CJRS: Your questions answered
Kate Upcraft answers questions about the calculations needed for CJRS claims and other issues raised by AccountingWEB members. This article was updated on 17 November following release of the legislation.
Accountants and payroll professionals are frustrated by government guidance that appears late, and then is incomplete or confusing. We hear your pain at AccountingWEB, and are striving to find the answers you need.
1. The definition of “reference pay” for a monthly paid employee on a fixed salary should be their pay for October 2020 – is that correct?
No. The reference pay for a fixed-pay employee, who was not eligible for the earlier CJRS schemes, is the pay in the last pay period that ended on or before 30 October 2020. For monthly paid employees this will normally be the September pay period if the October pay period ends on 31 October.
If the employee was included in a claim for CJRS.1 or CJRS.2, his reference pay is his last pay period that ended on or before 19 March 2020, ie the same reference pay as used in earlier CJRS claims. If that employee was reported as leaving the employment before 23 September 2020, and rejoined by 30 October 2020, he will be treated as a new joiner.
2. HClarke asks: A new employee joined in October and was paid on 30 October, but the pay period ends on 31 October, what is their reference pay?
The guidance is very confusing. It says the employee is eligible if employed on 30 October, which they were, but also requires that the FPS had been sent by midnight on that day. If those two conditions are met then the new employee is eligible.
However, the next problem is whether you use October’s pay as they haven’t got a pay period that ends on or before 30 October as their first pay period ends on 31 October.
The HMRC calculator simply asks for the last pay period before furlough start date, which in many cases will be the period ending 31 Oct 2020, if the employer began furlough from 5 November 2020 as most people did. I would go for putting it through the HMRC calculator and keeping a copy of the answer!
3. Mattaxnpayroll is confused about the average pay calculations for variable paid employees as the HMRC calculator appears to include furloughed days in 2019/20 which contradicts the guidance. Which is correct?
Nothing has changed for variable paid employees who were eligible for CJRS.1 and CJRS.2. I assume this question refers to employees first reported after 19 March 2020.
The guidance says that you should be using the pay from the start of this tax year or the start date if later. I do believe the HMRC calculator is incorrect. I have tried to do the same calculation for somebody who began in February but wasn’t reported until the end of March, so was not on an RTI return by 19 March 2020. We should be using average pay this tax year until the day before furlough. The HMRC calculator says only use the tiny amount of pay they earned in 2019/20.
4. Employees who were on the payroll in March and haven’t been furloughed so far, have taken a pay cut in August. What should be used as their reference pay if they are not put on furlough: the February 2020 salary or the lower September 2020 salary?
We have had mixed messages on this from HMRC. If the person was eligible for CJRS.1 and CJRS.2 but wasn’t furloughed, the guidance says we should be using the February 2020 salary which means they are better off.
This seems very odd as many people have had to take a pay cut but it also works the other way. Somebody who began work in October 2020 can be on a higher hourly rate, even if it’s just national minimum wage, than somebody with much longer service who was earning the national minimum wage as of February 2020, before the uprating in April 2020.
5. Michaelbeaver asks: Annually paid director was paid on 31 March 2020, but has not been paid yet in 2020/21. What is his reference pay?
Where the director paid himself on or before 19 March 2020 and was eligible under the previous CJRS, but has not been paid since 20 March 2020 he is not eligible for the current scheme.
Where the director paid himself on 31 March 2020, and reported that pay under RTI on that date, he has received pay in the period 20 March to 30 October so is now eligible for CJRS, but wasn't eligible for the earlier CJRS scheme. In this case his reference pay is that he received on 31 March 2020 (capped at £2500) as that is the last pay period on or before 30 October.
The legislation (Direction for CJRS.3) is clear that the reference pay of a fixed rate employee is the last pay period ending in the period: 20 March to 30 October 2020.
6. Where an annually paid director received and reported his pay of £9,000 on 20 March 2020, then switched to a monthly pay of £750 from April 2020, what is his reference pay?
I would treat him as a fixed-rate employee and would therefore use £750 per month, if that’s what he received in the last pay period ending before 30 October.
7. Seasonal staff who are paid by the hour work short-time in winter, and were furloughed in March at low reference pay. When the business reopened the existing staff were brought back, worked longer hours over the summer, and some new staff were taken on. All staff are now furloughed again, but those who were employed in March appear to be on lower furlough pay than new staff taken on in the summer. Is this correct?
I don’t think it’s morally appropriate but it’s the way that the guidance is written.
8. Holiday season is fast approaching (thank goodness!), can an employee use up paid leave while furloughed?
Yes, employees can take paid holiday leave while furloughed and the time they take as holiday can be counted as furloughed hours. Also, the employees will continue to accrue entitlement to paid leave as part of their employment contract while they are furloughed. Employers and employees can agree to vary holiday entitlement, but not below the 5.6 weeks of statutory paid leave per year.
However, holiday taken while furloughed must be paid based on their normal weekly remuneration which is calculated over the 52 worked weeks prior to the week of holiday (12 weeks in Northern Ireland). Thus, the amount of holiday pay paid to the employee while on holiday may not be the same as their furlough pay and indeed it may be higher, in which case the employer will have to make up the difference at their own cost.
9. How should holiday pay be calculated for an employee who has been furloughed off and on since March 2020?
Where pay varies (and this includes salaried staff who for example regularly undertake voluntary overtime) the basis for holiday pay is ‘normal remuneration’ which is calculated as the average pay looking back over the previous 52 worked weeks. This calculation should exclude any weeks where only holiday pay, statutory payments or furlough pay was all that was received in that week. You are required to look back 104 weeks prior to the holiday to find as many worked weeks as possible to a maximum of 52.
10. Debrahuzzard asks: Where the business closes for an extended break over Christmas can the staff by furloughed over that two-week break?
This is not in the spirit of the scheme. Employees should not be furloughed simply because they are going on holiday so the furlough period should begin before the holiday and continue afterwards in order to prove to HMRC that that is not the case.
This could be particularly important for businesses that close down for two weeks over Christmas. You cannot simply put everybody on furlough for two weeks and claim 80% of that money back as that is not what the scheme is intended for. The legislation says (para 2.3) that claims should only be made to reimburse expenditure incurred by the employer in respct of employees "whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission".
11. The TUPE conditions are confusing. What date does the employee have to be transferred to the new employer by, to allow the new employer to furlough them from 1 November 2020 or later?
This was corrected on 13 November and now reads that the new employee is eligible:
- If transferred from their old employer to their new employer on or after 1 September 2020
- Were employed by either their old employer or new employer on 30 October 2020
- Are on a PAYE Real Time Information (RTI) submission to HMRC, by their old or new employer between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee
12. Can an employee who is due to start maternity leave soon postpone this and take furlough now and SMP later?
Yes, that is possible, but the maternity pay period must begin, at the latest, the day after the day of the birth, if the baby comes along unexpectedly early!
If the employee is sick with a pregnancy-related absence (Covid-19 is not classed as a pregnancy-related absence if they were to be that unfortunate) in the four weeks before the due date, then the maternity pay period will be triggered automatically.