CJRS extension: Get the details right
Kate Upcraft explains what employers and tax agents need to know about the new version of the coronavirus job retention scheme (CJRS.3) which will apply from November 2020 to 30 April 2021.
Chancellor Sunak’s announcement on 5 November provided us with only a little information about the CJRS extension, further details are found in: "check if you can claim for your employees' wages through CJRS" guidance.
On 17 December 2020 Chancellor Sunak announced that the CJRS would be extended again until 30 April 2021. Also the government will continue to contribute 80% of the employee's salary for time the employee is not working. The employer must cover the employer's NI and pension contributions for all salary paid.
Sunak also announced the date of the next Budget as 3 March 2021.
The first weekly payrolls for November have already been run, when there was no indication of what reference pay or usual hours calculation was to be used for employees who had not been furloughed previously. Hopefully the new guidance will allow corrections to be made next week and before the vast majority of monthly payrolls are run.
Pay reference periods
For employees eligible for the previous iterations of the CJRS, the reference pay remains as the calculation for CJRS.2 that ended on 31 October. This is the case even if the employer did not make a claim for the employee.
Other employees may be now eligible for CJRS.3 as they either:
- had earnings for 2019/20 reported on a full payment submission (FPS) from 20 March 2020 to 19 April 2020 (19 April being the deadline for 2019/20 submissions); or
- had earnings for 2020/21 reported on a full payment submission from 6 April 2020 to 30 October 2020
The pay reference period will be:
- for fixed-rate employees the last pay period on or before 30 October 2020.
- for variable pay employees the average over the period from 6 April 2020 to last pay period on, or before, the day before they were furloughed under CJRS.3.
Note: Fixed-rate employees can be treated as variable if they have lots of fluctuating additional pay such as overtime.
Is it fair?
The calculation of reference pay appears more generous for variable-paid than for fixed-rate employees. Any pay rises from 1 November to start of furlough will be ignored for fixed rate employees, but pay will be included in the average for variable pay employees over (potentially) a much longer period if the business doesn’t need to furlough immediately under CJRS.3.
Conversely there doesn’t appear to be the option to use the pay period before the start of furlough if that was higher than the average for a variable pay employee.
There is also a strange outcome where an employee began work in October, as a fixed rate employee on say national minimum wage; they would be furloughed on £8.72 per hour, whereas a colleague employed since February 2020 would only be furloughed based on £8.21 per hour.
Owner managed businesses
Directors who reported their annual payment for 2019/20 to HMRC after 19 March 2020 will now be included in CJRS.3 having been excluded up until 31 October. The rate of earnings reported in the period from 20 March to 30 October 2020 can be claimed, subject to the £2,500 monthly pay cap. Remember this £2,500 cap is pro-rated to the number of furloughed hours as a proportion of usual hours.
With the ability to flexi-furlough being in place from 1 November 2020 this will be more attractive to such directors, but we still face the conundrum of trying to be able to evidence usual hours to support the claim.
For previously eligible employees the usual hours remain as per the calculation for CJRS.2 that ended on 31 October. This is the case even if the employer did not make a claim for the employee.
For newly eligible employees, usual hours will be:
- for fixed rate employees the contracted hours worked in the last pay period ending on or before 30 October 2020.
- for variable pay employees the average hours worked between 6 April 2020 and the day before they were furloughed under CJRS.3
The usual hours are based on calendar days in the claim period.
One of the most concerning differences from the CJRS.2 is the fact that claims for the prior month have to be made by the 14th day of the following month. Thus, claims up to 30 November have to be claimed by 14 December.
This will put an enormous burden on employers and agents and may prove impossible where payments for the month of November are paid in arrears in December with timesheets having to be collated. We will have to see whether an estimated claim is worth making by the deadline, and whether HMRC will allow corrections after 14th of each month.
Claims will be able to be made in advance (as now 14 days before payday) and will pay out within six days. The new CJRS claim portal opened at 8am on 11 November.
Employers are not required to submit their RTI returns before making a claim, so we appear to have returned to the ‘pay now check later’ model. There is also no mention in the policy paper of informing employees that their employer has claimed on their behalf as had been the intention with the JSS, but employers using the scheme will be named.
Individuals who had a date of leaving reported after the 23 September 2020 can be reinstated if the employer so chooses.
The government has recognised that it has been impossible to put in place furlough agreements from 1 November, given that employers were not aware what the reference pay period would be. Contract changes can be backdated to 1 November 2020 but must be issued by 13 November 2020, but as the new guidance is promised on 10 November this could be challenging.
Claim periods will cover a minimum of seven days and I assume orphan periods will be a feature of the new scheme, where a week split is over two calendar months, meaning there will be less than seven days in the claims. This should be okay as long as it’s preceded or followed by a seven day period of furlough.
The job support scheme will not be coming into effect this tax year and the job retention bonus has been scrapped.
What hasn’t changed from CJRS.1 and CJRS.2?
- All employment rights continue during furlough, eg accrual of holiday pay and leave.
- Employees can be included in a CJRS claim when they are off sick, and must be paid at least the level of SSP. Employers can choose to either pay SSP only or furlough pay, and clearly the latter is more beneficial to the employee and employer.
- Employers can top up furlough pay but aren’t obliged to.
- Employers will still be liable for employer’s NIC and pension contributions for any unworked hours
- Employees can train, volunteer, or work for another employer whilst furloughed