Coronavirus Job Retention Scheme (CJRS) FAQs
PLEASE READ: Detailed Update – Coronavirus Job Retention Scheme (June 2020)
2nd April 2020 (Information correct at the time of publication)
The vast majority of questions we have been asked are about the Coronavirus Job Retention Scheme (CJRS) and we feel it is useful to publish a FAQs page to try and cover the main ones asked.
Q:
I have stopped trading. Should I make my employees redundant or put them on ‘furlough’ and claim the CJRS grant?
A:
If you have no work for them, you are entitled to make your employees redundant, subject to taking professional advice to ensure proper procedures are followed. If you want to furlough employees, it is critical that you also obtain good legal advice first to ensure you are operating within the bounds of the contract with your employees. If you need that advice we can put you in touch with someone to give a free legal opinion, so contact us to do that. You will have to pay their wages and PAYE/NIC in the first instance and then make a claim for the CJRS grant, so there are Cashflow issues. Bear in mind that it may be easier to restart business again if you already have a workforce on the payroll, so looking to the future, furloughing is generally a good idea if you can make it work.
Q:
When will I receive the grant under CJRS?
A:
The Government has said it expects grants to be available from the end of April 2020.
Q:
What do I have to do to furlough employees?
A:
You must agree on the new terms of employment with staff, including a reduction in salary if appropriate, and write to them informing them of the new arrangements. It is critical that you obtain legal advice as to your position before taking action.
Q:
Some of my staff are now working reduced hours. Will they qualify for CJRS?
A:
No. Employees must not undertake any work for the business if they are to be furloughed. You might need to separate the work allocated so that some employees work full or part-time and others have no work so can be furloughed.
Q:
I have an employee who is self-isolating. Can I claim under CJRS?
A:
Employees who are on sick leave or self-isolating should get Statutory Sick Pay and cannot be furloughed. However, those who are ‘shielding’ because they are considered to be at extremely high risk of severe illness, or those you cannot have working because your office doesn’t allow sufficient space for the ‘social distancing’ rule of 2 metres separation to apply can be furloughed. These terms have been used in the media with casual interchangeability sometimes, but it’s important that you make the difference clear in your records.
Q:
My employee also works for another employer. Can he be furloughed?
A:
Yes, each employment is treated separately and the £2,500 limit applies to each employment.
Q:
I am working from home. Can I be furloughed? A:
No. You must not undertake any work for the business to be furloughed.
Q:
I am a Director. Can I be furloughed? A:
In theory, yes but you must not undertake any operational work for the business. We have anecdotal evidence that HMRC has said that undertaking statutory duties such as filing documents at Companies House and generally fulfilling your statutory and fiduciary responsibilities is acceptable since those are duties expected of a director, whether he is employed in an operational capacity or not. We are waiting for further formal guidance to be issued. If you are an owner / director, the furloughing will apply only to the salary paid and not to any dividends you take from the company.
Q:
My employees are on variable hours. How is the grant under CJRS calculated?
A:
If the employee has been employed for a year you can claim the higher of the same month’s wages for the previous year and the average of the 2019/20 monthly wages. If employed for less than one year, take the average monthly wages since they started work.
Q:
What does the £2,500 cap mean? A:
The CJRS grant is the lower of 80% of an employee’s ‘regular wage’ (their salary at 28 February 2020) and £2,500 per month. If the regular wage is more than £3,125 pm, 80% of that will be more than £2,500 so the grant is ‘capped’ at £2,500 per month
Q:
Do I have to pay 80% wages to furloughed employees or can I pay less? A:
The amount you pay employees while they are furloughed is open to agreement between you and the employee, but you do need to pay at least 80% of their regular wage. The CJRS grant will be restricted to that lower amount. If this takes the employee below NMW or NLW, that is OK as they won’t be working and those minima apply only while an employee is working.
Q:
How do benefits in kind come into it? A:
It has not yet been made clear whether benefits in kind are to be included in the grant cap calculation. However, from the examples given, it seems that only cash pay is to be brought into the calculation, so benefits will apply in addition, but of course, it is up to the employer to negotiate what they will pay, but the grant from HMRC will only apply to the cash element paid.
Q:
How is the new salary taxed? A:
The salary paid to furloughed workers will be entered through the employer’s payroll and taxed in the usual way, subject to PAYE and NIC.
Q:
If I have an employee who left us to become self-employed after 28 February and I now wish to take him back on, can he be furloughed? A:
The scheme applies to employees who were on the payroll on 28 February. If an employee has been made redundant since 28 February you can rehire them and put them straight on the scheme. If the employee was not made redundant, he left of his own accord, he does not qualify.
Unfortunately, and to add insult to injury, he will also not be eligible for the help offered to the self-employed, as the qualifying criteria for that means that he would have had to be self-employed on 5 April 2019, which he wasn’t.
Q:
If we are still trying to trade and furlough employees now, will we still get the CJRS grant if we subsequently make them redundant because we can’t make it work? A:
You will be entitled to the CJRS grant money if you have followed the proper procedure for furloughing. If you subsequently make redundancies because of poor trading conditions, that won’t affect the grant. The furlough / CJRS scheme runs only until 31 May, as it commenced retrospectively on 1 March for 3 months, so at this stage, we cannot tell if further grants will be made available past 31 May. You must follow legal guidance on making redundancies and normal statutory redundancy rules will apply.
We recommend that professional legal advice is taken when making employees redundant or placing them on furlough. Jacobs Allen are offering a free consultation with employment specialists, just contact us.
Q:
And finally a question on the ‘self-employed version’ of the CJRS, as that is in a way related and a similarly targeted relief grant. I am self-employed. Is it my gross or net profits used to calculate a grant under the Self-employment Income Support Scheme? A:
It is your net taxable trading profits as shown on your tax return for the period up to 2018/19, taken over a period depending on when your self-employment started.
