Under the Coronavirus Job Retention Scheme (CJRS), all employers in the UK are able to access support to continue paying part of employees’ salaries who would otherwise have been laid off during the ongoing crisis. 

Furloughed workers are employees whose employers cannot cover staff costs due to coronavirus, and as such they have been asked to stop working but have not been made redundant. 

Such employers have been able to access support to continue paying part of their staff’s wages, in order to avoid redundancies and so they can retain their teams. 

To avoid fraud, there are expected to be cross-checks between the applications for grants against PAYE records for each employer. 

The CJRS launched on Monday 20 April, just a month after it was announced. The claim can be made up to 14 days in advance of payroll payments. However, only one claim can be made during a claim period, so it would be advisable to make the claim shortly before or during running payroll. 

What are the latest changes to the scheme?

The CJRS will close after 31 October 2020.  For any claim periods up to 30 June 2020, the last day that a claim can be made is 31 July 2020.

Employers will continue to be able to claim grants of up to 80% of their workers’ wages for the months of June and July. Employees who had never previously been furloughed had to be put on furlough at the latest by 10 June 2020 in order to be eligible for the grant. This is due to the minimum period of furlough required to be at least three weeks. The scheme will be closed for any new employees’ wages to be claimed from 1 July 2020.

From 1 August 2020, the level of grant will be reduced in stages every month, as more employees are expected to be able to return to work. To be eligible for the grant, employees must continue to receive 80% of their wages, up to a cap of £2,500.

The changes to the scheme from 1 July are set out below:

  • Until 31 July 2020, the government will pay 80% of wages up to a cap of £2,500 as well as employer national insurance contributions (ER NICS) and pension contributions for the employees’ furloughed hours.
  • From 1-31 August 2020, the government will pay 80% of wages up to a cap of £2,500. Employers will be required to pay ER NICs and pension contributions for the employees’ furloughed hours.
  • From 1-30 September 2020, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% of the total up to a cap of £2,500.
  • In October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% of the total up to a cap of £2,500.

Employers will continue to be able to choose to top up employee wages above the 80% total and £2,500 cap at their own expense if they wish. Employers would pay the ER NIC and pension contributions on any top-up wages.

The £2,500 cap will be proportional to the hours not worked.

Summary of changes:

 

Up to 31 July

August

September

October

Government pays:

80% wages up to £2,500

+ ER NIC + AEPC1

80% wages up to £2,500

70% wages up to £2,187.50

60% wages up to £1,875

Employer pays:

-

ER NIC + AEPC

10% wages up to £312.50

+ ER NIC + AEPC

20% wages up to £625

+ ER NIC + AEPC

Employee must receive:

80% up to £2,500 per month

80% up to £2,500 per month

80% up to £2,500 per month

80% up to £2,500 per month

1 AEPC – statutory minimum auto-enrolment pension contributions

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Overclaims and underclaims

HMRC has issued updated guidance on how to correct claims where the amounts claimed were either too low or too high. This also includes a new penalty regime for deliberate non-payment of overclaimed amounts.

Overclaimed amounts can be adjusted for within the next claim that is made or the claim can simply be deleted within 72 hours of submitting it, with a revised corrected claim resubmitted. 

If no further claims are to be made because no more employees are being furloughed, then claimants should contact HMRC directly in order to make arrangements to repay the claim that they are no longer entitled to. 

There is now also a requirement to notify HMRC if a grant has been overclaimed but not repaid. Failure to notify and repay overclaimed amounts may lead to penalties being issued and HMRC has issued a new penalties factsheet CC/FS48 that provides further details.

Notification of overclaimed grants that an employer is not entitled to keep must be done by the latest of:

  • 90 days after receiving the grant
  • 90 days after a change in circumstances that led to entitlement ceasing
  • 20 October 2020.

HMRC will make an income tax assessment based on the notification. However, if HMRC has not made an assessment, the amount should be included in the self-assessment or corporation tax return. For self-assessment, this will be the 2020/21 tax return and due date for payment is 31 January 2022. For corporation tax, the amount should be included in the accounting period it relates to and the due date for payment will be 12 months from the end of the accounting period.

For any underclaimed amounts, employers should ensure that they still pay their employees the full amount that they were due. Employees who were entitled to be claimed for for any claim periods up to 30 June 2020 and were left off can no longer be added to any claims made after 31 July 2020. Other errors made on claims can still be amended after 31 July.

The only way to adjust any underclaimed amounts is by contacting HMRC directly. Further checks will be carried out by HMRC before the grant is paid. 

Contact details for HMRC can be found here.

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Complaining about HMRC

The guidance has also been updated to include how claimants can use the HMRC complaints process where mistakes or unreasonable delays have been caused by HMRC. 

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Getting started

Prior steps required

Before you make a claim, please read all the available guidance on GOV.UK and also gather all the information and the precise calculations. HMRC had previously stated that the session would time out after 30 minutes of inactivity and advised users to have all the information ready before starting the application to avoid typing in the information again. A facility to save the progress on a claim and return to it in order to finish it later has now been added, although a saved claim must be completed within seven days. This should be particularly helpful for claims with higher numbers of employees but below 99, where a spreadsheet upload method cannot be used. ACCA policy is continuing to push for a spreadsheet upload method for lower numbers of employees, particularly with the new rules of flexible furlough coming in from 1 July. 

  • The client will need to have enrolled for PAYE online for employers (activation codes have now been temporarily suspended so this is instantaneous).   
  • The agent must also be enrolled for PAYE online services for agents. 
  • The agent needs to give their Agent Government Gateway ID to the client. 

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Steps for the client to authorise the agent

  • The client signs into HMRC online services (their business tax account).   
  • In the business tax account, select ‘Manage account' and select the 'Add, view or change tax agent' option under the heading 'Tax Agents'.   
  • Select 'PAYE for employers' and click continue. 
  • On the 'Manage who can access your taxes and schemes' page, click the 'Add an agent' link next to the service that you want to assign an agent for – for example, PAYE. 
  • Enter your agent's Government Gateway ID provided to you by your agent and click continue. 
  • Click on 'Add agent' to confirm you want to add the selected agent. 
  • You will receive confirmation that the agent has been added on the screen. 
  • Businesses, and agents who are authorised to act on behalf of clients for PAYE matters, will be able to claim. However, file-only agents, including payroll bureaus, will not be able to access the service due to data protection reasons. 
  • To make a claim, employers will need the following information: 
  • employer PAYE reference number 
  • number of employees 
  • employees' names, national insurance numbers and payroll/works numbers 
  • your self-assessment, corporation tax unique taxpayer reference or company registration number 
  • claim period and amount claimed  
  • employer's bank account number and sort code 
  • employer's address 
  • contact details of the person making the claim. 
  • You can claim for payments made and to be made within the next 14 days. 
  • It will take around six working days for claims to be paid into the employer’s bank account.

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CJRS engagement letter template

ACCA members are advised to supplement their existing ACCA approved letters of engagement for payroll services with the additional services being offered, if they have been asked to prepare and/or submit the furlough grant claims on behalf of their clients. A template of schedule of services to supplement the Engagement letters – Coronavirus Job Retention Scheme (CJRS) can be accessed here. The schedule should be used in conjunction with our engagement letter guidance. 

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How the scheme works

  • The employer should have created and started a PAYE payroll scheme on or before 19 March 2020, be enrolled for PAYE online and have a UK bank account.
  • You can only claim for furloughed employees who were on your PAYE payroll on or before 19 March 2020 and who were notified to HMRC on an RTI submission on or before 19 March 2020. 
  • Employees who were employed as of 28 February 2020 and on payroll (ie notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for the employer after that and prior to 19 March 2020 can also qualify if the employer re-employs them and puts them on furlough.
  • There is a minimum three-week furlough period. As the scheme rules are changing from 1 July, for the minimum three consecutive week period to be completed by 30 June, the last day you could have furloughed an employee for the first time was 10 June.
  • From 1 July, you can only claim for employees you have furloughed for three consecutive weeks ending on or before 30 June and who were on a UK PAYE payroll scheme created and started on or before 19 March 2020, although from then on there will be no minimum furlough period.
  • The number of employees you claim for in any claim period starting from 1 July cannot exceed the maximum number of employees you claimed for under any claim ending by 30 June. For example, an employer furloughed 25 out of their 35 employees prior to 30 June. From 1 July, claims for more than 25 furloughed employees will not be accepted for that employer.
  • The employer should discuss the situation with affected employees and, following agreement, notify them in writing that they have become ‘furloughed workers’. The employer should keep this record for five years.
  • Templates to start, extend or end an agreement with an employee or worker to stop work temporarily during the pandemic ('furlough') can be downloaded  from  ACAS’s website
  • Up to 31 July, employers can claim a grant of the lower of 80% of an employee’s regular salary or £2,500 per month, plus the associated employer NICs and minimum automatic enrolment employer pension contributions on paying those wages. From 1 August, employers will fund the full amount of employer NICs and pension contributions as well as more of the workers’ wages: 10% in September and 20% in October (subject to caps).
  • If the employer chose to top up employees’ wages, it cannot claim for employer NICs on the topped-up amount.
  • NICs claimed cannot be more than 13.8% of the grant claimed for the employee's wages.
  • Employers who are eligible for the Employment Allowance to pay less employer NICs should use this allowance to reduce the cost of ER NICs payable as the Employment Allowance cannot be manually spread out over the tax year if it would otherwise be used up sooner.
  • The Employment Allowance used in any pay period should be subtracted from the claim so that employer NIC costs not being paid are not claimed for through the scheme.
  • If the amount of Employment Allowance claimed does not cover the total employer NICs due, the grant claimed should be the lower of the grant towards employer NICs costs already calculated and the employer NIC costs paid, or expected to be paid, across the entire payroll.
  • Eligible employers can claim the Employment Allowance at any point in the tax year they are claiming for, or for four years afterwards. If you have claimed or will claim the grant for employer NICs, you must ensure that you do not receive relief for the same employer NIC costs twice. Therefore, you should either not claim the employer NICs grant or reduce the grant you claim to take account of the Employment Allowance.
  • Employers who delay their Employment Allowance claim and have unused Employment Allowance available at the end of the tax year can use this to reduce other tax costs. Employers who have received a grant for employer NIC costs through the scheme should deduct the amount of grant they have received from the amount of Employment Allowance they have left before they use it, if not doing so would result in receiving relief for the same costs twice. Attempting to get relief for the same costs twice is a fraud and may result in claims being investigated. In such circumstances, employers should contact HMRC via the employer helpline to restrict the value of their Employment Allowance claim
  • From 1 July 2020, claimants should be able to report any corrections from errors made in previous claims as part of their next claim.
  • The employer could choose to fund the difference between the grants claimed and the workers’ usual wages, but does not have to. 
  • The employees remain on the payroll deducting tax and national insurance under the pay as you earn (PAYE) system.
  • From 1 July, employers can bring back to work employees who have been furloughed for any amount of time and any shift pattern, while still being able to claim CJRS grant for the hours not worked. 
  • Up to 30 June, furloughed workers should not undertake work for their employer while they are furloughed. If an employee is working, but on reduced hours or for reduced pay, they will not be eligible for this scheme; you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
  • From 1 July, you will be able to flexibly furlough employees. This means you can bring your employees back to work for any amount of time, and any shift pattern, so good records will need to be kept of how many hours employees work and the number of hours they are furloughed (ie not working). 
  • A revised agreement should be put in place with the workers, ensuring that it is consistent with employment, equality and discrimination laws. A written record of the agreement should be retained for five years.
  • If an employee’s salary is reduced as a result of these changes, the employee may be eligible for support through the welfare system, including universal credit. 
  • If an employee is on sick leave or self-isolating as a result of coronavirus, they will be able to get statutory sick pay. 
  • Employees who are currently off sick and are eligible to be furloughed should no longer receive sick pay and would be classified as furloughed. 
  • The scheme is available to all employees including sole director/shareholder companies. However, only the regular salary element paid via payroll will be eligible for the scheme – dividends are not included.
  • A sole director of a limited company can be an employee for the purposes of the furlough, provided there is an employment relationship between the company and the individual. They may also need to evidence any distinction between the director’s role as an officeholder and that of the employee. Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose: for instance, they should not do work of a kind that they would carry out in normal circumstances to generate commercial revenue or provide services to or on behalf of their company. This also applies to salaried individuals who are directors of their own personal service company (PSC). 
  • If the employer claims Employment Allowance, you need to adjust for this. If you do not have to pay any employer NICs in a pay period, you should not claim any employer NIC costs through the scheme.
  • If the amount of Employment Allowance you claim will not cover the total NICs due, you can claim the lower of: 
    -the grant towards employer NIC costs that you’ve already calculated 
    -the employer NIC costs that you paid, or expect to pay, across your entire payroll.
  • If the furloughed employee is a company director, and if the method used to calculate a director’s class 1 NICs is annual cumulative method, and if by the time you make the claim there is no NIC due, then you cannot claim a grant towards employer NIC costs.
  • Employers can continue to claim for a furloughed employee who is serving a contractual or statutory notice period; however, grants cannot be used to substitute redundancy payments.
  • HMRC guidance includes a calculator that can be used to work out the claim for most employees who are paid either regular or variable amounts each pay period – for example, weekly or monthly. HMRC will not decline or seek repayment of any grant based solely on the particular choice between a fixed or variable approach to calculating usual hours, as long as a reasonable choice is made.
  • There are exceptions to this for employees who have returned from maternity leave in the last three months; get director’s payments; have been transferred under TUPE; have been employed at separate times throughout the year; receive employer pension contributions outside of an auto-enrolment pension scheme; receive any discretionary payments; or have an annual pay period.
  • To work out pro-rata amounts of pay for non-standard periods (is not weekly or monthly), you can use the daily maximum wage amounts, as below: 
    £80.65 for March 
    £83.34 for April 
    £80.65 for May 
    £83.34 for June
    £80.65 for July
    £80.65 for August
    £83.34 for September
    £80.65 for October 
  • If you’re claiming for 100 or more furloughed employees, you’ll need to upload a file in .xls, .xlsx, .csv or .ods formats. You’ll need to ensure that you provide only the employee information requested below as any more or less may risk delaying your payment. You could also be asked to provide the information again. You should ensure that your data file contains only one line per employee for the whole period, and does not break up the calculation into multiple periods within the claim or split data by contract type. HMRC will expect the following information for each employee:
    full name
    national insurance number
    payroll number (optional)
    furlough start date
    furlough end date (if known)
    full amount claimed.

If employees are being flexibly furloughed, additional information will be required for:

  • hours actually worked in the claim period
  • usual hours for the claim period

HMRC has provided a revised template for uploading data for more than 100 employees which can be downloaded here

  • The employer could choose to fund the difference between this payment and the employee’s salary but does not have to.
  • The employees remain on the payroll deducting tax and national insurance under the pay as you earn (PAYE) system. 
  • Up to 30 June, the furloughed workers should not undertake work for their employer while they are furloughed, although they can and should be encouraged to undertake training or volunteer work with other employers. Note that for the hours on training, employees should be paid at least at the National Minimum Wage rate.
  • From 1 July, employees will be able to flexibly work part-time and be on furlough for the remainder of their usual working hours.
  • If an employee is working, but on reduced hours or for reduced pay, they will not be eligible for this scheme; you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
  • If an employee’s salary is reduced as a result of these changes, the employee may be eligible for support through the welfare system, including universal credit.
  • If an employee is on sick leave or self-isolating as a result of coronavirus, they will be able to get statutory sick pay. 
  • Employees who are currently off sick and are eligible to be furloughed should no longer receive sick pay and would be classified as furloughed.
  • The scheme is available to all employees including sole director/shareholder companies. However, only the regular salary element paid via payroll will be eligible for the scheme – dividends are not included.
  • A sole director of a limited company can be an employee for the purposes of the furlough, provided there is an employment relationship between the company and the individual. They may also need to evidence any distinction between the director’s role as an officeholder and that of the employee. Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose: for instance, they should not do work of a kind that they would carry out in normal circumstances to generate commercial revenue or provide services to or on behalf of their company. This also applies to salaried individuals who are directors of their own personal service company (PSC).
  • The basis for establishing the director’s employment status would be dependent on facts such as:
    whether there is a genuine contract of employment between the director and the limited company
    whether a ‘statement of written particulars’ has been issued, providing a distinction between officeholder duties and those of an employee
    what the obligations of each party are in pursuance of the contract
    where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
  • After a claim has been submitted online, a claim reference number will be provided by HMRC, which will then check that the claim is correct. HMRC should pay the claim amount by BACs into the nominated bank account within six working days.
  • Employers must keep a copy of all records for six years, including the amount claimed, the claim period for each employee and the calculations for the claims.
  • When the scheme ends on 31 October 2020, employers must decide whether employees can return to their duties or be made redundant.
  • Employers will have until 30 November to submit any claims that start on or after 1 July 2020.

Errors made on claims can be corrected online through the claims portal by:

  • reducing the amount for a subsequent claim if an overclaim has been made in a previous claim
  • deleting a claim within 72 hours of making it
  • contacting HMRC directly if an overclaim has been made and no further claims are to be submitted
  • contacting HMRC directly if an underclaim has been made – HMRC will need to carry out further checks due to an increase in the claim being made.

Links to further guidance

HMRC’s step-by-step guide

Sort code checker  

Employee guidance

Employer guidance

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Annual payroll submission date after 19 March

Company directors with an annual pay period

Those paid annually are eligible to claim, as long as they meet the relevant conditions. This includes being notified to HMRC on an RTI submission on or before 19 March 2020, which relates to a payment of earnings in the 2019/20 tax year. The requirement for there to be payment of earnings in the 2019/20 tax year applies for any employee being claimed for under the scheme, irrespective of how frequently they are paid (eg weekly, fortnightly or monthly). This will be relevant for those on an annual pay period if the last payment notified to RTI was before 5 April 2019 and no further payments were notified until after 19 March 2020.

The CJRS started on 1 March 2020 and will run in the above format until the end of July.

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Changes from 1 July 2020

  • From 1 July, the employer can bring back previously furloughed employees for any amount of time and still be able to claim CJRS grant for their normal hours not worked. (See 'flexible furloughing' below.)
  • In June and July, the government will pay 80% of wages up to a cap of £2,500 as well as employer national insurance (ER NICs) and pension contributions for the hours the employee doesn’t work; employers will have to pay employees for the hours they work.
  • Claims for periods ending on or before 30 June must be made by 31 July as separate claims will be required for claim periods prior to 30 June.
  • All claims made from 1 July must start and end within the same calendar month and must last at least seven days. If claiming for a period of less than seven days, eg the first few or last days of the month, you must have already claimed for the period ending immediately before it.
  • It would be advisable to match claim periods to the dates of payrolls, where possible, to avoid mismatches such as gaps and overlaps.
  • Claims can be made before, during or after the payroll is run. When claiming for flexibly furloughed employees, it would be better to claim once there is reasonable certainty of the exact number of hours they will have worked during the claim period. For any claims made in advance, if certain employees work for more hours than claimed for, some of the grant will need to be repaid to HMRC, possibly via adjusting the next claim as part of the error-correction process. 
  • Claim periods starting on or after 1 July must start and end within the same calendar month as parts of the scheme and calculation will change each month. If pay periods include days that straddle two months, separate claims for the days that fall into each month will need to be calculated and submitted.
  • In August, the government will continue to pay 80% of wages up to a cap of £2,500 but employers will pay ER NICs and pension contributions.
  • In September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work; employers will pay ER NICs, pension contributions and 10% of wages to make up 80% of the total up to a cap of £2,500.
  • In October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work; employers will pay ER NICs, pension contributions and 20% of wages to make up 80% of the total up to a cap of £2,500.
  • The cap on the furlough grant will be proportional to the hours not worked.

Flexible furloughing

  • From 1 July, businesses using the scheme can allow workers to return part time while still being under the scheme. The government will continue to pay 80% of wages for any of employee's normal hours they do not work up until the end of August. This flexibility comes a month earlier than previously announced to help people get back to work.  
  • For the working hours that the employee worked, they will get paid their normal wage. For the hours they are not working, they will be covered by furlough pay. This means that employees can work as much or as little as the business needs, with no minimum time that they need to furlough staff for.
  • Any working-hours arrangement agreed between a business and employee must cover at least one week and be confirmed to the employee in writing.
  • When claiming the CJRS grant for furloughed hours, the employer will need to report and claim for a minimum period of a week. They can choose to make claims for longer periods such as on monthly or two- weekly cycles if preferred.

Closure to new entrants from July

The scheme will close to new entrants. Employers will only be able to furlough employees who were furloughed for a full three-week period prior to 30 June.

This means that the final date by which an employer can furlough an employee for the first time was 10 June, in order for the current three-week furlough period to be completed by 30 June. Employers will have until 31 July to make any claims in respect of the period to 30 June.

The number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the current CJRS.

Employers can continue to make claims in anticipation of an imminent payroll run, at the point payroll is run or after payroll has been run.

Employers will be able to make their first claim under the new scheme from 1 July.

Example of how the part-time furlough scheme will work

A worker on a 40-hour contract receiving wages of £1,000 per month under the current furlough scheme is entitled to 80% of normal wages, ie £800. However, the employee is not allowed to carry out any work for the employer.

From 1 July, if the employee is going back to work for two days a week (eg 16 hours), they would get: 

  • 16/40 x 1,000 = £400 wages for the hours worked and 
  • furlough payment for the rest (ie 80% x 24/40 x 1,000 = £480)
  • total amount received (for two days' work) is £880 compared with £800 on a full furlough.

HMRC has published more examples of the various calculations for the flexible furlough scheme.

Where you are taking decisions that are not yet in legislation, research, seek guidance and document the approach taken. There will inevitably be a number of ‘reasonable excuse claims’.

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Maternity leave, adoption leave, paternity leave, shared parental leave and parental bereavement leave

  • For employees on maternity leave, adoption leave, paternity leave, shared parental leave or parental bereavement leave, the normal rules for maternity and other forms of parental leave and pay apply. The employer may need to calculate the average weekly earnings, if employees were put on furlough and then started leave on or after 25 April 2020, for maternity pay, adoption pay, paternity pay, shared parental pay and parental bereavement pay.
  • If the employee is getting maternity allowance, she cannot get furlough pay at the same time.
  • If the employee has agreed to be put on furlough, she must contact Jobcentre Plus to stop maternity allowance payments.
  • If the employee agrees to go on furlough and end her maternity leave early, she will need to give the employer at least eight weeks’ notice and she will not be eligible for furlough pay until the end of the eight weeks.

If an employee is pregnant and about to start maternity leave

  • If the employee’s earnings have been reduced because she was off sick before her maternity leave started, this may affect her statutory maternity pay.
  • If the employee’s earnings have been reduced because she was put on furlough and then started family-related statutory leave on or after 25 April 2020, the amount she receives in pay should not be affected. If she started family-related statutory pay before 25 April 2020, her entitlement may be affected. The same rules apply to adoption pay, paternity pay, shared parental pay and parental bereavement pay.

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Apprentices

Apprentices can be furloughed in the same way as other employees and they can continue to train while furloughed. 

However, the employer must pay their apprentices at least the Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage as appropriate for all the time they spend training. This means the employer must cover any shortfall between the furloughed amount claimed under CJRS and their appropriate minimum wage.

Guidance is available for changes in apprenticeship learning arrangements in England, Scotland, Wales and Northern Ireland

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Holiday entitlement and bank holidays

An explanation of how holiday entitlement and pay operate during the pandemic has been published by the Department for Business, Energy and Industrial Strategy. 

  • The legal minimum holiday entitlement is 5.6 weeks. Workers and employers can agree to alter the terms of the worker’s contract, provided it does not go below the statutory minimum of 5.6 weeks.
  • Holiday pay, whether the worker is on furlough or not, should be calculated in line with current legislation, based on a worker’s usual earnings.
  • Where this calculated rate is above the pay the worker receives while on furlough, the employer must pay the difference. However, as taking holiday does not break the furlough period, the employer can continue to claim the 80% grant to cover most of the cost of holiday pay.
  • New legislation has changed the rules regarding carrying annual leave into future leave years where the impact of coronavirus means that it has not been reasonably practicable to take it in the leave year to which it relates. Under the new legislation, the untaken amount may be carried forward into the following two leave years. When calculating how much holiday a worker can carry forwards, employers must give workers the opportunity to take any leave that they cannot carry forward before the end of the leave year.
  • Workers who are on furlough are unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period.
  • If the employer is unable to fund the difference, it is likely that this would make it not reasonably practicable for the worker to take their leave, enabling the worker to carry their annual leave forwards.
  • In this situation, the worker must still be given the opportunity to take their annual leave, at the correct holiday pay, before the carried annual leave is lost at the end of the next two leave years.
  • Generally, employers remain able to require workers to take annual leave to ensure that holiday is taken in the leave year to which it relates.
  • If an employee usually works bank holidays, then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave, then the employer would either have to top up their usual holiday pay or give the employee a day of holiday in lieu.

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Employees on a fixed-term contract

An employee on a fixed-term contract can be re-employed, furloughed and claimed for if either:

  • their contract expired after 28 February 2020 and an RTI payment submission for the employee was notified to HMRC on or before 28 February 2020
  • their contract expired after 19 March 2020 and an RTI payment submission for the employee was notified to HMRC on or before 19 March 2020.

If the employee’s fixed-term contract has not already expired, it can be extended or renewed. You can claim for them if an RTI payment submission for the employee was notified to HMRC on or before 19 March 2020.

Employees who started and ended the same contract between 28 February 2020 and 19 March 2020 will not qualify for this scheme. This is not specific to employees on fixed-term contracts; the same would apply to employees on all other contracts.

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A word about scams

Stay vigilant about scams, which may mimic government messages such as 'Stay at home' and 'Stay home, stay safe', as a way of appearing authentic and unthreatening.

Don’t give out private information or reply to text messages, and don’t download attachments or click on links in texts or emails you weren’t expecting.

You can forward suspicious emails claiming to be from HMRC to phishing@hmrc.gov.uk and texts to 60599.

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ACCA code of ethics and conduct and anti-money laundering regulations

ACCA members are reminded that:

  • They should not be associated with any information that they believe is false, inaccurate or misleading
  • They should act within the requirements of Professional Conduct in Relation to Taxation (PCRT) in handling the tripartite relationship between themselves, their clients (or employers in the case of in-house advisers) and HMRC. 
  • If they have a suspicion of financial crime (which would on the face of it include deliberately claiming furlough payments for employees who are then required to keep working) they should report this to their firm’s money laundering reporting officer (MLRO) or, in the case of sole practitioners, consider making a suspicious activity report (SAR).This obligation overrides client confidentiality.  

Find out more here

HMRC has stated that the employer must return any grants back to HMRC immediately if they are unwilling or unable to use it to pay their employee’s salary and the employer NICs and pension contributions.

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Furloughed employees and employment law

Is an employer required to fund the difference between the grant received and full salary? 

No, but the scheme is being designed with underlying reference to employment law.

The general principle for employees (not for casuals or agency workers) is that an employer cannot reduce unilaterally an employee's pay without their consent unless the employer has provided for reduced payment in the contract of employment (which is relatively rare). 

Thus, if an employer unilaterally imposes a pay cut on an employee that constitutes a breach of contract, that would entitle an employee to leave and claim constructive dismissal (less likely in the current circumstances) or remain with the employer under protest and make a claim for back wages on the basis of unlawful deduction.  

The key message is to talk to the employees, and probably the most sensible course of action is to make any changes to the employment contract in writing.

Is it mandatory for an employee to accept furlough?

An employee does not have to accept furlough if offered, but the employer could then make the employee redundant instead, using the usual employment law procedure. 

Can the employer decide which employees should be furloughed?

Identifying which workers to furlough will largely be a business decision, but employers should ensure they follow a fair, well-documented process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment. Employers are advised to treat such processes in the same way as redundancies to minimise the risk of tribunal claims.

Are furloughed employees treated as being made redundant?

No. This period is considered as continuous employment; they retain their seniority and all other continuous employment rights.

Can a furloughed employee take on another job with a different employer?

Because a furloughed employee remains on the payroll, they are treated as an employee, so they are subject to the terms of the contract of employment.

Most contracts would prevent an employee working for another firm while employed by their current employer. If an employee wants to take another job while furloughed, they will need to seek consent from their current employer. However, those employees who have more than one employment allowed under the terms of their contract can continue to work for another employer while being on furlough with one employer. 

If an employee has had multiple employers over the past year, has only worked for one of them at any one time, and is being furloughed by their current employer, their former employer/s should not re-employ them, put them on furlough and claim for their wages through the scheme.

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Pension contribution payments

The Pensions Regulator has advised that the employer’s duty to pay pension contributions has not changed. Contributions will be based on payments made to workers, and employers must meet the statutory minimum pension contributions. 

If the employer fails to pay the contribution on time, the pension provider is still required to report employers to The Pensions Regulator for failed payments. However, the regulator also understands that these are exceptionally challenging times, and for this exceptional period it requires pension providers to report employers for late payment when they are over 150 days late in paying, rather than the previous 90 days. This gives the employer a longer period to bring the payments up to date before being formally reported to the regulator.

The regulator has published the following statement:

'We know this is a challenging time for everyone and we recognise the strain this is putting on employers. We will take a proportionate and risk-based approach towards the enforcement of decisions, in light of these challenging times, with the aim of helping to get employers back on track and supporting both employers and savers.'

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Examples of monthly claims up to June 2020

Example 1 (using 2019/20 rates)

Full-time or part-time employee on the payroll as at 28 February 2020 earning basic salary of £3,500 per month gross. Use February payroll figure to claim up to 80% of gross pay, capped to £2,500, from 1 March 2020. 

CJRS claim (80% of £3,500) = £2,800 (A) 

CJRS cap = £2,500 (B) 

Maximum claim gross pay (lower of A or B) = £2,500 

Plus: employer’s NIC 13.8% x (2,500-719) = £245.78 

Plus: employer’s minimum auto-enrolment contributions 3% x (2500-512) = £59.64 (3% of qualifying earnings) 

Total CJRS claim = £2,805.42 

The employer can choose (but is not obliged) to fund the difference in salary of £1,000 per month not reimbursed through CJRS and pay any additional employer’s NIC and auto-enrolment contributions. 

Example 1A (using 2020/21 rates)

Full-time or part-time employee on the payroll as at 28 February 2020 earning basic salary of £3,500 per month gross. Use February payroll figure to claim up to 80% of gross pay, capped to £2,500, from 1 March 2020. 

CJRS claim (80% of £3,500) = £2,800 (A) 

CJRS cap = £2,500 (B) 

Maximum claim gross pay (lower of A or B) = £2,500 

Plus: employer’s NIC 13.8% x (£2,500-£732) = £243.98 

Plus: employer’s minimum auto-enrolment contributions 3% x (£2,500-£520) = £59.40 (3% of qualifying earnings) 

Total CJRS claim = £2,803.38 

The employer can choose (but is not obliged) to fund the difference in salary of £1,000 per month not reimbursed through CJRS and pay any additional employer’s NIC and auto-enrolment contributions. 

Example 2 (using 2019/20 rates)

Full-time or part-time employee on the payroll as at 28 February 2020 earning basic salary of £2,000 per month gross. Use February payroll figure to claim up to 80% of gross pay, capped to £2,500, from 1 March 2020. 

CJRS claim (80% of £2,000) = £1,600 (A) 

CJRS cap = £2,500 (B)  

Maximum claim gross pay (lower of A or B) = £1,600 

Plus: employer’s NIC 13.8% x (£1,600-£719) = £121.58 

Plus: employer’s minimum auto-enrolment contributions 3% x (£1,600-£512) = £32.64 

Total CJRS claim = £1,754.22 

The employer can choose (but is not obliged) to fund the difference in salary of £400 per month not reimbursed through CJRS and pay any additional employers’ NIC and auto-enrolment contributions. 

Example 2A (using 2020/21 rates)

Full-time or part-time employee on the payroll as at 28 February 2020 earning basic salary of £2,000 per month gross. Use February payroll figure to claim up to 80% of gross pay, capped to £2,500, from 1 March 2020. 

CJRS claim (80% of £2,000) = £1,600 (A) 

CJRS cap = £2,500 (B) 

Maximum claim gross pay (lower of A or B) = £1,600 

Plus: employer’s NIC 13.8% x (£1,600-£732) = £119.78 

Plus: employer’s minimum auto-enrolment contributions 3% x (£1,600-£520) = £32.40 

Total CJRS claim = £1,752.18 

The employer can choose (but is not obliged) to fund the difference in salary of £400 per month not reimbursed through CJRS and pay any additional employers’ NIC and auto-enrolment contributions. 

Example 3 (using 2019/20 rates) 

Employee on zero-hour contract employed since January 2019; monthly gross pay for March 2019 was £1,800; average gross pay for period April 2019 to February 2020 is £1,950. Use the higher of March 2019 pay (£1,800) and average earnings for 2019/20 to date (£1,950), to claim up to 80% of gross pay, capped to £2,500, from 1 March 2020. 

CJRS claim (80% of £1,950) = £1,560 (A) 

CJRS cap = £2,500 (B) 

Maximum claim gross pay (lower of A or B) = £1,560 

Plus: employer’s NIC 13.8% x (£1,560-£719) = £116.06 

Plus: employer’s minimum auto-enrolment contributions 3% x (£1,560-£512) = £31.44 

Total CJRS claim = £1,707.50 

Example 3A (using 2020/21 rates) 

Employee on zero-hour contract employed since January 2019; monthly gross pay for March 2019 was £1,800; average gross pay for period April 2019 to February 2020 is £1,950. Use the higher of March 2019 pay (£1,800) and average earnings for 2019/20 to date (£1,950), to claim up to 80% of gross pay, capped to £2,500, from 1 March 2020. 

CJRS claim (80% of £1,950) = £1,560 (A) 

CJRS cap = £2,500 (B) 

Maximum claim gross pay (lower of A or B) = £1,560 

Plus: employer’s NIC 13.8% x (£1,560-£732) = £114.26 

Plus: employer’s minimum auto-enrolment contributions 3% x (£1,560-£520) = £31.20 

Total CJRS claim = £1,705.46

Example 4 – full calculation for a furloughed employee from 1 July (from HMRC guidance)

This example has been included to illustrate the full sequence of calculation steps that an employer must take when claiming through CJRS. It has been based on a common scenario in which the employee has a fixed monthly salary, fixed working hours, and is flexibly furloughed. This scenario may not be directly relevant to you, though it may be helpful to see an illustrative example of a full calculation.

Employee has worked for F Ltd since 2016, working 40 hours a week for a monthly salary of £3,000 calculated to the last day of each month. The employee was furloughed on 25 April 2020 and from 1 July 2020 is asked to return to work half-days.  Pay has not been topped up and there is no bonus, commission or other additional pay.

As it prepares the payroll for the end of July, F Ltd also calculates its CJRS claim.

As F Ltd runs payroll on a calendar month it decides to claim for 1 to 31 July.

The employee is flexibly furloughed from 1 July, so F Ltd works out the usual hours.  The employee has fixed hours and a salary that doesn’t vary by the number of hours worked so the calculation is:

  1. The number of hours the employee was contracted for at the end of the last pay period ending on or before 19 March 2020. This was 40 hours per week.
  2. Divide by the number of days in the repeating shift pattern. It is a weekly pattern, so divide by 7
  3. Multiply by the number of days in the pay period (31 days in July, so multiply by 31).
  4. Result is 177.14, rounded up to 178.

Next, F Ltd calculates the number of working hours and furloughed hours. The employee will work 23 half-days, each of four hours, so working hours are 92.  Furlough hours are calculated as :

  1. number of usual hours, 178
  2. subtract the number of actual hours worked, so subtract 92 = 86 furlough hours.

F Ltd calculates the maximum wage amount that can be claimed.

As the pay period is a month, the cap is £2,500 but it is reduced because the employee is flexible furloughed.

  1. The maximum wage amount for the period claimed for is £2,500.
  2. Multiply by the number of hours the employee is furloughed for – 86
  3. Divide by the employee’s usual hours, 178 = £1,207.87.

F Ltd then works out the 80% of the usual wage.

The employee is furloughed throughout July so there are 31 furlough days.

The employee is on fixed pay, so the calculation is:

  1. Start with the employee’s wages from their last pay period before 19 March, £3,000. Claim is for a full pay period so skip to step 4.
  2. Skip
  3. Skip
  4. Multiply by 80% = £2,400.

Furlough pay for flexibly furloughed employee is:

  1. Usual hours for the pay period, 178
  2. Deduct working hours in the pay period, 92 = 86
  3. Multiply by 80% of usual wage, £2,400
  4. Divide by usual hours, 178 = £1,159.55.

As the claim is for July, F Ltd can claim a wage grant for the whole amount of the furlough pay.

F Ltd then works out the employer national insurance. The company uses payroll software to calculate the actual NICs due but must use the scheme calculation for claims between 1 July and 31 July to work out how much grant it can claim.

First, apportion the relevant secondary NICs threshold.

  1. Start with the relevant secondary NICs threshold for the NICs earnings period.  The earnings period is the month, so the threshold is £732.
  2. Divide by the number of days in the earnings period, 31
  3. Multiply by the number of days in the claim, 31
  4. Divide by the number of usual hours in the claim, 178
  5. Multiply by the number of furlough hours in the claim, 86 = £353.66.

Calculate the employers’ national insurance grant:

  1. Start with the amount claimed for employee’s wages, £1,159.55
  2. Deduct relevant apportioned secondary threshold, £353.66
  3. Multiply by 13.8% = £111.21.

F Ltd is not eligible for Employment Allowance and the grant amount is less than the total NICs it will pay in respect of this employee, so £111.21 is the grant amount it can claim.

F Ltd then calculates the pension contribution grant using the calculation for claim periods 1 July to 31 July.

First, apportion the relevant lower earnings limit:

  1. Start with the relevant lower earnings limit (LEL) for the pay period, £520.
  2. Divide by the number of days in the pay period, 31
  3. Multiply by the number of days in the claim, 31
  4. Divide by the number of usual hours in the claim, 178
  5. Multiply by the number of furlough hours in the claim, 86 = 251.24

Calculate the pension contribution grant:

  1. Start with the amount claimed for wages, £1,159.55
  2. Deduct the apportioned LEL, £251.24
  3. Multiply by 3% = £27.25.

For further examples, please see HMRC guidance

Further examples of flexible furlough claims have been added by HMRC here.

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More information

Find out more with the following resources:

Please also see ACCA’s suite of technical factsheets on employment law  and the article, What is the priority for employers?

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