Coronavirus: The Job Retention Scheme – Updated Information

Key Features of the CJRS

The CJRS enables the government to cover up to 80% of the usual monthly wage costs of any employee who is not required to work (‘furloughed’) for a continuous period of at least 3 weeks. There is a cap of £2500 per month for each affected employee, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

The grant will be open to all UK employers, including charities, recruitment agencies and public authorities provided they have a PAYE payroll scheme on or before 19 March 2020 and have a UK bank account. Payments can be backdated to 1 March 2020 with the CJRS running for 3 months, although the Chancellor has noted the scheme will be extended if necessary. Employers can only claim once every 3 weeks.

Grants are to be provided by HMRC once employers submit applications through an online portal. The portal for accessing the scheme will begin on 20 April, with payments starting on 30 April. Employers are not obliged to top salaries up to 100%, but should note the risk of employees suing for unlawful deduction of wages or breach of contract if they do not (unless otherwise agreed with the affected employee).

“Furloughed” Employees

The CJRS will be made available to employees on the payroll on or before 19 March 2020, including full-time and part-time employees, employees on agency contracts, and employees on flexible or zero-hour contracts, who are “furloughed”. To be eligible, furloughed employees cannot perform any work in the time they are furloughed, which must be a minimum of 3 weeks.

It is the employer’s decision as to which, if any, employees are placed on furlough. The employer should be mindful not to discriminate while selecting employees for furlough, although prioritising vulnerable workers such as those with health conditions or the over-70s is most likely justifiable. Employees who were employed as of 28 February 2020 and on payroll, and have been dismissed, voluntarily left or been made redundant after that and prior to 19 March 2020 can be furloughed if they are rehired. This applies even if the employee was not re-hired until after 19 March. There is no legal obligation on the re-engaged employee to re-pay any termination payment they may have received, this is a matter for agreement between the parties.

Unless an employer has a contractual right to lay-off staff, an employer will need the consent of the employee before placing them on furlough. The government has confirmed that not all employees need to be placed on furlough, and there is nothing in the guidance that would preclude employers from rotating employees on furlough (provided they abide by the minimum 3-week time block). If an employee works for more than one employer they can be furloughed for each job, with the cap applying to each employer individually.

Continuity of employment and holiday accrual will both continue while employees are furloughed. HMRC Customer Support have indicated that annual leave taken during furlough must be paid at full pay, although this is yet to be confirmed by official government guidance.

Calculating Wages

The grant will cover wage costs plus the employer’s NI contributions and the minimum automatic enrolment employer pension contributions. The grant will be based on the employee’s actual salary before tax, even if the 80% payment is below the national minimum wage. Fees, commission and bonuses cannot be included. When applications are made to HMRC, it is the responsibility of the employer to make the calculations on the amount to be claimed for.

For employees whose pay is irregular, the employer can claim based on the higher of the employee’s earnings in the same month of the previous year, or the employee’s average monthly earnings in the 2019/20 tax year. For employees who have been employed for less than a year, employers can claim based on their average monthly earnings since they started work. Employees who only started in February 2020 will have their earnings pro-rated.

Volunteer Work or Training

Furloughed employees can partake in volunteer work or training, provided it does not generate revenue. If workers are required to complete online training while furloughed, they must be paid at least the national minimum/living wage for the time spent training, even if this is above 80% of their subsidised wage.

Note that volunteering while on furlough is different from Emergency Volunteering Leave (EVL). EVL allows all workers (not just employees) to take statutory unpaid leave for maximum of 4 weeks volunteering in any 16 week block, provided they have been certified by an appropriate authority (i.e. the Department of Health or NHS). Employees who volunteer while on furlough are not subject to the same restrictions as for EVL and are still entitled to be paid through the CJRS while volunteering.