Coronavirus Job Retention Scheme (CJRS)
(or “Everything you wanted to know about furlough but were too scared to ask”)
Last Updated: May 17th, 2020
Extension of the Furlough Scheme
The government will provide funding to enable employers to continue to pay up to 80% of the salary for employees for whom there is no work. These employees must be placed on furlough (i.e. put on a leave of absence).
The furlough scheme will now run until at least 31st July 2020 in its present form. From August - End of October staff will continue to receive 80% but employers will be asked to pay a percentage of this and workers will be allowed to work part-time while on furlough.
More details are expected from the end of May.
What do I need to do first?
Identify who to furlough (put on a leave of absence). Agree this with your staff and make any changes to the employment contract. Take legal advice if needed. Write to each employee confirming they have been furloughed, and the date the furlough leave started, and make sure you keep a copy of the communication for five years. This is a precondition of the furlough scheme.
ACAS have produced a letter that you can use here: www.acas.org.uk/furlough-letter-template
Claims can be made from the date the employee finished work, even if this is before the date on the letter.
How much is furlough pay?
You can apply for 80% of the usual wage costs up to £2,500 per month, plus the related employers national insurance and minimum auto enrolment employer pension costs. You must pay at least the amount of wage costs that you reclaimed for each employee, although you are free to top it up to the normal wage if you wish.
For an employee on a fixed salary, this is based on the February wage.
For employees with a variable wage, the furlough pay is based on the higher of the:
same month’s earnings from the previous year
average monthly earnings for the 2019/2020 tax year
Overtime, fees, and compulsory commission payments can be included. Bonuses, commission, and non-cash payments can’t.
The minimum wage doesn't apply to the furlough pay, apart for any time the employee spends training.
How long is the furlough leave for?
Furlough leave must be for a minimum of three weeks per employee. An employee may be furloughed multiple times but for at least three weeks each time.
Who can be furloughed?
employees for whom there is no work
employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) provided they can’t work from home and you would otherwise make them redundant
employees unable to work because they are caring for someone (e.g. looking after children)
company directors with no work
people employed by individuals such as nannies
employees on sick leave that meet the other requirements, provided statutory sick pay is not also claimed for the same period.
Who can’t be furloughed?
employees on unpaid leave that started on or before 28 February
employees that were not employed by you on PAYE on 28 February (or in some cases 19th March)
anyone who is still working even if on reduced hours
How about if I am Director of my own company?
Where you have no work, the scheme is available for your PAYE earnings. The rules allow you to carry out minimum administrative duties but are very clear that you must not do work that you would carry out in normal circumstances in connection with generating revenue or providing services to or on behalf of your company. The decision by the board to furlough a director should be formally adopted as a decision of the company, noted in the company records, and communicated in writing to the Director involved.
The Online Portal for Claims
You'll find the portal here:
The reimbursement payments are expected to be made six working days after the application. Get your claims in promptly to make sure you receive the money in time for the end of the month payroll run. You may apply 14 days ahead of the payment date.
If we run your payroll, then we can make the claim for you, for a nominal fee.
If you are making a claim yourself:
Make sure you have collected together all the relevant information as the new portal has no save facility and will bounce you out after 30 minutes of inactivity.
You will need:
your employer PAYE scheme reference number
the number of employees being furloughed
National Insurance Numbers for the furloughed employees
Names of the furloughed employees
Payroll/employee number for the furloughed employees (optional)
your Self Assessment Unique Taxpayer Reference, Corporation Tax Unique Taxpayer Reference, Company Registration Number or Employer Name (as appropriate)
the claim period (start and end date)
amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
your bank account number and sort code
your contact name
your phone number
Good news-a save facility has now been added to the portal.
Calculating the Furlough Pay (the details)
HMRC have at last bought out the detailed guidance on this. They have also making available a calculator to assist with the calculations.
HMRC Calculator.
Broadly for monthly pay:
The gross will be 80% of the regular wages, or £2500 per month if lower. Where wages vary, they can be based on the 2019/2020 average before the start of the furlough period or the same period the year before (excluding discretionary payments such as commission and bonuses).
The NI is calculated by reference to the entire pay period, then time apportioned for the furlough days, then multiplied by the percentage of furlough pay reclaimed.
The minimum employer pension contribution due on qualifying earnings can also be reclaimed. First take the gross amount claimed (i.e. the 80% figure), deduct the minimum qualifying earnings figure (£520 a month for 2020/2021) and multiply by 3%
Of course, you can only claim amounts you actually have to pay. National insurance may be lower or even nil if you are entitled to the employment allowance; and pension contributions can only be claimed where your employee is enrolled in a pension scheme and you make contributions towards this.
Example calculations
A simple example:
Jane works for ABC Ltd. Her usual salary is £1875 per month, and she is a member of the auto enrolment pension scheme. She is on furlough leave from 1 April. The amount to be claimed is as follows:
Gross pay: £1875 x 80% = £1500
National Insurance: [1500 – 732 (the 2020/2021 NI threshold)] x 13.8% (NI rate) = £105.98 (assumes ABC Ltd is not entitled to any employment allowance for April)
Pension: [1500 – 520 (2020/2021 minimum qualifying earnings)] x 3% = £29.40
So in total, ABC Ltd can claim £1635.38 for Jane for April 2020.
A more complex example
Kyle is paid a fixed amount monthly of £2,400. He agrees to be furloughed by Alpha Ltd on 16 April 2020. Alpha Ltd chooses to top up his furlough pay to 100%. Kyle’s gross pay at the end of the month is £2,400. This is made up of £1,200 of normal wages funded by Alpha Ltd, in respect of 1 to 15 April (15 days), and pay for the furlough period of £1200 (£960 (i.e 80%) grant-funded and £240 (i.e. 20%) employer funded) in respect of 16 to 30 April (15 days).
First calculate the total national insurance:
£2,400 minus £732 (the amount of pay minus the relevant National Insurance contributions secondary threshold)
Multiply by 13.8% (this gives you the amount employer National Insurance contributions due on an employee’s total pay for the pay period)
Divide by 30 (the number of days in the pay period)
Multiply by 15 (the number of furlough days in the pay period)
Multiply by £960 / £1,200 (this is the furlough pay received for the furlough period divided by the total pay received for the furlough period) - this equals £92.07
Alpha Ltd can claim £92.07 in respect of the employer National Insurance contributions due on Kyle’s April pay. The total grant for employer National Insurance contributions cannot exceed the total amount of employer National Insurance contributions due to be paid.
Next calculate the pension contributions:
Start with £960, the gross pay grant amount.
Time apportion the lower level of qualifying earnings on a daily basis: 520 x 15/30 = 260
Deduct the lower qualifying earnings level from the gross pay grant amount and multiply by 3%
i.e (960 - 260) x 3% = £21.
In total, Alpha Ltd can claim 960 + 92.07 + 21 = £1073.07 for Kyle for April
How does Holiday Pay and Holiday Entitlement Work for Furloughed Workers?
Make sure you are aware of the rules so you don’t get caught out. The detailed government guidance is:
Government guidance on holiday
Holiday is accrued as normal
Holiday can be taken whilst on furlough, and where this happens pay should be topped up to the normal amount
Tip! Top up Bank Holiday days to normal pay, otherwise you will have to give your employee time for holiday later.
Where to find more information on Furlough
For our full information on this and all other Government help for Businesses take a look at:
Blitz Gooday’s Covid help pages
The government's guidance documentation is here:
Please note that the above is intended as a summary guide only. Please take further advice or check the detailed Government guidance before taking any action.
