HM Revenue & Customs (HMRC) has published detailed guidance on the operation of the Coronavirus Job Retention Scheme (CJRS) from 1 July 2020 onwards, including examples of how to calculate claims for the new flexible furlough option.
The CJRS currently provides grants to employers covering 80 per cent of the usual wages of furloughed employees – who remain on the payroll but must not carry out any work – up to a cap of £2,500 a month, as well as employer National Insurance Contributions (NICS) and pension contributions.
However, from 1 July, employers will be able to make new flexible furlough agreements with employees that enable them to return to work on a part-time basis, while the employer will still be able to claim a CJRS grant for the hours not worked. Only employees who have been furloughed for a full 3-week period up to this point will still be eligible to be furloughed.
From 1 August, CJRS grants will cease to cover the costs of employer NICs and pension contributions in respect of furlough pay.
Then, in September, the value of CJRS grants will reduce to 70 per cent of furloughed employees’ usual wages, with employers required to top-up the remaining 10 per cent so that furloughed employees still receive 80 per cent of their usual wages, capped at £2,500 a month.
Finally, October will see the value of CJRS grants fall to 60 per cent of furloughed employees’ usual wages, with employers having to contribute the remaining 20 per cent.
Employers are responsible for calculating the correct amounts to claim from the scheme, with HMRC expected to take a hard line on errors that are not corrected quickly.
The new guidance walks employers through the various calculations needed to work out the amounts they need to claim in respect of furloughed employees in different circumstances over the remaining months of the scheme.
This includes information about:
- calculating flexible furlough claims;
- calculating employer NICs and pension contributions on hours worked and furlough hours;
- dealing with considerations around the National Living Wage (NLW) and National Minimum Wage (NMW);
- employees returning from parental leave;
- employees returning from Statutory Sick Pay (SSP); and
- the reduction in the value of the main grant in September and October.
To help employers deal with the potentially wide range of permutations, HMRC has published example calculations dealing with different situations.
Where employers find that they have overclaimed, they can report this as part of their next claim, which will be adjusted down to take the previous overpayment into account. HMRC says it is working on a mechanism to deal with circumstances where an employer has overclaimed but does not wish to make further claims. In the event of underclaims, employers should contact HMRC directly.
As part of the changes to the scheme, HMRC has also confirmed that claims for periods ending up to 30 June must be made by 31 July, while claims periods from 1 July onwards must begin and end in the same calendar month and last at least 7days. If an employee is furloughed in June and continues to be furloughed for their full hours in July, separate claims will need to be submitted, even if this differs from an employer’s own pay periods.