Whilst there is a constant influx of news surrounding COVID-19, it can become increasingly confusing. This blog has been written to tell you all you need to know about the Coronavirus Job Retention Scheme.
The scheme is available to all UK employers that have a PAYE scheme that started on or before 19 March 2020. The scheme covers part of an employer’s salary when they would have otherwise been laid off, this is known as ‘furloughing’. Any employment contract types (full-time, part-time, agency, flexible, zero-hour) can be included in the claim.
To access the support, employees are ‘furloughed’ by their employer, meaning they cannot work but are still on payroll. Only employees that have been on payroll on or before 19 March 2020 who have received pay in 2019/20 can be covered. HMRC will pay 80% of a furloughed employee’s salary up to £2,500 per month, with associated employer NICs and minimum automatic employer pension contributions on the subsidised wage. Furloughed employees are not able to carry out work during their furlough and there are also rules surrounding volunteer work and training.
The following are the general requirements for making Coronavirus Job Retention Scheme claims:
- the employer must agree with the employee that they are a furloughed worker.
- employees must be notified that they have been furloughed.
- employees must be furloughed for a minimum of three weeks.
- the employee cannot do any work for the employer that has furloughed them.
- the scheme allows claims for 80% of wages, up to a maximum of £2,500 per month per furloughed employee.
- separate claims are needed for each PAYE scheme.
- only employees who were on the PAYE payroll on or before 19 March 2020 may be furloughed.
- an HMRC RTI submission notifying payment in respect of the employee claimed for must have been made on or before 19 March 2020: and
- the employer must have a UK bank account.
Most employers with full-time or part-time employees on net salaries will need to make the following calculations for the claim period:
- total amount being paid to furloughed employees – 80% of your employee’s wages up to a maximum of £2,500 a month per employee
- total employer NICs
- total employer pension contributions (up to 3%)
Here is an example:
An employee who has been working for an employer for many years is paid a fixed gross monthly salary of £2,400 per month, with the last payment received on the last day of February 2020. The employee has agreed to be placed on furlough from 21 March 2020, at 80% of their salary.
The employer can claim a CJRS payment for Mach as follows:
£2,400 divided by 31 (days in March) = £77.42
£77.42 x 11 days (21 March to 31 March) = £851.62
£851.62 x 80% = £681.30
The maximum amount test is: monthly maximum of £2,500 divided by 31 days in March = £80.65
£80.65 x 11 days of furlough = £887.15. This employer’s claim of £681.30 is a lower amount, so this is the amount that may be claimed.
The employee’s gross pay at the end of the month is made up of £1,548.40 of salary funded by the employers for 1 to 20 March (20 days), plus £681.30 of pay funded by CJRS for the remaining 11 days of March. The employer NICs due on the total gross pay of £2,229.70 is £208.48
Step 1: £208.48 divided by 31 days in March = £6.73
Step 2: Daily employer NIC amount of £6.73, multiplied by 11 furlough days = £74.03.
The employer claims £74.03 for employer NIC’s due on the employee’s March pay.
How do I make the claim?
Employers must be PAYE registered before making a claim. Once the relevant information is gathered, the claim can be made at: https://www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme.
Payment will be received six days after making an application. As such, employers that want to receive their payment from the scheme before the end of the month need to submit their claim with six working days in advance.
Just note that HMRC are contacting employers on a random basis to check if a claim is valid.
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