CJRS extension: The details

We have set out below what you need to know about the new version of the coronavirus job retention scheme (CJRS 3), which now applies from November 2020 to March 2021.

Which Employers are eligible to claim?

• All employers with a UK bank account and UK PAYE scheme
• Employers do not need to have previously used the CJRS

Which employees can be included in the scheme?

• Employees must have been on the employer’s payroll as at 30 October 2020 (and a RTI submission made to HMRC for that employee between 20 March & 31 October 2020)
• Any type of employee contract is permitted, such as a part time, zero hours etc.
• Any variation to normal hours must be agreed in writing with the employee (see more below)

What can be claimed?

• Full time and flexi-furloughing will be permitted
• For hours not worked (which will be calculated in the same way as previously), the Government will pay 80% of the wages, up to a cap of £2,500 per month
• Employers will remain liable for the employer’s National Insurance contributions and Employer’s Pension contributions
• Employers must pay the full cost of hours worked and can choose to top up their employees’ wages up to 100% for hours not worked
• The financial support from the scheme is in line with that which operated for August 2020

What hasn’t changed from CJRS 1 and CJRS 2?

• Employers pay full contracted pay rates for all hours worked by employees
• All employment rights continue during furlough, e.g. 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 are still liable for employer’s NIC and pension contributions for any unworked hours
• Employees can train, volunteer, or work for another employer whilst furloughed.

Re-Employment of former Employees

• Individuals who had a date of leaving reported after the 23 September 2020 can be re-employed, if you wish.
• You will need to consider whether this is a brand new contract of employment with a brand new start date (often preferable to restart the two year minimum period of service to qualify for redundancy pay in the future) or a continuation of the previous contract and period of service.

Contract changes

Employers should discuss with their staff and make any changes to the employment contract by agreement.

Changes to contracts must be issued by 13 November 2020 if you are backdating the changes to apply from 1 November 2020. As the Govt. guidelines were only issued late last night, 10 November, and you are getting this late on 11 November, making retrospective changes to contracts in time will be challenging to say the least.

Contractual changes made after 13 November can only apply from that date onwards.

To be eligible for the grant, employers must have confirmed to their employee (or reached collective agreement with a trade union) in writing that they have been furloughed or flexibly furloughed.

Employers must:

• make sure that the agreement is consistent with employment, equality and discrimination laws
• keep a written record of the agreement for 5 years
• keep records of how many hours their employees work and the number of hours they are furloughed (for example, not working), for 6 years

The terms of any agreement must:

• reflect the hours the employee has actually worked or not worked over the period of the agreement

The employee does not have to provide a written response and employers do not need to place all their employees on furlough.

Pay reference periods

For employees eligible for the previous CJRS schemes or previously furloughed, 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 that employee.

Other employees may now be 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 for these new employees now eligible for CJRS 3 will be:

• for fixed-rate employees the last pay period on or before 30 October 2020; or

• for variable pay employees the average over the period from 6 April 2020 to the day before they become 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 2020 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 2020 – here, a fixed rate employee, on say national minimum wage, 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.

Usual hours

For employees eligible for the previous CJRS schemes, 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; or

• 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.

Claim deadline

One significant difference 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 won’t be an issue for us as payroll agents as we submitted all CJRS claims by the end of the month itself, with the latest claim being the 5^th of the following month due to us waiting for information.

Claims can be made in advance (as previously – 14 days before payday) and will pay out within six days. The new claim portal will open at 8am on 11 November.

Employers are not required to submit their RTI returns before making a claim, so it is a return to the ‘pay now, check later’ model.

Employers who claim CJRS will be named and employees will be able to check that a claim has been made for them, so they can check they have been paid correctly from Govt money provided to the employer.

Weekly payrolls

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. Corrections can now be made to the previously submitted weekly payrolls, before the vast majority of monthly payrolls are run.

Schemes scrapped

The job support scheme will not be coming into effect now and the job retention bonus has been scrapped, though the Govt. may re-introduce some form of employee retention bonus next April.

We are here to help you with the CJRS 3 claims, so do call us on 01737 844 322 if you have any queries.