The various grants and schemes announced by the UK government continue to evolve on a weekly – even daily – basis. The graphic below summarises what’s available. Please read – or at least skim – to the FAQs at the bottom of the page.
JRS opened for claims on 20 April.
The scheme will continue in its current form until the end of July, after which employers will be expected to contribute to the wage bill. The rules will also change so employers can able to bring furloughed staff back to work part-time.
You’ll receive the money within 6 working days of making your claim.
Coronavirus Job Retention Scheme (JRS)
- This is the 80% grant that everyone is asking about. Only staff employed under PAYE on 28 Feb 2020 will qualify.
(15 April update – if you took on staff up to 19 March and notified HMRC then you can also claim for them. In practice, unless the person was weekly-paid and was declared on a weekly payroll return on or before 19 March, new starters still won’t qualify.)
- Understand what furloughing means. It’s all about keeping people in a job.
If you have good staff that you want to keep, furloughing is the way to go.
- You must tell your staff that you are furloughing them – here’s a template letter.
Employees must be completely inactive, so JRS does not apply to employees on reduced hours. Furloughed staff must not provide services or generate revenue for the employer.
- You can furlough some or all of your workers.
- You must pay your employee the lower of 80% of their regular wage or £2,500 per month. You can choose to top up an employee’s salary beyond this but that is voluntary and the top-up won’t be reimbursed.
- 3 weeks is the shortest period for a furlough claim. If you furlough someone for a shorter period, you won’t be able to reclaim the wages. You can bring someone back from furlough to carry out some work, and then re-furlough them (“rotational furloughing”).
- Staff retain all their normal employment rights including holiday pay, which will continue to accrue during the period of furlough. Equality laws still apply and employers must take care not to discriminate when selecting staff for furloughing.
- You must tell your staff that you are furloughing them – here’s a template letter.
- For full and part time salaried employees, the grant paid under JRS will be 80% of the actual salary before tax, plus employers’ NIC and the legal minimum pension contributions.
Sammy earns £1000 per month before tax (gross)
Employer’s National Insurance Contribution is £39
Employer’s pension contribution is £15
Total monthly cost to the employer is £1,054.
The grant is payable on this total cost.
In this case, the employer can claim £843.20 per month (80% of £1054).
Sammy’s actual take-home (net) pay will depend on their tax code.
- For employees whose pay varies, including those on zero hours contracts, the 80% is based on an average of their earnings from the 2019/20 tax year.
- You should continue to pay your staff. Otherwise you’ll be in breach of contract. So you may have to pay first and then claim it back.
- The scheme will be open until October, although the Chancellor has said it will change over the summer and employers will have to shoulder some of the cost.
- Limited company directors, who are employees of their own companies, are eligible. Whilst furloughed, directors must only carry out statutory duties like accounts and payroll – any commercial or revenue-generating activities will fail the JRS requirements. This includes marketing, and hiring and managing subcontractors so don’t do it!
Either you are shutdown, or you are providing services and receiving income. There’s no in-between. If the income isn’t enough, that’s a cashflow problem and you should look at CBILS or BBL below.
We expect stringent anti-fraud measures and we warn all business owners that if they abuse the system, they should expect public naming and shaming for what is, after all, illegal profiteering from a national crisis.
HMRC has put in place an online portal for employees and the public to report suspected fraud.
Prosecution and heavy penalties will follow for those who try to rip off the government in this way.
- Gov.uk Coronavirus guidance for employees
- Gov.uk Coronavirus JRS claims – guidance for employers
- HMRC YouTube channel –Coronavirus support
How to Claim under JRS
The claim process is simple. The calculations are not. Things to remember:
- You can’t claim back the employer’s NI if you are claiming the Employment Allowance.
(Most small businesses won’t use the full £4000 Employment Allowance in 2020/21. Since they effectively don’t pay employer’s National Insurance, you can’t claim it under CJRS.)
- If you are topping up the wages above 80%, you can’t claim the entire employer’s pension contribution. Check the calculation guidance for how to work it out – it’s not a flat 80% of the pension contribution.
- Ditto for employer’s NI, should you be able to reclaim it.
HMRC has released a step by step guide for employers. If you are making your claim yourself, read it carefully and check you’ve got everything you need before you start. You can now save your part-completed claim and return to it later, as it will time you out after a short (c.15 min) period of inactivity.
20 Apr We succeeded in getting some claims registered today, and the actual claim process itself was very simple. Hats off to HMRC!
The same cannot be said for some of the calculations, especially where staff are furloughed partway through a pay period, and/or are in a workplace pension and/or receive employer top-up. Read the calculation guidance several times, get your head round it, gather your figures and start calculating. And hope that HMRC don’t move the goalposts again.
Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS)
- You may have cashflow problems. Speak to your bank. As well as their normal overdrafts and loans, they will be offering Coronavirus Bounce Back Loans (BBL) and the Coronavirus Business Interruption Loan Scheme (CBILS) – a loan that is interest-free for 12 months.
“To qualify for either type of loan, your business must have a business plan and a borrowing proposal that the lender would accept if it were not for the Covid-19 pandemic. In other words, your business must be viable in normal trading circumstances” [-FreeAgent].
Statutory Sick Pay
This includes a business rates holiday for retail, hospitality and leisure businesses; deferring VAT payments (but VAT returns must still be filed); small business grant scheme etc. Commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction. The government’s Business Support website now has a dedicated Coronavirus section, detailing all the various financial support packages available. Everything in one place.
- New! Simple questionnaire to signpost you to the help that you qualify for https://www.gov.uk/business-coronavirus-support-finder
- Personal finances – MoneySavingExpert
- If you owe personal or business taxes, ask HMRC for a “Time to Pay” arrangement.
The 80% grant is calculated by referring to a previous pay period (Feb or earlier). Increasing employee wages now has no impact on claims under this scheme
We have clients – from pubs to preschools – that have genuinely lost all their income overnight.
Anyone wanting to take advantage of this national emergency needs to take a good hard look in the mirror.
Frequently Asked Questions
How do I get the money to pay my staff?
You must pay your staff upfront and then get reimbursed. HMRC will pay direct into your business bank account.
Will J&K claim for me?
No. We have neither the capacity nor the authority with HMRC to do so for all our clients.
For most of our clients, we provide a filing-only service. This means we can file your normal payroll returns to HMRC, but we don’t have the power to do anything else.
We will of course give you the info needed to make your claim.
What if I can’t afford to pay my staff?
You should seek financial support from your bank e.g. BBL or CBILS.
When do I pay my staff?
Furloughed staff should get their wages on their normal payday. Any changes without their agreement would be a breach of their contract of employment.
Can I backdate it?
You can only backdate to the point that work stopped. E.g. hospitality and leisure businesses closed after 20 March. You must pay staff for the hours that they worked up to 20 March. They are then furloughed from 21 March.
Do I have to furlough everyone?
You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake ANY work for you.
If you have some work available, you may choose to furlough part of your workforce while others carry on.
The point of the scheme is to keep people in jobs who would otherwise be made redundant due to the Covid-19 crisis.
How much do I pay?
You must pay employees the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
Can my staff work elsewhere?
If they normally work 9-5 for you, they shouldn’t be working for anyone else during those contracted hours. What they do in their own time is up to them.
They may already have another job and they can be furloughed for each job.
A furloughed employee can take part in volunteer work, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.
What about holiday pay?
Furloughed staff continue to accrue holiday. If employees take holiday whilst furloughed, this must be paid at their FULL rate, i.e. topped up by the employer to 100% of their normal wage. This includes Bank Holidays, of which we’ve just had 3!
Together we face an unprecedented situation, one in which 90% of us will do the right things:
- Don’t stockpile loo roll or anything else.
- Check on your vulnerable neighbours.
- Practise social distancing.
- Wash your hands.
- Be kind.