On 1 July the Coronavirus Job Retention Scheme (CJRS) enters its second phase. CJRS Version 2 (CJRS V2) allows complete flexibility for employees and employers to adopt whatever working/non-working pattern is agreed between them.
The furlough period can vary from day to day, or week to week, but accurate records must be maintained. Crucially, these records must be maintained in hours.
Employment law must continue to be observed and as in the first phase, contracts may need to be varied and amended, perhaps several times in the coming months.
The overriding principles remain that employees must be paid their contractual entitlement through the payroll, reported through the Real Time Information (RTI) system. The employer can then choose to apply for a CJRS government grant to offset all or part of this cost.
The new version of the scheme is to support the return to work while also being sufficiently flexible to adapt to business needs, as well as those of employees needing time for childcare or to look after other relatives. It also recognises that many offices will not be able to have their entire workforce in the workplace at the same time while they implement social distancing measures.
While furlough becomes much more flexible, it is important to note that the level of the CJRS V2 grant will be reduced and as we progress through August to October, it is less than CJRS V1.
In July the grant will be restricted by reference to furloughed hours where the employee is working only some of the time.
During August to October the grant will be restricted to furloughed hours where the employee is working only some of the time, but also because the grant itself is being reduced.
Claim Periods
You should match your claim period to the dates you run your payroll, if you can.
You can only make one claim for any period so you must include all your furloughed or flexibly furloughed employees in one claim, even if you pay them at different times.
If you make more than one claim, your subsequent claim cannot overlap with any other claim that you make.
Where employees have been furloughed or flexibly furloughed continuously, the claim periods must follow on from each other with no gaps between the dates.
When you should claim
You can claim before, during or after you run your payroll; you can make your claim up to 14 days before your claim period end date and do not have to wait until the end of a claim period to make your next claim.
When claiming for employees who are flexibly furloughed you should not claim until you are sure of the exact number of hours they will have worked during the claim period. This means that you should claim when you know the number of hours your employees are working during the claim period.
If you claim in advance and your employee works for more hours than you have notified HMRC, then you will have to pay some of the grant back to HMRC.
Employees must be paid their contractually agreed rate for any hours they work.
How much you can claim
From the 1 July you will still need to work out the maximum wage for each employee in order to calculate how much your employee should be paid and the amount of grant you can claim towards the employees’ wages.
If the length of time you are claiming for is not one week or one month, then you will need to use the daily maximum wage amounts to calculate the maximum wage amount for each employee. To calculate the daily maximum wage amount, you will need to multiply the daily maximum wage amount, as per the table below, by the number of days the employee is furloughed in the claim.
|
March 20 |
£80.65 |
|
April 20 |
£83.34 |
|
May 20 |
£80.65 |
|
June 20 |
£83.34 |
|
July 20 |
£80.65 |
|
August 20 |
£80.65 |
|
September 20 |
£83.34 |
|
October 20 |
£80.65 |
Work out the minimum furlough pay
If an employee is flexibly furloughed, the minimum furlough pay will depend on their working and furloughed hours. You will need to start the calculation with the lesser of:
- 80% of the employee’s usual wage
- The maximum wage amount
For the periods ending on or before 31 August employers can claim a grant for the full amount of the minimum furlough pay.
For periods starting on or after 1 September, employers will need to calculate the grant amount as follows:
- Start with the amount of minimum furlough pay
- Divide by 80
Depending on which month you are claiming for, then multiply by:
- 70 for September
- 60 for October
Example of the CJRS claim calculation for a flexible furloughed employee:
This example is based on a common scenario of an employee who has a fixed monthly salary, fixed working hours and is flexibly furloughed.
Employee A has worked for XYZ Limited since 2016 and:
- He works 40 hours per week
- Has a monthly salary of £3,000 calculated to the last day of the month
- He was furloughed on 25th April 2020 and from 1 July he has been asked to return to work half days
- His pay has not been topped up and there is no bonus, commission or additional pay
The claim will be for the period 1 July to 31 July.
Calculation of the usual working hours and furloughed hours:
Employee A has fixed hours and his salary does not vary depending on the hours worked, therefore the calculation of the usual hours is as follows:
40 hours per week, which are his contracted hours
Divided by 7, which is the number of days in the repeating shift pattern, in this it is a weekly pattern, therefore divide by 7 days
Multiply by the number of days in the pay period, July has 31 days, therefore multiply by 31 days
Contracted hours: 40
Divide by 7: 5.174
Multiply by 31: 177.14
Round up: 178 usual hours in July for Employee A
Employee A will work 23 half days in July (23 being the working days in July, Mon – Fri). Each day he will work 4 hours, as he would normally work 40 hours per week, which is 8 hours per day, but as he is returning to work half days, he will work 4 hours per day, therefore working a total number of hours in July of 92 hours (23 * 4).
The furlough hours are then calculated as follows:
Number of usual hours: 178
Less actual hours worked: (92)
Furloughed hours: 86
Calculation of maximum wage amount:
The pay period in this case is 1 month, therefore the cap is £2,500 but it is reduced as Employee A is flexibly furloughed. Therefore the calculation is:
Maximum Wage amount for the claim period £2,500
Multiplied by the number of furloughed hours x 86
This equals to £215,000
Divide this by the number of usual hours / 178
The maximum wage amount for Employee A in July is £1,207.87
XYZ Limited now needs to calculate the 80%of the usual wage. Employee A is furloughed throughout July, ie 31 days and he is on a fixed pay. His last pay as at 19 Mar was £3,000 therefore 80% of £3,000 is £2,400.
Calculation of the furloughed pay
Maximum furlough amount £2,400
Multiplied by the number of furloughed hours x 86
This equals to £206,400
Divided this by the number of usual hours / 178
The furlough pay for Employee A in July is £1,159.55
Claim for the wage grant for July:
For the July claim, XYZ Limited can claim a wage grant of the lower of:
- The maximum grant: £1,207.87
- The furloughed pay: £1,159.55
Therefore, XYZ Limited will be able to claim via the CJRS for the July period the wage grant amount of £1,159.55
Calculation of the ER NIC for the July claim:
XYZ Limited will continue to apportion the NIC threshold by the number of days in the pay period:
NIC lower threshold £732
Divided by 31 days in July / 31
Multiplied by the number of days in the claim * 31
Divided by the usual hours in the claim / 178
Multiply this by the number of furloughed hours * 86
The ER NIC apportioned for July for the furloughed hours is £353.64
The wage grant amount for July is £1,159.55
Less the apportioned NIC threshold for the furloughed hours (353.64)
Multiplied by 13.8% of ER NIC rate * 13.8%
The ER NIC claim for July is £111.22
XYZ Limited is not eligible for employment allowance and the grant amount is less than the NIC the company will pay in respect of Employee A, as per the payroll run. Therefore, XYZ Limited can claim a grant of £111.22 in July in respect of the ER NIC.
Calculation for the pension contribution for the July claim:
The lower level of earnings is £520
Divided by 31 days in July / 31
Multiplied by the number of days in the claim * 31
Divided by the usual hours in the claim / 178
Multiply this by the number of furloughed hours * 86
The ER pension contribution apportioned for July for the furloughed hours is £251.24
The wage grant amount for July is £1,159.55
Less the apportioned ER pension contribution for furloughed hours (£251.24)
Multiplied by the ER pension contribution rate * 3%
The ER pension contribution claim for July is £27.25
The total grant XYZ Limited can claim for July:
Wage grant £1,159.55
ER NIC claim £111.22
ER pension contribution claim £27.24
Total claim for July £1,298.01