Coronavirus Job Retention Scheme (CJRS)
27th March 2020 – Update (Information correct at the time of publication)
The Government yesterday released much needed detail on how the CJRS will work in practice.
The scheme is available to all UK businesses with a PAYE payroll scheme in operation on 28 February 2020.
Where there is no work for an employee, the employer can claim a grant for the wage costs if the employee is ‘furloughed’ instead of being made redundant. Furloughed employees are on a leave of absence, they cannot undertake any work for the business but they are still on the payroll.
Employers wishing to place employees on furlough must agree it with them and write to them confirming they have been furloughed. A record of that communication must be kept.
Employees who are on sick leave or self-isolating should get statutory sick pay, but they can be furloughed after that. Employees who are shielding in line with public health guidance can be placed on furlough.
The employer must continue to pay wages and account for PAYE/NIC in the usual way. They can then apply for a grant using a portal to be set up by HMRC. It is expected that the grant will be available by the end of April.
The amount of the grant is calculated by reference to a ‘base wage’. For salaried employees that is the amount of salary as at 28 February 2020. Fees, commissions and bonuses should not be included.
For employees with variable earnings, who have been employed for more than one year, the ‘base wage’ is the higher of the same month’s earnings for the previous year and the average monthly earnings over the year 2019/20. For those employed for less than one year, take the average monthly earnings since they started work.
The grant is 80% of the base wage up to a maximum of £2,500 per month. In addition, all of the employers NIC and the minimum employers auto enrolment pension contribution on that amount can be claimed.
The actual wages paid to employees who are ‘furloughed’ is governed by the contract of employment. The contract of employment can be changed by agreement with the employee to effect a reduction in wages, for instance to 80% of normal salary, but cannot be reduced below the amount of the grant.
Latest advice indicates that, in principle the scheme should apply to earnings received by directors/shareholders of owner-managed companies. However where such individuals continue to work in or administer the business of the company, they will not qualify. Dividends are not covered by the scheme.
Employees can be furloughed for more than one employment. The cap applies to each employer individually.
25th March 2020 (Information correct at the time of publication)
Employers are being encouraged to retain staff for whom there is no work by designating them as ‘furloughed workers’. A furloughed worker remains on the payroll and is not made redundant, it does not include those working reduced hours, taking a pay cut or self-isolating. The employer can claim a grant of up to 80% of the wages cost, up to a cap of £2,500 per month. This scheme will run for at least 3 months from 1 March 2020.
HMRC are setting up a new online portal and are currently setting up a system for reimbursement which they expect to be available by the end of April.
CJRS can only be claimed for employees. Under existing case law, it is unlikely you are an employee of your own limited company, for example if you have a controlling interest, or are the sole shareholder or sole director and cannot be dismissed.