The UK Government has announced a slew of financial support initiatives to help businesses and workers in the UK survive the Covid-19 crisis and the consequent lockdowns. Coronavirus Job Retention Scheme – CJRS – is one of these initiatives. Businesses struggling during this period can use this scheme to ensure continued employment for their staff.
Understanding the whys and wherefores of this scheme is necessary to figure out whether your organisation is eligible and what support you can ask from the government. This article answers the most common questions related to the CJRS.
Note: The purpose of the below article is to highlight the key information related to the CJRS scheme, and it does not constitute business or legal advice. For detailed information on the topic, please read HMRC’s Guidance.
1. What is CJRS? Why did the UK Government launch it?
The Coronavirus Job Retention Scheme is created to support businesses impacted by the Covid-19 situation and the lockdowns – the aim is to protect the UK economy and save the jobs for the employees.
According to the government guidance, CJRS is “a temporary scheme in place for 4 months starting from 1 March 2020, but it may be extended if necessary, and employers can use this scheme anytime during this period.”
In short, CJRS allows businesses to furlough their employees and claim 80% of wages up to a maximum of £2,500 per month per furloughed employee. Employers are expected to pay NI and pension contributions and can claim for these also.
2. Who is eligible to apply for CJRS?
Businesses, charities, recruitment agencies (for workers paid through PAYE), public authorities, individuals, overseas organisations, and other entities with UK payroll can apply for the scheme. In order to be eligible, the entity needs to have in place:
- a PAYE payroll scheme started on or before 19 March 2020
- PAYE online enrolment
- a UK bank account
3. Is the furlough arrangement available for all types of employees?
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:
- full-time employees
- part-time employees
- employees on agency contracts
- employees on flexible or zero-hour contracts
The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
4) How much can my business claim as an employer?
CJRS allows eligible businesses to claim the salary of a furloughed employee equal to the lower of 80% of their regular salary as at 28th February 2020, or £2,500 per month. In addition, it covers the associated Employer National Insurance Contributions (NICs) and minimum Automatic Enrolment employer contributions.
HMRC’s guidance on the subject outlines how the 80% is to be calculated.
5) Does the employer have to pay the remaining 20% or salary deficit amount for the furloughed employees?
The CJRS will pay either 80% of your employees salary, or £2,500 – whichever amount is lower. As an employer, you are under no obligation to supplement the pay of furloughed employees – you may choose to do so.
However, if you choose not to, this decision has no bearing on your CJRS claim. If you do decide to bear the cost for the rest of the salary, it cannot be recouped via CJRS. Your decision will be based solely on the financial health of your organisation and your business approach to the situation.
6) What if some of my employees refuse to accept furlough arrangements?
Agreement of the employees is a must to initiate the furlough process. You cannot place an employee on furlough without their agreement. However, if the alternative to this is making the employee redundant, you can lay out the options in front of them. If you choose to make such an employee redundant, their rights protecting them from an unfair dismissal will come into play, and you will need to proceed with a fair dismissal process.
The CJRS guidance to employees says: “If your employer asks you to go on furlough and you refuse you may be at risk of redundancy or termination of employment, depending on the circumstances of your employer. However, this must be in line with normal redundancy rules and protections.”
7) Can my employee work for me while on furlough?
One of the key conditions of the scheme is that furloughed employees cannot work for your business or any associated organisations. The government wants to make sure that furloughed employees are not working in situations that:
- Make money for their employers or companies linked or associated with their employer
- Providing any services to their employers or companies linked or associated with their employer
However, the employee can undertake other employment if the contract allows. In such cases, the employee must be able to return to work if the employer decided to stop furloughing them.
HMRC’s guidance to employees asks them to report to the government in case the employer is asking them to work during the furlough period. So companies must be careful that the furloughed employees are not working during the furlough period.
The furlough has to be a minimum of 3 weeks, and employers can take a roll on and roll off approach to the furlough arrangements.
8) How does the CJRS impact temporary agency workers?
Agency workers paid through PAYE, including ones employed by umbrella companies, are eligible to receive support through this scheme. The furlough has to be agreed between the agency and the worker and discussion with the end client is also advised.
The same rules apply to agency workers – they are not allowed to work for, through or on behalf of the agency that ha furloughed them during the furlough period, including performing such work through or on behalf of the agency for the agency’s clients.
If the agency supplies clients with workers employed by an umbrella company that operates the PAYE, the umbrella company and the worker will need to agree on whether to furlough the worker or not.
9) How can my business access the CJRS?
On 20 April 2020, HMRC opened the reimbursement claim portal (link can be found here, and you will need your Government Gateway user ID and password you got when you registered for PAYE online to access it) that you can use to apply for the grant.
If your application is successful, HMRC aims to pay you the amount within 6 days of the application. Until you receive the payment, your company is expected to pay the wages to the employees. If you are unable to do so, you can consider accessing other types of financial support provided by the government.
For step-by-step details on how to claim, check HMRC’s guidance on the topic.
10) Will HMRC audit the CJRS claim? How can I prepare for it?
HMRC can refuse to pay your claim if it has a reason to believe that it is invalid. Also, HMRC can audit the claims retrospectively. In case it deems your claim to be fraudulent or based on incorrect/inaccurate information, HMRC can recover the funds and may also pursue criminal proceedings in case they suspect deliberate fraud. HMRC suggests that you maintain a copy of records related to:
- the amount claimed and claim-period for each employee
- the claim reference number for your records
- your calculations in case HMRC need more information about your claim
During an audit, HMRC could take the following steps:
- Record of furlough consent from your employees
- Interview your employees to uncover any work for the company while on furlough
- Review email records, payroll records, vehicle tracking data or onsite CCTV details to confirm your claims
- In order to be prepared for a possible audit, you must also maintain all the records for at least 6 years.
Get support for your CJRS application
There is no doubt the Coronavirus Job Retention Scheme can prove to be an important lifeline to employers and workers need to ride out this difficult period. However, many businesses are struggling to take the benefit of this scheme owing to its complexity. If you require any support for preparing your CJRS claim, please feel free to get in touch with us – we can help you:
- determine your eligibility for the scheme,
- prepare claims and documents for your firm,
- file claims on time and
- get your accounts up-to-date for the application
Please get in touch with us for more details.