for the first 12 months, or the Bounce Back Loan Scheme for loans of up to £50K. We have summarised this and the other support available to businesses and individuals on our Covid-19 Hub. Please do get in touch with us if you'd like to talk through any of the support available to you or your business

Other considerations

  • There are special rules for those employees who are on maternity leave, adoption leave, paternity leave or shared paternity leave. 
  • Salaried Members of Limited Liability Partnerships (LLPs) may be eligible to be furloughed and receive support through this scheme.
  • There are special rules for how much you can claim for employees whose pay varies.
  • You cannot claim for any pension contributions that are above the mandatory employer contribution. You may need to speak to your pension provider about whether your scheme is affected.
  • If you provide taxable benefits in kind or operate a salary sacrifice scheme this may affect how much you can claim.

 
Statutory Sick Pay Rebate Scheme

From 26 May, it has been possible to find out if you can use the Coronavirus Statutory Sick Pay Rebate Scheme to claim back employees’ coronavirus-related Statutory Sick Pay (SSP).  The repayment will cover up to two weeks’ SSP starting from the first qualifying day of sickness.  HMRC’s page here allows businesses to make a claim.

Personal Service Companies (“PSCs”)

We understand that it is feasible for a director of an owner-managed business to claim under the JRS, as long as they do not do any work for the company, other than to enable the company to meet its statutory obligations such as filing accounts. 

Self-employed individuals

On 13 May, the government opened applications to help self-employed workers under the Self-Employment Income Support Scheme. Details of this are available here

We will continue to keep you updated in the coming days, weeks and months, as the government releases more detail of the support available for individuals and businesses.

Please get in touch with your usual contact if you'd like any assistance with the support available. Please continue to use the main telephone number, 01892 546546, or any of our usual channels, to communicate with our team. If the main line is busy, please do leave a message and we will get back to you.

Please note: The information above is based on our understanding and interpretation of the government's guidance as of 12pm on Monday 16 November 2020. Changes to government guidance on a daily basis may mean that this information is not accurate or complete beyond this time.