COVID-19:Job Retention Scheme

What’s changed?

The Coronavirus Job Retention Scheme (CJRS) was designed to support employers whose operations have been affected by the coronavirus (COVID-19) pandemic. The scheme was available from March 2020 and will end in October 2020.

On 24 September 2020 the Chancellor announced the new Job Support Scheme which will come into effect from 1 November 2020. We are now waiting for more detailed guidance around this.

HMRCs compliance powers

HMRC is taking a more proactive approach to the compliance and enforcement regime for the CJRS and is currently approaching circa 30,000 employers to start making enquiries into their CJRS claims where they consider there may be a higher risk of overclaims. HMRC have also confirmed that they will be sending similar ‘nudge’ letters to all 1,200 Large UK Businesses that made CJRS claims, and asking they respond before 20 October 2020.

HMRC’s guidance on compliance and enforcement requires businesses to voluntarily disclose any CJRS overclaims before the notification deadline being the latest of either:

  • 90 days after the business receives the grant they were not entitled to,
  • 90 days after the circumstances change meaning that the business was no longer entitled to the grant; or 20 October 2020.
  • Therefore, for any Grant claims made prior to 22nd July 2020, the notification deadline is 20 October.

The law treats any person who knowingly failed to notify HMRC of an incorrect claim within the notification period as making a ‘deliberate and concealed’ failure, with penalties of up to 100%. HMRC have confirmed they will not actively seek out and penalise innocent errors, but they want to help employers correct any honest mistakes.

We recognise that many employers had to calculate and apply for these grants in exceptional circumstances and therefore there may be errors as a result of misunderstandings or as a result of the frequent updates in HMRC guidance.

Job Retention Bonus

The Chancellor announced, as part of the Summer Economic update, that employers could apply for a one off bonus payment of £1,000 per furloughed employee, provided the employee in question is brought off furlough and remains in employment through to the end of January 2021. The bonus is available for any employee who was previously furloughed and included within a valid CJRS claim and earning above the Lower Earnings Limit for National Insurance. The payment itself can be claimed from February 2021, it will be taxable and should be included on a businesses Corporation or Self Assessment tax return.

It will be important for employers to ensure that all employee and payroll details are accurate and up to date. Inaccurate or incorrect CJRS claims which are not subsequently amended in accordance with the latest guidance may mean employers are unable to claim the bonus.

Other important changes and key dates to note:

1 September 2020 – The Government will pay 70% of wages up to a monthly cap of £2,187.50 for the usual hours the employee does not work. Employers will continue to pay furloughed employees 80% of their usual wages for the hours they do not work, up to a cap of £2,500 per month and will need to fund the difference between this and the CJRS grant themselves. Employers will also continue to pay employer NICs and pension contributions

From October 2020 – The Government will pay 60% of wages up to a monthly cap of £1,875 for the usual hours the employee does not work. Employers will continue to pay furloughed employees 80% of their usual wages for the hours they do not work, up to a cap of £2,500 per month and will need to fund the difference between this and the CJRS grant themselves. Employers will also continue to pay employer NICs and pension contributions.

The Chancellor has confirmed his current position that all forms of the scheme will cease at the end of October 2020.

Other notable developments

Announcement regarding Statutory Redundancy when employees are on furlough – From 31 July 2020 new legislation was implemented to ensure that employees who benefitted from CJRS do not lose out on certain entitlements. The legislation is designed to ensure that a number of statutory rights including redundancy pay, notice pay and compensation for unfair dismissal are based on their ‘normal’ wage, rather than their furlough pay.

Record keeping – In order to evidence eligibility for the support measures, compliance and accuracy of the claim calculations (with evidence trails for computations), employers must retain permanent records for up to six years.

Job Support Scheme announcement – The new scheme, launching on 1 November 2020, will provide a critical lifeline for up to six months for those businesses that are able to provide workers with at least one third of their ‘normal’ working hours. This one-third test will be revisited by HMRC after 3 months to see whether this minimum threshold should be increased.

What should organisations consider now?

Making the decision whether to access flexible furlough

In order to claim a grant for those previously furloughed employees who you are bringing back to work for less than their ‘usual hours’ you will need to have detailed records of both the actual and ‘usual’ working hours and report this to HMRC. Accurate time recording and how that might be managed will be key in submitting correct claims. There are some practical relaxations where employees are being brought back from full furlough to work their usual hours part way through a claim period.

Agreeing to furlough employees

Employers must discuss the terms of furlough with their staff and make any changes to their terms of employment by agreement. From 1 July 2020, employers must obtain the agreement of staff to revise their furlough agreements and permit flexible furlough and part-time working arrangements. We would advise employers to seek legal advice on the process as the scheme does not infer an automatic right for an employer to furlough workers or reduce their hours or pay without agreement.

Making payments to employees

HMRC have provided revised and detailed instructions regarding the calculation of furlough pay. Given the need to ensure accuracy, these instructions should be considered carefully by employers when making payments to staff. The latest guidance explains how pay is to be apportioned across a number of scenarios and different pay reference periods. HMRC have also introduced the facility to correct errors through the CJRS claims portal.

What support is available to help you at this critical time?

HMRC and the Government have regularly updated and refined their guidance to help employers accurately calculate claims under CJRS. This has been a complex and challenging undertaking for many employers and will continue to be so with the introduction of Flexi Furlough from 1 July.

If you have concerns about any aspects of the claims you have made or how to navigate through this process, an independent review by our specialist team of the approach that you have taken and positions adopted will help provide assurance. We can support you where needed, whether you are concerned about the eligibility criteria, the specifics of your calculations in each pay period or the legal positions that you have adopted.

Contact us

John Harding

John Harding

Partner, Employment, PwC United Kingdom

Tel: +44 (0)7801 042607

Follow us