Job Retention Scheme Claims – Further Guidance – Coronavirus

On 26th March, HMRC released further information on Coronavirus Job Retention Scheme claims and the associated eligibility criteria.

What can be claimed?

When the Coronavirus Job Retention Scheme goes live (expected by the end of April), eligible employers will be able to use an online portal to claim the following for their furloughed workers:

  • 80% of monthly wage costs (this does not include any fees, commission or bonuses) – up to a maximum of £2,500 a month
  • The associated Employer’s National Insurance contributions
  • The minimum automatic enrolment employer pension contributions

Which employers can claim?

HMRC have made it clear that any UK organisation with employees can apply, but they must have started a PAYE payroll scheme on or before 28th February 2020.

This means that any organisation that created a PAYE scheme after this date will not be eligible to claim under the Coronavirus Job Retention Scheme.

The organisation claiming must also have a UK bank account to allow HMRC to reimburse the wage costs.

Which employees can you claim for?

  • ANY furloughed worker – this includes full and part time employees, and those on agency or flexible/zero-hour contracts

The Coronavirus Job Retention Scheme has been designed to be as inclusive as possible, but there are some crucial caveats to that statement:

  • The employee you’re claiming for must have been on your payroll on 28th February 2020. You will be unable to claim for any employee who joined the payroll after this date.
  • The employee that you are declaring as a furloughed worker must not be undertaking any work on behalf of the business – whether this is providing services or generating revenue. Even if the employee is on reduced hours, or you have reduced their salary, they will not be eligible if they are continuing to work.
  • Employers should write to their employee to confirm that they have been furloughed. It’s important to keep a record of all communication issued in relation to this.

To cover employers who may have made employees redundant before the announcement of the Coronavirus Job Retention Scheme, any employees made redundant (since 28th February) and subsequently rehired after the announcement can also be claimed for.

A business may have employees in a variety of circumstances – to account for this, HMRC have made the following clarifications:

  • If your employee is on unpaid leave they cannot be furloughed, unless the unpaid leave began after 28th
  • If your employee is on Statutory Sick Pay due to sickness or self-isolation, they can be placed on furlough after it ends.
  • If your employee has more than one job you can still furlough them – each employer is treated separately and can claim for the wage costs in their own right.
  • If your employee is on maternity leave, contractual adoption pay, paternity pay or shared parental pay the normal rules apply. The exception to this is if you pay an enhanced contractual amount, in which case these costs are included as wage costs and can be claimed for under the scheme.

How to work out what you can claim

How an employer will calculate the amount they are eligible to claim under the Coronavirus Job Retention Scheme will vary depending on the furloughed worker’s circumstances, as outlined below.

Full time and part time employees:

To calculate the 80% claimable for full time and part time employees, you should use their actual salary – any fees, commissions and bonuses should not be included.

Employees whose pay varies (hourly workers, etc.):

If the employee has been employed for 12 months prior to the claim, the calculation can be based on the higher of either:

  • The same month’s earnings from the previous year (e.g. to calculate what can be claimed for April 2020, you look at the employee’s earnings from April 2019)
  • Average monthly earnings from the 2019-20 tax year (April 2019- March 2020)

If the employee has been in employment for less than 12 months, you should use the average of their monthly earnings to date.

If your employee only began working in February, you should pro-rata their earnings to date to calculate the amount you should claim.

Employer National Insurance and Pension Contributions:

It’s important to note that all employers will still remain liable for any Employer’s National Insurance and minimum automatic enrolment employer pension contributions that arise from paying the wages of their furloughed workers.

To assist with this, in addition to the 80% of an employee’s salary (to a maximum of £2,500) employers will be able to claim for the cost of the Employer’s NI and the minimum employer pension contributions.

While we know that employers can choose to ‘top up’ their furloughed worker’s salary, any additional Employer’s NI or minimum pension contributions on this amount will not be funded under the Coronavirus Job Retention Scheme.

National Living Wage/National Minimum Wage:

A key point to acknowledge here is that employees are only entitled to the National Minimum/Living Wage for the hours they are actually working.

As furloughed workers should not be undertaking any work for the organisation, the normal National Living/Minimum Wage rules do not apply – even if the 80% (or maximum of £2,500) would put them below the National Living/Minimum wage based on their usual working hours.

What you will need to make a claim

The Coronavirus Job Retention Scheme claim portal is not expected to go live until the end of April, but HMRC have outlined what an employer will need to make a claim.

  • PAYE reference number
  • The number of employees being furloughed
  • The claim period (start and end date)
  • Amount claimed (per the minimum length of furloughing which is 3 weeks)
  • Bank account number and sort code
  • Contact name
  • Telephone number

It is the employer’s responsibility to calculate the amount to be claimed, and HMRC reserve the right to retrospectively audit any and all aspects of your claim.

Employers will be permitted to make one claim at least every 3 weeks – this is the minimum length of time that an employee can be furloughed for. We know from the chancellor’s announcement that claims can also be backdated to 1st March once the Coronavirus Job Retention Scheme claim portalgoes live.

After receiving a Job Retention Scheme claim, and confirming eligibility, HMRC will pay the grant via BACS into the employer’s UK bank account – payments will not be permitted to an overseas bank account.

At the point the government ends the Coronavirus Job Retention Scheme, employers will need to decide whether the furloughed workers can recommence their normal working duties. If this is not the case, the furloughed worker’s employment may need to be terminated.

Key Points:

  • Furloughed workers’ wages will still be subject to Income Tax, National Insurance and any auto-enrolment pension contributions as normal.
  • Fees, bonus and commission amounts are not to be included when calculating the amount claimable for a furloughed worker – as no work is being undertaken by the worker there should be no additional performance-based amounts to include anyway.
  • Further guidance will be made available nearer the time of the scheme going live to assist in calculating the claims.

Please get in touch if you would like any further advice on the Coronavirus and government support.