Until 1 November, you may be eligible to claim under the Coronavirus Job Retention Scheme. From 1 November, this is being replaced by the Job Support Scheme. Employers who have claimed under the Coronavirus Job Retention Scheme may also be eligible for the Coronavirus Job Retention Bonus.
Coronavirus Job Retention Scheme
What payments are available?
The Coronavirus Job Retention Scheme enabled all UK employers to apply to the Government to continue paying 80 per cent of their employees' salary costs for those employees who are furloughed (on a leave of absence) as a result of the COVID-19 pandemic. Since 1 August 2020, employers have only been able to access the scheme for employees who had already been furloughed under the scheme before 10 June 2020 and employers have been asked to share the cost of paying furloughed employees' salaries so will be able to claim less from the Government (see "How has the furlough scheme changed since it opened?" below).
How has the furlough scheme changed since it opened?
The key changes are as follows.
First, since 1 August 2020, employers are no longer able to seek reimbursement of the national insurance and pension contributions (estimated to be around 5% of the cost of the scheme on average). Since September, employers have had to start paying 10% of the furlough salary (with the Government paying 70%) and from October, this will increase to a 20/60% split. The scheme will close for good on 31 October 2020.
Second, the scheme closed to new applicants on 30 June, in anticipation of the scheme beginning to offer "maximum flexibility" from 1 July. This means that the furlough scheme is now only available for employees who were previously placed on furlough on or before 10 June and who therefore completed the previous three-week minimum furlough period by 1 July. The exceptions to this are those returning from statutory family leave (including maternity, adoption or shared parental leave), and armed military reservists.
Third, since 1 July employers have been able to bring back any previously furloughed employees on a part-time or flexible basis, while still claiming under the scheme for the normal hours not worked (though employers can still furlough employees on a full-time basis should they wish). There is also no longer a minimum period for which an employee must be put on furlough (as mentioned above, before 1 July the minimum period was three weeks). Both of these features will be particularly helpful for employers who are planning a phased return to work over the coming months. For further details of how this "flexible furlough" will work, see update here.
What is included in the payments and is there an upper limit?
Yes, the Government will pay a certain percentage of the salary costs of eligible employees. From 1 October 2020, the Government will contribute 60% up to a cap of £1,875, per month for each employee. The salary on which to base the calculation is the employee's gross salary in the pay period to 19 March (however, if you have calculated salary based on 28 February as per earlier guidance and this is different then you can choose to base it on that calculation instead). This includes other regular cash payments that you are obliged to pay, such as past overtime and compulsory commission payments but not discretionary bonus and commission payments. The cost of benefits should not be included in the reference pay. The Government will continue to support businesses in paying their employees' salaries until October, but since 1 August 2020 businesses have been asked to share the cost on a sliding scale (see "How has the furlough scheme changed since 1 July?" above).
How do I calculate pay for zero hour workers?
If an employee on variable pay, such as a zero hours or casual employee, has been employed for 12 months, you can claim the higher of: the same month's earning from the previous year, or average monthly earnings from the 2019/2020 tax year. For those who have been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
Can I apply for payments for all my employees?
No, the scheme only applies to those on PAYE, including zero-hours and casual employees, office holders such as salaried company directors and salaried LLP members (apprentices are also included). Further, since 1 July, there has been an added requirement that employees must have been previously placed on furlough on or before 10 June (see "How has the furlough scheme changed since 1 July?" above). Payments will also not be available for employees who continue to work for your organisation (other than unpaid voluntary work and training) during any periods which have been designated furlough periods (whether as part of a full- or part-time furlough arrangement).
What about those employees who are on sick leave?
The latest Government guidance states that you can furlough employees on sick leave (though note that the scheme closed to new entrants on 30 June (see "How has the furlough scheme changed since 1 July?" above). It highlights that short term illness or self-isolation should not of itself be a reason to furlough but if there are business reasons then employees on sick leave can be furloughed along with other employees. If so those employees should not receive sick pay but furlough pay instead. Employers can equally decide to furlough employees on long term sick leave. An employee on furlough who becomes ill is entitled to receive payment equal to at least SSP but the employer can choose whether to continue to furlough and pay furlough pay. Those employees who are self-isolating in line with public health guidance, because they themselves are vulnerable, can be put on furlough.
We have employees who are currently on maternity and shared parental leave – can they be furloughed?
Employees on statutory family leave will continue to receive their statutory payments in the normal way (for example statutory maternity pay at 90% of salary for the first six weeks of leave, followed by 33 weeks at the statutory flat rate). If you offer enhanced contractual pay for maternity and other forms of statutory family leave, this can be claimed through the scheme as wage costs. They will be treated as still on statutory family leave alongside furlough leave, with the various rights that that entails, but employers can claim a grant in relation to 80% of any enhanced contractual pay. An employee who returns from maternity leave or other statutory leave will be entitled to be paid furlough pay based on the pre-leave salary, not the reduced pay, if any, they received before the return. Note that employers can furlough those who return from statutory family leave after 10 June, even if they were not previously furloughed (see "How has the furlough scheme changed since 1 July?" above).
How do I apply?
To access the scheme, you will need to:
- designate affected employees as ‘furloughed workers,’ and notify the employees of this change in writing. You will have to seek employees' agreement to reducing their pay under their employment contract, unless you choose to top up, and to varying any other terms needed for furlough,
- submit information about the employees to HMRC through a new online portal. This will include your PAYE reference number, number of employees furloughed and the period for which you claim, along with a calculation of the amount.
Since 1 July, there have been additional considerations when calculating and/or submitting claims:
- The number of employees in any claim period after 1 July must not exceed the maximum number of employees claimed for under any claim before 30 June. For example, if an employer has previously submitted three claims before 30 June, with a total of 50, 40 and 60 employees furloughed in each respective claim, the maximum number of employees that can be furloughed in any single claim after 1 July is 60 (though certain employees, such as those returning from statutory family leave, will not count towards this total).
- Since 1 July, employers have not been able to claim for periods that straddle calendar months. So, in the above example, one claim had to be made for the period to 30 June and another for the post 1 July period.
- Generally, a claim period must be for a minimum of 7 days (though there are occasions when it may be less).
- Employers will need to calculate and submit to HMRC employees' usual hours, and the number of hours actually worked/not worked for the claim period in question. This means that, before submitting a claim, employers will need to know the exact number of hours an employee has worked and not worked, which may limit employers' ability to submit claims before the end of the claim period. There are also complicated rules regarding how an employee's "usual hours" are calculated, depending on whether they work fixed or variable hours. For further details, see Steps to take before calculating your claim.
When combined with the gradual phasing-in of employer contributions to furloughed employees pay (see "How has the furlough scheme changed since 1 July?" above), there are concerns that the above features (and others) of the flexible furlough scheme render it so complicated that employers may be put off from applying for it. If you are in doubt about how to submit a claim and/or how to perform the calculations involved, it is advisable to check the Treasury Direction or seek legal advice if necessary.
When will I receive the money to pay my employees?
HMRC has committed to pay within six working days of a claim being submitted according to the Claim Guidance. HMRC has asked employers not to contact unless they have not received payment more than ten working days after submitting their claim.
How long will I be able to claim for?
The scheme will end on 31 October 2020. From 1 November 2020, employers may be able to access the Job Support Scheme instead. See the Job Support Scheme FAQs below.
Do I have to pay the difference between what the Government pays and the employee's full salary?
No. The employer can choose to fund the difference but does not have to. Since 1 August 2020, the Government requires employers to share the cost of salaries under the scheme (see "How has the furlough scheme changed since 1 July?" above) but there will still not be a requirement to top up to full pay.
What happens to holiday for employees on furlough leave?
Holiday continues to accrue in the usual way during furlough, and your employees can take, or be required to take, holiday in the same way as if they were working normally. However, the guidance now makes it clear that employees will be entitled to their full pay for any periods taken as holiday, so if you agree to or require holiday to be taken during furlough leave you would have to top up the furlough pay to full pay for that period.
Do I have to pay national minimum wage?
No. This means that even if an employee's reduced salary would fall below the NMW you would not have to top up their pay. However, if they are undertaking training during the leave then you would need to ensure that the furlough payment is sufficient so that NMW is paid for the time spent on the training.
Business has reduced significantly but some of our team are still busy. To make it fair can I furlough half the team for a period and then rotate with the other half?
Under the original scheme, employees had to be furloughed for a minimum period of 3 weeks at a time. Since 1 July, there has been no minimum period for which an employee must be furloughed. Therefore, provided employees are eligible to be placed on flexible furlough (see "How has the furlough scheme changed since 1 July?" above), and subject to obtaining the employees' agreement in relation to their working arrangements, teams can be rotated and otherwise asked to work flexibly without limitation.
Will our share plans continue as normal when employees are furloughed?
Some HMRC tax sponsored share plans require that employees satisfy a minimum working time commitment. This is particularly relevant for Enterprise Management Incentives (EMI) which are popular with high growth entrepreneurial businesses. Since a furloughed employee may no longer meet the working time requirement, there is a risk that their outstanding EMI options will be disqualified. Representations are being made to HMRC to provide a concession given the circumstances, to ensure these options continue to benefit from the tax incentives.
Questions also arise for Save As You Earn (SAYE) and Share Incentive Plans which operate through deductions from salary. As a furloughed employee will have a reduced salary, the employee may want to adjust the contributions they make to the plans. This will be problematic under SAYE where contributions must be made at a fixed rate throughout the savings period and so cannot be changed. As an alternative, a SAYE participant may be able to take a savings holiday for up to 12 months.
How do I end employees' furlough?
If a furlough agreement is in place, the employees' furlough ends in accordance with the terms of the agreement. If there is no agreement in relation to how to end furlough, by giving notice to the employee that they are required to return to work and when. Notice should be reasonable and in writing and employers should consider if any associated requirements are necessary such as health and safety consultations, reasonable adjustments etc.
What happens to an employee's pay when their furlough ends?
Employees' pay and other conditions should return to normal i.e. the same as they received pre-furlough. If employers wish to provide anything less than full pay, they should consult employees and reach a written agreement.
How do I choose who should return to work?
Asking for volunteers might be the best option but if there are not enough volunteers, or not enough volunteers in the different functions that may be required to run the business, you might need a mandatory selection system. You should consider potential discrimination or procedural/fairness issues when selecting which employees will return to work and think about allowing vulnerable employees or those with caring responsibilities to continue working from home or to remain on furlough if appropriate. Since 1 July, employees have been able to return on a part-time or flexible furlough arrangement (see "How has the furlough scheme changed since 1 July?" above).
Coronavirus Job Retention Bonus
What is the Coronavirus Job Retention Bonus?
Employers may be eligible to receive a taxable "bonus" of £1,000 per employee who was previously furloughed under the Coronavirus Job Retention Scheme and remains employed at 31 January 2021.
Which employers can claim the Coronavirus Job Retention Bonus?
Any employer which has furloughed employees and made an eligible claim for them through the Coronavirus Job Retention Scheme will be eligible to claim for the Coronavirus Job Retention Bonus, provided that the employee eligible criteria set out below are met. However, if an employer has had to repay any amounts received under the Coronavirus Job Retention Scheme in respect of a particular employee, for any reason, they will not be eligible to claim the Coronavirus Job Retention Bonus for that employee. Employers may make a claim under the new Job Support Scheme and remain eligible for the Coronavirus Job Retention Bonus.
Which employees can an employer claim for?
- For whom the employer made an eligible claim under the Coronavirus Job Retention Scheme (employers are precluded from claiming the Coronavirus Job Retention Bonus in respect of any employees for whom they made an incorrect claim);
- was continuously employed by the employer from 1 November 2020 – 31 January 2021;
- who is not serving notice (contractual or statutory) on 31 January 2021 (including notice of retirement); and
- who was paid the "minimum income threshold" by their employer (see below).
Note the Coronavirus Job Retention Bonus is not limited to employees. Employers can also claim for office holders and workers, provided the other criteria are met.
What is the "minimum income threshold"?
To be eligible, employers must have paid the relevant employee a total of at least £1,560 (gross) in aggregate in respect of the tax months of:
- 6 November to 5 December 2020;
- 6 December 2020 to 5 January 2021; and
- 6 January to 5 February 2021.
The employee must also have been paid at least one payment of taxable earnings (of any amount) in each of the above tax months.
When can employers claim the Coronavirus Job Retention Bonus?
Applications will be able to be made between 15 February – 31 March 2021. Further guidance on how to access the online service will be made available from the end of January 2021.
Job Support Scheme
What is the Job Support Scheme?
There are two variations of the JSS –"JSS Open" for those businesses that are allowed to remain open but are struggling due to the pandemic, and "JSS Closed", for businesses that have been required to close as a direct result of restrictions set by one of the four governments of the UK. JSS Closed does not apply, however, to businesses required to close by public health authorities due to specific workplace outbreaks of the virus. Under JSS Open, employers will be able to claim a grant towards the cost of paying employees when they are not working, provided there is sufficient work for employees to work at least one-fifth of their normal working hours. It is not yet clear whether there will be any requirements on what that "work" must involve (for example, whether it must be the employee's normal job, or whether employers can provide employees with alternative work).
Is my business eligible?
All small and medium size businesses are automatically eligible for the scheme. The Government has not yet specified who small and medium size businesses are for this purpose. However, it is likely to be employers who satisfy two out of three of the following: (1) turnover of less than £25 million; (2) fewer than 250 employees; and (3) gross assets of less than £12.5 million.
Large businesses may also be eligible, provided that they meet a financial assessment test, known as a Financial Impact test. If the employer's turnover has remained equal or has decreased compared to the previous year, they will qualify.
Employers of any size need a UK bank account and a UK PAYE scheme in order to claim the grant. Employers do not need to have previously used the Coronavirus Job Retention Scheme.
Which employees can I claim for?
Employers can claim for any employees who were on payroll (in other words, for whom an RTI submission was made to HMRC) on or before 23 September 2020.
For the first three months of the scheme, employees must work at least one-fifth of their usual working hours unless you are required by law to close your business (in which case, see 'What if I am required by law to close my business'). After the first three months of the scheme, the government will consider whether to increase this threshold.
For salaried or fixed hour employees, normal working hours will be assessed by reference to their contractual hours. It is not yet clear whether employers will be able to claim grants under the scheme for zero hour workers, or the extent to which employees must actually perform any duties in exchange for pay.
Employees can be moved on and off the scheme, and their working hours can be changed (provided they are not reduced below one-fifth of normal working hours) as long as each short time working arrangement lasts for a minimum of seven days at a time.
What can I claim for?
For every hour of their normal working hours that an employee is not working, an employer can claim a grant of 61.67% of their usual wage, subject to a cap of £1,541.75 per month per employee. The grant will not cover Class 1 employer NICs or pension contributions, which remain payable by the employer, and the employer will remain liable in relation to NICs and income tax calculated by reference to the total amount paid to the employee, irrespective of whether the money came from a scheme grant or from the employer. The employer must contribute 5% of the usual pay in respect of the non worked hours in order to be eligible for the grant.
Do I need to pay employees when they are not working?
In order to claim the grant under JSS Open, employers must pay employees 5% of their usual wage for every hour of their normal working hours which is not worked.
Employers may top up an employee's pay for hours when they are not working, but it is not a requirement of the grant scheme that they do so beyond the 5% mandatory contribution. In all circumstances, employee consent must be obtained in writing and in accordance with normal employment law principles for any reduction to their normal pay.
What if I cannot provide all of my employees with enough work?
If you cannot provide employees with sufficient work, and cannot afford to continue paying employees when they are not working, then redundancies may be your only option. You should seek specialist employment law advice urgently.
Can I dismiss employees by reason of redundancy and claim a grant in respect of them under the JSS?
No. If you are claiming for a contribution under the JSS towards an employee's wages then you cannot make that employee redundant or give notice of redundancy. If you wish to make an employee redundant, you must first bring them off the JSS, and then follow the appropriate redundancy process.
Can I make capital distributions (such as dividends) whilst I am claiming a grant from the JSS?
The current guidance states that the Government expects large employers not to make any capital distributions whilst claiming a grant from the JSS. It remains unclear whether this will be prohibited.
How long will the JSS last?
The JSS will be in place until at least 30 April 2021.
Can I claim the Coronavirus Job Retention Bonus as well as sums under the JSS?
Yes, provided you meet the eligibility criteria for both – see "What is the Coronavirus Job Retention Bonus?"
Do I need to have participated in the Coronavirus Job Retention Scheme in order to access the JSS?
No, neither the employer nor the employee needs to have claimed under the Coronavirus Job Retention Scheme in order to access the JSS.
What if I am required by law to close my business?
The Government has announced an expansion to the Job Support Scheme (the "JSS Closed") [see "Job Support Scheme FAQs" for further information] for businesses whose premises are legally required to shut as part of local or national restrictions (i.e. restrictions set by one or more of the four governments in the UK). JSS Closed does not apply, however, to businesses required to close by public health authorities due to specific workplace outbreaks of the virus. Under JSS Closed, employers will receive grants to pay the wages of staff who cannot work.
What payments are available?
The Government will pay eligible employers two thirds (67%) of each eligible employee's salary, up to a maximum of £2,100 a month.
When will payments become available?
As with the Job Support Scheme, JSS Closed begins on 1 November 2020 and will be available for 6 months until 30 April 2021, with a review point in January.
Payments will be made in arrears via HMRC. The online claims service will be available from early December.
Will employers have to contribute?
Employers will be required to cover employees' NICs and pension contributions, but will not have to contribute towards wages (though they may top up if they wish).
Which employers are eligible?
Employers can only claim the grant while they are subject to restrictions that legally require them to close. This includes businesses that are required to provide only delivery and collection services from their premises. Note that employers forced to close by local public health authorities as a result of specific workplace outbreaks will not be eligible.
There is no requirement for employers to have previously used the Coronavirus Job Retention Scheme [see "Coronavirus Job Retention Scheme FAQs" for further information]. Employers will be expected to agree changes to the employee's employment contract with the employee, and to notify them in writing that they intend to access JSS Closed.
Large employers will be expected not to make capital distributions (e.g. dividend payments, share buybacks etc.) while accessing JSS Closed.
Which employees are eligible?
Employers can only claim under JSS Closed for employees who have ceased work for a minimum of 7 consecutive days. Employees cannot be made redundant or put on notice of redundancy during the period for which their employer is claiming under JSS Closed for them.
To be eligible, employees must also have been employed on their employer's payroll as of 23 September 2020 and an RTI submission must have been made to HMRC on or before that date.