COVID-19: Job Retention Scheme

What’s changed since the scheme was announced

As previously reported, the Coronavirus Job Retention Scheme (CJRS) is designed to support employers whose operations have been affected by the coronavirus (COVID-19) pandemic.

We now know that the CJRS scheme will be available to employers for a total of eight months, from March through to October 2020. Over recent weeks there have been a significant number of important updates to HMRC’s guidance and amendments to the Treasury Direction. It is essential that employers familiarise themselves with the very latest guidance to ensure that they understand the changes and continue to meet the eligibility criteria.

The new changes you need to be aware of

The introduction of a Flexible Furlough option from 1 July

On Friday 12 June 2020 the Government published details of the changes that will be made to the scheme from 1 July (CJRS2). The changes introduce greater flexibilities and remove the requirement for a minimum furlough period. These changes are designed to support businesses as the economy moves out of lockdown and the focus shifts on getting employees back to work.

Fundamentally, changes have been designed to allow employers to bring furloughed employees back to work on a part time basis in July and still receive a grant for the time when they are not working. While many employers will welcome the ongoing support measures and the new flexibility that this offers to their businesses, the extended scheme will present a number of challenges. For example, it means that many employers will, for the first time, have to maintain detailed records of the both the actual and ‘usual’ working hours of their staff and report this data to HMRC with their CJRS claims.

Employer contributions to start from August

While employers have been afforded greater flexibility, there are also some changes in the way that the furlough costs will be funded. From 1‌‌ August 2020, a new taper will be introduced and employers will have to start contributing towards the costs of paying their furloughed staff. This employer contribution will gradually increase in September and October.

Other important changes and key dates to note:

1 July 2020 - From 1 July employees can return to work on a part-time basis with employers claiming through the flexible furlough option for the usual working hours that have not been worked. There will be no minimum furlough period and the cap on the grant payments will remain at £2,500 plus the associated NIC and Auto Enrolment minimum pension contributions.

1 August 2020 - From 1 August the Government will continue to pay 80% of wages up to a monthly cap of £2,500 but employers must now pay the employer NICs as well as the minimum pension contributions.

1 September 2020 - From 1 September 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 employer NICs and pension contributions plus 10% of wages to make up the total of 80%; up to a cap of £2,500.

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 pay employer NICs and pension contributions plus 20% of wages to make up the 80% total; up to a cap of £2,500.

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

It’s important for businesses to note that even through the introduction of the flexible furlough option, an employee cannot work for the employer (or another linked or associated company) throughout the period of furlough. ‘Voluntary work’ for the employer would also breach the terms of furlough.

Other notable developments

Draft measures for inclusion in Finance Bill 2020: Taxation of coronavirus support payments

Proposed draft measures were published by HMRC on 29 May for consultation. The schedules include new compliance and penalty measures and will give HMRC the power to raise income tax assessments to recover amounts that have been paid to employers to which they are not entitled or did not use to pay furloughed employee costs. The income tax charge will be equal to 100% of any over-claimed CJRS payment and HMRC will also be able to charge a penalty in the case of deliberate non-compliance. Employers must notify HMRC within 30 days of ceasing to be eligible for the payment, or 30 days of the bill passing, whichever is the later.

Record keeping

In order to evidence eligibility for the support measures, compliance and accuracy of the claim calculations (with evidence trails for computations), employers should be aware that they are required to retain permanent records for up to six years.

Ongoing access and eligibility for the scheme

It is also important to understand that the current scheme will close to new entrants (i.e. employers who have not previously made a claim and employees that have not been previously furloughed) on 30 June. All employers planning to submit a claim for the CJRS2 grant from 1 July must therefore have completed their first claim before 30 June.

From 1 July, employers will only be able to furlough employees that they have furloughed for a full 3 week period prior to 30 June. This means that the final date by which an employer can furlough an employee for the first time was 10 June.

Any organisation with a PAYE scheme and a UK bank account can apply for the CJRS grant and this means that businesses, charities, recruitment agencies (agency workers paid through PAYE), public authorities and individuals who employ their own staff (e.g. nannies) are all eligible for the scheme.

What should organisations consider now?

Making the decision whether to access CJRS2

Before applying for the grant, all organisations should first consider their eligibility. The scheme is available to any business that has been affected by COVID-19.

Interaction between Time to Pay / PAYE deferrals and CJRS grants

HMRC have clarified that the employer’s NICs and employee PAYE on furlough pay must be paid in accordance with the normal payroll timeline and cannot form part of any PAYE and NIC deferral arrangement. Any failure to pay the PAYE and NICs to HMRC on the amount of the government grant used to pay furlough wages, could result in interest and penalties.

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 to permit flexible furlough and part-time working arrangements. As before, 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 also 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 released a number of materials on this topic which are available to all and since its launch, HMRC have regularly updated and refined their guidance to help employers accurately calculate their claims under the scheme. This has been a complex and challenging undertaking for many employers and will continue to be so with the changes from 1 July.

If you have concerns about how to navigate through this complexity, an independent review of the approach that you have adopted for your CJRS grant claims will determine whether the methodology and basis for your claim is accurate. 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

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