There’s been no less than six updated guidance notes on Friday evening for the new version of the Coronavirus Job Retention Scheme “CJRS” (Furloughed Workers). There’s a (long) summary & calculations below.
The main changes are around the flexible furlough scheme (FFS), claim periods and reductions in government support from 1st August to 31st October when the scheme ends.
You’ll need a bit of time to fully digest these, so get a brew and something sweet before sitting down! If I’ve not been clear with anything, please let me know.
There were further updates to the Self-Employed Income Support Scheme which I will cover in a separate update.
FFS changes summary
1) The first point to note is that any employee not furloughed for three weeks prior to the 1st July will not be eligible for the new version of CJRS. The qualifying three weeks can be from any time between 1st March to 30th June.
2) We are used to claims being made up to 14 days in advance of pay day; under the new CJRS the first claim for July can be made on 1st July which means you cannot make an advance claim in June for a July pay period. If you run a weekly or perhaps fortnightly pay period that falls in the first week of July, the business will need to cover the wage liability until the grant is received given the 6 day turnaround for payment.
3) Employees not previously furloughed cannot be placed on furlough leave and a claim made under the new CJRS, the cutoff date was 10th June. The exception to this rule is employees coming back from parental leave, subject to them being on the company payroll at 19th March 2020.
4) Claims from July are limited to a maximum number of employees per claim equal to the maximum employees submitted on a previous claim. For example, if April there were 3 employees, May 2 and June 4, the maximum number of employees eligible for a claim from 1st July is 4.
This provision has come out of nowhere and no fuss has been made about it, but, is probably the most important.
So if your staff have been furloughed at different times and the total you want to furlough exceeds the total maximum you’ve claimed for previously, this is an issue.
5) The final day for making a June CJRS claim is 31st July 2020.
6) The qualifying gross salary amount stays the same as we have previously been calculating, for most employees this will be based on their February 2020 payslip, average of 12 months’ pay or same period in 2019.
7) Claims from 1st July will need to be made in the same monthly period. The claims should match with the payroll submission made to HMRC.
8) Up to 30th June the minimum furlough period is 3 weeks. If you’ve brought any employees back for any period between 10th & 30th June, and then refurloughed before the 30th June, they must complete a full 3 week period into July before you can put them on the FFS.
For example, a previously furloughed employee can start a new furlough period on 22 June which would have to continue for at least 3 consecutive weeks ending on or after 12 July. After this the employee can they can then be flexibly furloughed for any period. However, after 1 July, employers cannot make claims that cross calendar months, so the employer will need to make a separate claim for the period up to 30 June.
9) Government support is reducing from 1st August –
August – you can no longer claim for employers NI or employers pension
September – You will need to top up the pay from 70% to 80% (if you’re not already)
October – you will need to top up from 60% to 80%
Some businesses, if not fully open (hospitality / leisure & retail being the sectors we’re most concerned about) may struggle to pay these additional sums of money. If you need any additional support, do let us know as soon as possible.
From the 1st July the same rules still apply for employees not being able to carry out any work or promotion of the business whilst on furlough leave.
New Calculation – Flexi Furlough Gross Pay
From 1st July employees can be bought back from furloughed leave for any number of hours in any working pattern to suit the business. For hours not worked, the employee can remain on furlough pay for those hours and the business can still make a CJRS claim.
Calculation as follows:
Gross monthly salary £4,000, 80% or capped at £2,500
Normal weekly hours 37.5 (calculated on last pay period prior to 19th March)
Monthly hours 37.5 / 7 calendar days, multiply by calendar days in the month 31 = 166.07
Rounded up (always) 167 hours
Employee works 50% of normal hours – 83.5 paid at employee’s full pay = £4,000 x 50% = £2,000
Furlough pay = £2,500 x 83.5 then divided by total hours (167) = £1,250
Gross employee pay for the period = £3,250
Claim for CJRS = £1,250
New Calculation – Flexi Furlough Employer’s National Insurance
If the employment allowance of £4,000 has not yet been fully utiltised, this will need to be used up first before being able to claim any Employers NIC under the CJRS.
If the allowance has been utiltised, the following calculation applies:
NIC Monthly Threshold £732
Total monthly hours 167 per gross pay workings
Furloughed hours 83.5 per gross pay workings
CJRS threshold £732 x 83.5 hours then divided by total hours (167) = £366
Furlough Gross Pay £1,250
CJRS claim for NIC £1,250 – £366 then multiplied by 13.8% = £121.99
New Calculation – Flexi Furlough Employer’s Pension
We must use the lower level of qualifying earnings “LLQE” regardless of the pension scheme the business uses for their auto-enrolment scheme.
LLQE threshold – £520
Total monthly hours – 167 per gross pay workings
Furloughed hours – 83.5 per gross pay workings
CJRS threshold – £520 x 83.5 hours then divided by total hours (167) = £260
Furlough Gross Pay – £1,250
CJRS claim for NIC: £1,250 – £260 multiplied by 3% = £29.70
If you are on weekly pay, the above threshold amounts (£732 and £520) will need to be divided first, by the calendar days in the month and then multiplied by the 7.
If you are on fortnightly pay, the above threshold amounts (£732 and £520) will need to be divided first, by the calendar days in the month and then multiplied by the 14.
If you are on four weekly pay, the above threshold amounts (£732 and £520) will need to be divided first, by the calendar days in the month and then multiplied by the 28.
Phased Employer Contribution
Assuming the hours and amounts remain the same in the worked examples above:
July 2020 -> HMRC will reimburse £1,250, £121.99 and £29.70 = £1,401.69
August 2020 -> HMRC will reimburse £1,250
September 2020 -> HMRC will reimburse £1,093.75, employer tops up £156.25 to £1,250
No reimbursement for employer’s NIC or Pension
October 2020 -> HMRC will reimburse £937.50, employer tops up £312.50 to £1,250
No reimbursement for employer’s NIC or Pension
If you have any questions, please do get in touch with the team, we are all here anytime to happy to help.