Coronavirus Job Retention Scheme (CJRS) – What you need to know

Updated 20th April 2002

The CJRS is a mechanism introduced by the government which enables all UK employers to access support to continue paying part of your employees’ salary to avoid redundancies where there is a downturn in work as a result of coronavirus (COVID-19).

The government’s guidance is clear that the intention is for the CJRS mechanism to be used where business operations have been severely affected by COVID-19. However, the guidance does state that all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus. We understand this to mean that if a business isn’t severely impacted by COVID-19 but certain employees are then the employer should be able to claim under the CJRS in relation to the affected employees.

Affected employees need to be reclassified as “furloughed workers”.

If an employee has been furloughed, they can do no work. If any element of their employment duties continues to be performed it is likely to mean that the employee will not qualify for the scheme.

Please refer to our previous CJRS blog for further background.

FAQs – Updated 20 April 2020

Which employers can claim relief under CJRS?

To claim relief on wages paid to furloughed workers under the CJRS mechanism, employers must have:

The scheme is designed to help employees where their employer is unable to operate or has no work for the employee to do because of coronavirus.

Public sector employers and those in receipt of public funding

The government does not expect the CJRS to be used by many public sector organisations, given that most public sector employees are continuing to provide essential public services or contribute to the coronavirus response.

Where employers receive public funding for staff costs, and that funding is continuing, the government also expects employers to use the funding received to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.

Organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff.

In a small number of cases, for example where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff.

Which employees does CJRS apply to?

Any worker on your payroll can be considered for furlough, however you can only claim under CJRS for employees who were on your PAYE payroll scheme at 19 March 2020 and were notified to HMRC on an RTI submission on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.

The scheme is designed to help employees where their employer is unable to operate or has no work for the employee to do because of coronavirus.

HMRC announced on 15 April 2020 that the start date for employees who can be considered for furlough had been extended from 28 February 2020 to 19 March 2020, but any employees who joined the business after 19 March 2020 remain ineligible to be included in the scheme. We understand that this is an anti-avoidance measure, but it will continue to cause commercial issues for businesses (and affected employees) who have hired employees in good faith after that date, but before the announcement of the CJRS. Likewise, commercial issues will arise where employees were hired before 19 March 2020 but were not included on an RTI submission until after 19 March 2020.

The updated government guidance now confirms that employees that were employed as of 28 February 2020 and on the payroll (i.e. notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for the employer after 28 February 2020 and prior to 19 March 2020, can also qualify for the scheme if the employer re-employs them and puts them on furlough. .

This applies to employees that were made redundant or stopped working for you after 28 February, even if you do not re-employ them until after 19 March. This applies as long as the employee was on your payroll as of 28 February 2020 and had been notified to HMRC on an RTI submission on or before 28 February 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020.

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.

The government’s guidance at CJRS government guidance highlights the impact on particular groups of employees.

Do I pay employees their full salary when they are furloughed?

If you haven’t entered into a formal variation to an employment contract with an employee, then you should pay them their normal salary and benefits package throughout the furlough period.

We consider the wording used by the government stating that you can choose to “top up” your employee’s salary is slightly misleading given that you must formally agree with the employee to vary their contract of employment to pay them at a reduced salary.

The government’s guidance makes it clear that this change to an employee’s status (of not being at work) is subject to existing employment law. What this means in practice is that you will have to immediately try to get agreement of employees to place them on furlough, either by asking staff to indicate if they are agreeable to it or by asking for volunteers.

Once agreed you must write to your employee confirming the furlough and the commencement date to be eligible to claim relief under CJRS. A record of this communication must be kept for five years.

If you intend to change your employees’ entitlements in any way, then you will need to formally vary their employment contracts.

Employers will need to ensure that employment contracts are updated, and employees are properly consulted on the changes to their contract to be able to take advantage of the CJRS.

We recommend that employment law advice is sought if you intend to make any changes to your employees’ pay. Contact details of local employment lawyers are included at the end of this note.

How are furloughed employees paid?

The employer will continue to pay the employee through payroll as usual on the normal pay day using the Real Time Information (RTI) system. The employee will pay tax and NIC on payments made as normal. Employees will still be required to pay student loans and employee pension contributions during the period of furlough.

Payment of PAYE and NIC should be made to HMRC and the RTI filing requirements continue to apply. In addition, pension uploads, along with payments, should continue to be made to the pension provider.

What can I claim back from the government?

Employers can make a CJRS claim for:

  • 80% of the employees’ wages up to a maximum of £2,500
  • Employer National Insurance contributions on the subsidised furlough pay
  • Minimum automatic enrolment employer pension contributions on the subsidised wage (which will be 3% of the employee’s qualifying earnings)

The government has confirmed that you can claim for any regular payments you are obliged to pay your employees including wages, piece rate payments and non-discretionary overtime, fees and commission payments. However, non-cash payments and discretionary bonuses, tips and commission payments are not included as part of monthly earnings.

For salaried workers, you can claim for 80% of the employee’s gross salary in their last pay period prior to 19 March 2020. Please note however that where salaried employees receive variable pay elements on top of their contractual salary then they will be treated as employees whose pay varies and you will need to know their total hours worked across the tax year and relevant comparative pay period.

If, based on the previous government guidance, you have calculated your claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) you can choose to still use this calculation for your first claim.

For employees whose pay varies, employers will be required to calculate an average to determine the amount available to claim under the CJRS.

The 80% grant will apply to the higher of:

  • The earnings in the same period in the previous year; or
  • The average earnings per pay period for the 2019-20 tax year

If a worker has been employed for less than 12 months, you can claim for 80% of their average earnings per pay period since they started work.

If the employee has been employed for less than a month before they were furloughed, a pro-rata of their earnings to the point of furlough should be calculated and 80% claimed accordingly.

Please note that the amount the employer can claim back from the government under the CJRS may be different to the amount that the furloughed employee is entitled to receive contractually.

This will be the case where a variable paid employee has been awarded a pay increase during the 2019-20 tax year, for employees who earn either fixed or variable pay at the NMW levels which increase from 1 April 2020 (or as employees move into the next pay bracket) or where employees are entitled to receive employer pension contributions which exceed the statutory minimum requirements.

The CJRS has been introduced to try to keep employees who would otherwise have been made redundant in work. The fact that the grant claims available under the CJRS are based on historic data means that many employers will not be able to claim full relief from the government in respect of all contractual entitlements due to employees whilst they are furloughed.

Examples illustrating what an employee is entitled to contractually and what the employer can claim back from the government under the CJRS can be found at this link.

You can claim CJRS relief for a minimum of 3 weeks per furloughed employee and for up to 4months from 1 March 2020. The CJRS scheme was originally open to the end of May, but the Chancellor of the Exchequer announced on 17 April that the scheme would now be open until the end of June.

The total maximum grant amount that can be claimed by an employer per employee will be £2,500 per month (i.e. the equivalent of £30,000 per annum) plus the associated Employers’ NIC and minimum automatic employer contributions. The £2,500 cap equates to £576.92 for a weekly-paid worker and £2,307.69 for a four-weekly paid worker.

To work out the maximum amount that can be claimed where an employee is furloughed part way through a pay period, you need to multiply the daily maximum wage amount by the number of days the employee is furloughed for in the period.

The daily maximum wage amounts are as follows:

Month            Daily maximum wage amount
March 2020 £80.65 per day
April 2020 £83.34 per day
May 2020 £80.65 per day
June 2020 £83.34 per day

Based on the NIC thresholds applicable from 6 April 2020, if an employee receives wages per month of £1,000, the employers’ NIC would be £37 and the minimum employer pension contribution would be around £14. The total cost to the employer of paying this employee for the month will be £1,051. The grant available would be £817 per month (which is made up of 80% of the wages i.e. £800, plus the employers’ NIC of £9 and the minimum employer pension contribution of £8 on the subsidised wage).

If an employee is furloughed part way through a period, or their furlough pay is being topped up, the secondary NIC threshold should be deducted from their total pay in the pay period to calculate the total employer NIC due, which is then pro-rated based on the number of furlough days in the period to calculate the grant claim amount.

In calculating the total employer NICs paid in any pay period, the employer should subtract any Employment Allowance used in that pay period. If you have not, or do not expect to pay any employer NICs in a pay period as a result of the Employment Allowance, you should not claim any employer NICs costs for furloughed employees in that pay period. If you expect to exhaust any Employment Allowance in a pay period then you should claim the lower of the employer NIC grant calculation, and the employer National Insurance contributions costs that you paid, or expect to pay across your entire payroll.

To calculate the minimum employer pension contribution which can be claimed where an employee is furloughed part way through a pay period, the NIC lower earnings limit should be apportioned accordingly (based on the number of furlough days in the pay period) before deducting from the furlough pay and multiplying by 3%.

If monthly employment costs for an employee are normally £3,125 or more, then the amount the employer can claim in respect of the wages (before calculating the employer NIC and pension contribution claim) will be the capped at £2,500 per month from the government by way of a grant.

If an employer agrees with a furloughed employee to vary their salary under furlough such that the total employment costs in respect of the wages will be reduced to £2,500 per month, (where they had normally exceeded £3,125) then this should be covered in full by the grant claim.

If, however, the employer continues to pay the employee at their normal rate, then any excess paid to the employee above the capped amount of £2,500, along with any additional employer NIC on salary above £2,500 and any additional / enhanced employer pension costs will continue to be an expense to the employer.

We expect that, for some employers, the availability of the grant will still make it easier to agree with higher paid staff that furlough is appropriate in certain circumstances where staff are unable to work or have been rendered unproductive due to the COVID-19 outbreak.

Apprenticeship Levy payments should continue to be paid as usual. CJRS grants do not cover these.

As the grant can only be claimed against 80% of wages for a previous pay period, increasing employee wages now will have no impact on what they would be paid with this scheme. This is partly an anti-avoidance measure to prevent abuse of what is intended to be a system to protect employment.

In circumstances where a pay rise had been formally agreed with an employee which was due to take effect on 1 March 2020, the employee is entitled to the revised pay under employment law. In this instance, if the employee is paid calendar monthly on the last working day of the month, the employer would need to fund the pay rise element as this amount cannot be reclaimed from the government under the CJRS (as the amount you can reclaim from the government is based on an employee’s salary in the last pay period prior to 19 March 2020).

How do I make a claim?

The CJRS grant from the government must be claimed through HMRCs online portal, which launched today (20 April).

In order to access the portal (or to allow an agent to access the portal and file a claim on the employer’s behalf), the employer must be registered for PAYE Online for employers. If you have not already registered, details of how to do this can be found below.

To make a claim via the portal, employers will need:

  • the employer PAYE scheme reference number
  • the number of employees being furloughed
  • National Insurance Numbers for the furloughed employees
  • names of the furloughed employees
  • payroll/employee number for the furloughed employees (optional)
  • the employer’s Self Assessment Unique Taxpayer Reference, Corporation Tax Unique Taxpayer Reference, Company Registration Number or Employer Name (as appropriate)
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
  • the employer bank account number and sort code
  • contact name
  • phone number

The employer (or their agent, if using an agent for the claim) will need to calculate the amount to be claimed.

If fewer than 100 employees have been furloughed in the business, details of each employee the employer is claiming for will need to be entered directly into the online portal system along with the claim amount. If 100 or more employees have been furloughed, a file containing the relevant information will need to be uploaded to the portal.

You should gather all of the information you need to make the claim before you start the claim as the application needs to be done in one session and the session will time out after 30 minutes of inactivity, there is no save and return option.

MHA Tait Walker can assist you to calculate the claim amount and file your CJRS claim with HMRC.

The employer will be responsible for maintaining records in respect of furloughed employees.

These records must demonstrate how your business has been impacted by COVID-19. Business plans from both before and after the COVID-19 outbreak could assist with this.

The government advises that employers should make a CJRS claim  either shortly before or during running a payroll. Claims can be made up to 14 days before a payroll run which will help businesses to manage cashflow.

HMRC will check your claim, and if you’re eligible, pay the amount due to you by BACs into a UK bank account. HMRC has advised that claims will be paid within 6 working days.

HMRC has the power to retrospectively audit all aspects of a CJRS claim.

What is the tax treatment of amounts received under the CJRS?

Payments received by a business under the CJRS should be included in the business’ calculation of taxable profits for Income Tax or Corporation Tax purposes, in accordance with normal accounting principles.

The CJRS grant income should be offset against the deductible employment costs as normal.

Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) are not taxable on grants received under the scheme.

Can employees do any work whilst they are “furloughed”?

There is no provision to partially furlough staff. This means employees will need to be entirely non-active to qualify.

Throughout a period of furlough, an employee cannot do any work that:

  • makes money for the employer’s organisation
  • provides services for the employer’s organisation

Furloughed employees can take part in volunteer work or training. An employer can agree to find furloughed employees new work or volunteering opportunities whilst on furlough if this is in line with public health guidance.

Furloughed employees can engage in training, as long as in undertaking the training the employee does not provide services to, or generate revenue for, or on behalf of their employer organisation.

Where training is undertaken by furloughed employees, at the request of their employer, the employee is entitled to be paid at least their appropriate national minimum wage for this time. In most cases, the furlough payment of 80% of an employee’s regular wage, up to the value of £2,500, will be sufficient to cover these training hours. However, where the time spent training attracts a minimum wage entitlement in excess of the furlough payment, employers will need to pay the additional wages, taking into account the increase in minimum wage rates from 1 April 2020. Any additional wages paid above 80% will not qualify for CJRS relief.

How do I enrol for PAYE Online?

You must have registered for PAYE Online services to claim relief back under CJRS.

You will need to enrol separately for HM Revenue and Customs’ (HMRC) PAYE Online service if you didn’t get a login when you registered as an employer – this is usually because you didn’t register online.

Please note, your payroll provider cannot do this for you. They may have added your payroll to an Agent Account but you will need to ensure you have registered for the Employer’s PAYE Online service.

You’ll need your PAYE reference and Accounts Office reference to register – these are included in the letter from HMRC confirming your registration or your payroll history reports.

How you enrol depends on whether you already have an online account for other taxes, e.g. Corporation Tax or Self Assessment.

If you already have an account

Log in to HMRC Online Services, then select the option to enrol for ‘PAYE for Employers’ under ‘Services you can add’ and enter your details.

If you don’t already have an account

Enrol as a new user at HMRC Online Registration by selecting ‘PAYE for Employers’ under ‘Organisation’ and following the steps.

Do directors / office holders qualify for CJRS?

Yes.

Furloughing of any individual who has been subject to PAYE will be possible.

Office holders can be furloughed and receive support through this scheme. The furlough, and any ongoing payment during furlough, will need to be agreed between the office holder and the party who operates PAYE on the income they receive for holding their office. Where the office holder is a company director or member of a Limited Liability Partnership (LLP), the furlough arrangements should be adopted formally as a decision of the company or LLP.

As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. 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.

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 they would carry out in normal circumstances to generate commercial revenue or provides 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 directors are included within the furloughed workers, as they often take a low or no salary from the business and dividends are utilised to top up their income, which are not subject to PAYE, then the dividend amounts will not form part of the CJRS calculation for the director.

A further concern is that a director must only fulfil their statutory obligations whilst furloughed but, given they may need to continue to manage the business in some way, especially if they operate a personal service company, they are unlikely to be completely inactive in accordance with the furlough requirements and therefore may fail the CJRS requirements.

The direction issued by the Chancellor of the Exchequer to HM Treasury on 15 April 2020 specifically states that “work undertaken by a director of a company to fulfil a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the director’s company must be disregarded” in determining whether a CJRS relief claim can be made. We understand this to mean that so long as directors are only ensuring filing and processes continue which relate to the ongoing administration of the business then they should qualify for relief under the CJRS.

Commercially businesses will need to make a choice between the cost saved by furloughing directors and the commercial disruption of not having that director performing an active role in the business. 

Do casual workers and employees on zero-hour contracts qualify for the CJRS?

Yes. The employer can choose the employees to furlough and enter into a communication process accordingly.

Pay entitlements will be calculated in the same way as that for any worker earning at a variable rate.

What if I need a furloughed employee to perform some work?

The government’s guidance confirms that a furloughed worker may return to work, be taken off furlough and then placed back on furlough. A worker must be furloughed for a minimum of 3 consecutive weeks for each separate furlough instance for their employer to be able to claim CJRS relief.

An employer can place a worker on furlough more than once, and one period can follow straight after an existing furlough period, while the scheme is open.

Whilst on furlough, an employee must not perform any employment duties. Therefore, a reduction in an employee’s hours will not qualify for relief under the CJRS.

If employers have the ability to plan for peaks and troughs, it may be that they can plan to utilise employees for a particular busy period and furlough them for quieter periods. Alternatively, it may be possible to rotate teams to share the furlough periods between the workforce.

What is the impact on National Minimum Wage?

National Minimum Wage (NMW) legislation does not apply to furlough payments, as the employee will not be allowed to work (unless the employer requires them to undertake training). As NMW is based on working time, no work means that any payment made is outside the scope of NMW.

Therefore, furloughed employees being paid NMW can be paid the lower of 80% of their salary or £2,500 even if based on their usual working hours this would be below their appropriate minimum wage.

What about benefits provided to employees?

Benefits in kind provided to an employee do not qualify for CJRS relief, unless they are provided to meet minimum legal requirements e.g. automatic enrolment pension contributions.

The reference salary should not include the value of non-monetary benefits received by an employee.

If the employee’s salary entitlement reduces whilst they are furloughed, then benefits based on the level of salary will also decrease e.g. employer and employee pension contributions.

Employers will need to determine whether they continue to provide other benefits or enhanced benefits (i.e. above the minimum legal levels) as part of any furlough discussions with employees.

You must not encourage an employee in any way to “opt out” of an automatic enrolment pension scheme. Doing so could cause the employer to be in breach of the existing regulations relating to Workplace Pensions. 

Company cars

Where a company car is ‘unavailable’ to an employee for a period of time, HMRC has confirmed that the car benefit charge would no longer apply only in certain circumstances.

Unfortunately, it is not as simple as not using cars for a particular period of time, whether that be for 30 days (the period of minimum ‘unavailability’ stated in legislation), or any shorter period that the government might consider.

The company car benefit charge applies where a car is made available for private use, whether or not it is so used. For example, a car kept on an employee’s driveway during a period of furlough would still be considered to be made available. Neither would HMRC accept a SORN declaration as proof of unavailability. Guidance at EIM25175 explains when HMRC would not accept that a car is unavailable and includes when there is no road tax, MOT or insurance.

In most cases, HMRC would expect that the car is handed back to the employer so that it cannot be used. However, they recognise that under the current circumstances it may not be possible to hand the car itself back, so exceptionally, they have confirmed that they would accept that where all the keys (or tabs) are in possession of the employer, and the employee does not have the authority to request the keys are returned to them, the car would be ‘unavailable’ for the purposes of the BIK rules. The car should remain unavailable for at least 30 days for the BIK charge not to apply.

Salary sacrifice schemes

Where a furloughed employee is a participant in a salary sacrifice scheme then, unless the employees’ contractual terms are varied, the salary sacrifice will continue throughout the period of furlough and the benefits available to the employee will also continue.

Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly. As with all contractual variations, this should be discussed and agreed with the employee and, if necessary, employment law advice taken by the business. 

Can CJRS be backdated?

CJRS grant claims can be backdated to 1 March, but claims will be limited to being backdated to the day the employee completely stopped undertaking duties of employment. In practice this means backdating of claims from the date the CJRS was announced to 1 March is only likely to relate to those who had already been made redundant as a result of coronavirus prior to the launch of CJRS, but who are then treated by the employer as re-employed and immediately furloughed.

If businesses re-employ staff that were made redundant between 28 February 2020 and 19 March 2020, these employees are eligible for furlough and the employer can apply for the CJRS grant.

CJRS will not apply to employees who have been put on reduced hours.

This means that if an employee worked reduced hours because of Coronavirus from 12 March and became completely inactive on 26 March, CJRS relief could only be claimed from the government from 26 March.

What if I have an employee who has stopped working for me due to childcare difficulties?

The government guidance confirms that employees who are unable to work because they have caring responsibilities resulting from coronavirus can be furloughed. This includes employees that need to look after children.

What if I need to make a furloughed employee redundant?

A furloughed employee can be made redundant while on furlough or immediately after. CJRS grant payments will cease when the redundancy occurs.

Can I furlough an employee who is currently on unpaid leave?

If an employee started unpaid leave after 28 February 2020, you can put them on furlough instead. If you put them on furlough then you should pay them at least 80% of their regular wages, up to the monthly cap of £2,500.

If an employee went on unpaid leave on or before 28 February, you cannot furlough them until the date on which it was agreed they would return from unpaid leave.

What happens to an employee’s holiday entitlement during their period of furlough?

Furloughed employees continue to accrue leave as per their employment contract.

The employer and employee can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.Employees can take holiday whilst on furlough, they must be paid at their normal rate of pay for these days. The employer will therefore be obliged to pay the employee an additional amount over the grant.

What about bank holidays?

The treatment will depend on whether the employee usually works bank holidays or not.

Where an employee usually works bank holidays, the employee will be entitled to receive furlough pay, as set out in the furlough agreement, for any bank holidays.

Where an employee usually takes the bank holidays as leave, the employer will either have to top up their furlough pay so that the employees are paid at their normal rate of pay for the bank holidays, or the employer could give the employee a day of holiday in lieu.

What if an employee refuses furlough?

If you ask an employee to go on furlough and they refuse, you may consider redundancy or termination of employment, depending on the circumstances. However, this must be in line with normal redundancy rules and protections.

What if an employee is sick or self-isolating and claiming SSP?

These employees cannot be furloughed whilst in receipt of SSP. They can be furloughed and CJRS relief claimed once they are no longer receiving SSP. Note the CJRS relief should be calculated based on the employee’s salary (as opposed to the pay they received whilst off sick).

The government’s guidance advises that an employer can claim CJRS relief for employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and the employer would otherwise have to make them redundant.

What if an employee is has more than one job?

If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.

Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.

If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough.

For any employer that takes on a new employee, the new employer should ensure they complete the starter checklist form correctly. If the employee is furloughed from another employment, they should complete Statement C.

What if an employee is currently on maternity leave, adoption leave, paternity leave or shared parental leave?

The normal rules for maternity and other forms of parental leave and pay apply.

You can claim through the scheme for enhanced (earnings related) contractual pay for employees who qualify for either:

  • maternity pay
  • adoption pay
  • paternity pay
  • shared parental pay

If an employee is furloughed on return from family-related statutory leave, the amount that can be claimed under the CJRS should be calculated based on their salary (as opposed to the pay they received whilst on family-related statutory leave).

What if an employee is currently pregnant and due to start Maternity Leave?

Employees will start Maternity Leave as usual.

If their earnings have reduced due to a period of furlough or SSP prior to Maternity Leave starting, then this may affect their SMP entitlement.

The same principle applies to contractual adoption pay, paternity pay and shared parental pay.

What if someone has an attachment of earnings what will happen to these deductions, will they continue if someone furloughs and is on 80% earnings?

The Department for Work and Pensions (DWP) are writing to employers to ask them to temporarily stop benefit debt repayments. Therefore, you should not make any Direct Earnings Attachment deductions from your employees’ pay in April, May or June 2020.

I am an employer, what should I do now?

  • Enrol for PAYE online if you have not already registered (this can take up to 10 days)
  • Document how your business has been affected by COVID-19
  • Designate affected employees as “furloughed” workers
  • Consider whether to vary employment contracts during the period of furlough
  • Engage employment lawyers a relevant
  • Enter communication process with employees, write to employees confirming the furlough, keep a record of this communication for five years
  • Keep records of information relating to furloughed employees including the date they became inactive, their earnings and other benefits paid to them during this period
  • Document the date that each employee returns to work
  • Calculate the pay that your furloughed workers are contractually entitled to
  • Calculate the amount that can be claimed back from the government under CJRS on an ongoing basis
  • Submit the RTI filings to HMRC
  • Pay the furloughed worker
  • Make payments to HMRC, pension providers, etc. unless you’ve agreed different payment terms
  • File your CJRS claim with HMRC.

Consider cashflow management recommendations set out in our blog – Managing cash in a time of crisis.

Local employment lawyers who you may wish to consult: