On 20 March, the Chancellor reassured employers with the words “we will stand by you and we hope you will stand by your employees.”
Open to all U.K. employers with an active PAYE scheme as of 19 March, the Coronavirus Job Retention Scheme (CJRS) was launched, initially to cover the period March through the end of May. This was later extended until the end of June to enable employers to retain their employees by funding a period of layoffs referred to as furloughs, which, in this context from March until June, meant a minimum period of three weeks where the employee would be laid off from work duties. In return, they would receive pay at the minimum of 80% of their usual wage or salary to a monthly capped amount of £2,500. The employer, in turn, could reclaim this amount from the U.K. Government.
Usual wages would refer to fixed pay where the pay does not change in relation to the hours worked by the employee or variable pay.
Amounts that could be included within pay (both fixed and variable) included the following:
- Regular wages or salary paid to the employee
- Non-discretionary payments for hours worked which include overtime
- Non-discretionary fees, commission payments
- Piece-rate payments
The emphasis on the concept of discretionary is important to note as amounts that could not be included were payments that were the following:
- Had been made at the discretion of either the employer or client
- Discretionary bonus and commission
- Non-cash payments
- Non-monetary payments such as Benefits in Kind (BiKs), which also extended to include those provided under a salary sacrifice scheme
As for salary sacrifice, the 80% is based on post sacrifice pay and not pre-sacrificed pay. A salary sacrifice arrangement is a contractual reduction to pay in return for a non-cash BiK. It is not a deduction to pay, even where the employer may display it as such on a payslip.
Fixed pay calculations are based on the final period that ended on or before 19 March. For variable pay, two calculations were needed to determine the amount payable. The amount claimed was based on the higher figure of either the following:
- The average pay for the 2019-2020 tax year
- The pay of a corresponding pay period in 2019-2020
Before a period of furlough can begin, an agreement must be reached between the employee and employer, which the employer must confirm in writing and retain in its records for five years.
National Minimum Wage, Training Hours
During the period of furlough, the employee is not working, so the requirement to ensure that the National Minimum Wage (NMW) is being paid is one less issue for the employer to contend with. However, an employee can take part in training during their time on furlough and training hours do count as working time for NMW purposes. In the event the 80% is insufficient to cover the time spent on training, the employer will need to top up (increase) the employee’s pay.
Family Leave, Statutory Payments
Family related statutory leave can apply for an employee on maternity, adoption, paternity, shared parental leave, and (since April 2020), parental bereavement leave, as well as unpaid parental leave. On returning from leave, the employee’s pay should be based on either their normal contractual salary—for fixed pay employees—or the higher of figure as mentioned previously for variable pay workers.
The same rules apply for an employee returning form a period of sick leave.
All types of employment are covered by the CJRS: full-time, part-time, casual, zero hours, agency workers, and single director-owned companies. This aimed to be as fully inclusive as possible with the key requirement being that the employee needed to have had a payment submitted on an RTI (Real Time Information) submission on or before 19 March (the day before the scheme was announced) to be included within a claim.
The first lesson we all had to learn was that the claim calculation process was different than most (if not all) processes encountered within payroll.
CJRS: The Second and Final Phase
As from 1 July, the CJRS has changed and we know it will end on 31 October 2020.
Furlough periods, as we know and understand them, have come to an end. There is no minimum period anymore. Employees can be brought back in to work on a part-time basis and work any number of hours and shift pattern while being furloughed for the remainder of their usual working hours.
However, an employee could only be brought forward into the second phase of CJRS and furlough (of any type) from 1 July when they have been previously subject to a three-week period of furlough. Equally, employees can remain on full furlough or can return to work as normal.
While there is no longer a minimum furlough period, there is a minimum claim period of seven days. Previously, an employer could choose what claim period suited them, so long as it included all employees who were to be included within that period and it did not overlap with another claim period.
From July, and in recognition of the fact that funding is to change between July and October, all claim periods must have been made within the calendar month.
The number of employees who can be included in a claim from 1 July must not exceed the maximum number who were claimed in a previous claim ending on or before 30 June. There are exceptions where employees have returned from a period of family leave, military reservists returning to their workplace, or employees included within a TUPE transfer (Transfer of Undertakings [Protection of Employment]).
In July, CJRS will continue to fund the hours not worked up to 80% of wages to a cap of £2,500. From July, employers will be required to pay for the hours worked by the employee.
From August, CJRS will continue to fund 80% up to a cap of £2,500 and employers will be required to pay employer NICs (National Insurance Contributions) and pension costs for the hours not worked, as well as for the hours worked. CJRS will no longer fund the employer on-cost element.
From September, claims will be for 70% of wages, to a cap of £2,187.50, for the hours that the employee does not work. The employer will pay 10% to make up the shortfall to 80% to a cap of £2,500 plus the employer on-costs for NIC and pension.
From October, claims will fund 60% of wages to a cap of £1,875 for the hours the employee is not required to work, the employer will be expected to contribute 20% up to the 80% and cap of £2,500 plus the on-costs of employer NIC and pension.
The cap will be proportional to the hours not worked.
Calculating Usual Hours for CJRS Claims
One of the most challenging concepts of flexible furlough has been the calculation of an employee’s usual hours. It is an essential one though, as employees are required to record the actual hours worked as well as the furloughed hours for each claim period.
Claim calculations are made using calendar days, which include non-working days, a concept that for many is foreign. However, the data used is historical as we saw in the first phase. Workers on fixed hours use the hours the employee was contracted for at the end of the last pay period ending on or before 19 March 2020.
For variable hours workers, two calculations continue to be needed to establish which is the higher of: the average number of hours worked in the tax year 2019 to 2020, or the corresponding calendar period in the tax year 2019 to 2020.
All records of the calculation of usual hours, furloughed hours, and working hours must be retained for a period of six years. Where a new agreement is reached with an employee for returning the employee to work under flexible arrangements, written confirmation needs to be issued by the employer. This can be a letter or email and will need to be retained for five years.
Plan for Jobs
During his Summer Statement, the Chancellor, while acknowledging that there would always be calls to extend the scheme, reconfirmed the CJRS would end on 31 October. However, that is not to say that the U.K.’s Government support will end. He went on to reveal the government’s plan for jobs, which focuses on the need to support, protect, and create employment.
There are many facets to this plan, but the Job Retention Bonus will see employers receive a bonus of £1,000 when they employ a previously furloughed employee continuously through to the end of January 2021 earning an average in each month of £520 (the Lower Earnings Level) per month. Further details have yet to be revealed.
For now though, the Chancellor stands by his reassurance to employers: “Our message to business is clear: if you stand by your workers, we will stand by you.”
And So It Goes On
Our Chancellor likes his straplines (marketing slogans). History will be the judge as to whether these measures will be successful. In a call to encourage people to get out of their homes and in support of the hospitality industry, the Chancellor went on to announce a scheme “never tried in the U.K. before” where the Government funds a discount of 50% to a maximum of £10 per head for everyone who eats out during August on a Monday, Tuesday, or Wednesday at participating businesses.
To be creative, he added: “Eat out to help out.”
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Samantha Mann, MAAT, MCIPPDip, is the Chartered Institute of Payroll Professionals’ (CIPP) Policy and Research Technical Lead.