COVID-19, or coronavirus, has created unique challenges to businesses in a variety of sectors. Many have been forced to seize trading for the foreseeable future which is causing cash flow problems and often resulting in difficulties maintaining the organisation’s workforce. The Government has launched measures to provide businesses with an injection of cash and one of the schemes created is the Coronavirus Job Retention Scheme (CJRS) which aims to tackle any salary payment problems organisations might have. With the scheme about to open for applications on 20 April, we’ve created a guide to help you understand the scheme and the ways it could help your small business through these tough times.
What is the Coronavirus Job Retention Scheme?
CJRS is designed to help those employers whose operations have been affected by the coronavirus pandemic. The scheme’s objective is to provide financial support to help employers retain their employees.
Under the scheme, employers can furlough employees and apply for a Government-backed grant. The grant will cover 80% of the furloughed employee’s monthly gross pay up to £2,500 per month. In addition to the salary, the scheme will also cover:
- Employer National Insurance Contributions
- The minimum employer auto-enrolment pension contributions
The employer can claim for any regular payments they are obliged to pay to their employees. This includes wages, past overtime, fees and compulsory commission payments. However, non-monetary benefits or benefits provided through salary sacrifice schemes should not be included.
The salary upon which the payments are calculated can depend slightly between different types of employees.
For those with a regular monthly salary, the employer should use the actual salary they paid as of 19 March 2020.
For employees with a variable pay, the employer can claim the higher of:
- The same month’s earnings from the previous year
- The average monthly earnings for tax year 2019/20
If the employee has been working for less than 12 months, the employer should claim either the average monthly earnings so far or a pro-rata amount if the employee only began work in February 2020.
Initially, the scheme is set to run for three months starting from 1 March 2020. Businesses and organisations can claim for the three-month period or for any duration the employee was furloughed during these three months.
The Chancellor has announced that the scheme will be reviewed mid-May so the timeframe may be lengthened.
Which organisations are eligible to use the scheme?
The Coronavirus Job Retention Scheme is open to UK employers including individuals who employ people, as long as they meet certain criteria. As an employer, you will have to:
- Have operated a PAYE scheme on 19 March 2020
- Have enrolled for PAYE online
- Have a UK bank account
The scheme doesn’t exclude the public sector, although many public sector organisations are unlikely to use it, as they will be engaged with essential services and therefore, don’t face similar problems to many private sector organisations. Furthermore, if your private sector business receives public funding to pay staff, you should continue to use that funding to pay employees, assuming that public funding has not stopped.
In essence, the scheme can be used by any entity with a UK payroll – including businesses, charities, recruitment agencies and public authorities.
Which employees are covered by the scheme?
In terms of employees that can be furloughed, the scheme is usable for all employees that were employed as of 19 March 2020. The employees can be working full-time or on zero-hours contracts. The scheme covers everyone who is part of the employer’s PAYE system.
If the employee is on unpaid leave, the scheme allows furloughing if the leave started after 19 March 2020. Please note that those off sick or self-isolating should be paid SSP but after that runs out or the employee has recovered, they can also be furloughed.
The Government recently changed the cut-off date from 28 February to 19 March which also means that employees made redundant or who stopped working after 28 February can be furloughed. You can re-employ those employees and put them on furlough – even if you do not re-employ them until after 19 March. In these situations, the employee must have been on PAYE on or before 28 February and HMRC had been notified on an RTI submission on or before that date as well.
It is also possible to use the CJRS to furlough apprentices, who are also allowed to continue training whilst furloughed. You can read more about the changes in apprenticeship learning arrangements from this Government guide.
It is crucial to understand that furloughed employees should not provide any services or generate revenue for the employer. The Coronavirus Job Retention Scheme is strictly used to cover the salaries of employees who are not working due to the pandemic.
Furthermore, employers must confirm in writing with their employees that they are being furloughed. This communication must be retained for five years.
When can you apply?
The Government has announced that the scheme will go live on 20 April and companies can expect first payments 10 days after that. In the future, the claims will be paid within four to six days from application.
How to apply?
The application can be made online, with the service being accessed by your current gateway login. You will be required to submit the following information with your claim:
- Your employer PAYE reference number
- Names and National Insurance numbers for the furloughed employees
- Your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
- The claim period and the amount you want to claim
- Your bank account number and sort code
- Your contact details
Where can you get more help for your small business?
The current situation is creating unique challenges to businesses and staying on top of the help available for your business is important. We’re here to help you know what schemes are available and how your business can use them. In addition to the Coronavirus Job Retention Scheme, small businesses can also access loans and there is a scheme to help the self-employed who are not covered by CJRS.
Our professionals at Devonshire Green are happy to answer your questions and help you sort out your finances. Contact us today to discuss your situation and let’s map out a path forward!
