CJRS update: Portal opens; new guidance on calculating claims; clarity on holiday
After a month of frantic preparation, the Coronavirus Job Retention Scheme (CJRS) claims portal opened on 20 April to a flurry of employer claims.
After a month of frantic preparation, the Coronavirus Job Retention Scheme (CJRS) claims portal opened on 20 April to a flurry of employer claims. HMRC estimate that 140,000 UK businesses submitted refund applications in the first day alone, with many more expected imminently as end-of-month payroll dates approach for many employers.
At the same time, it was announced that the CJRS will be extended by one month, from the end of May to the end of June 2020 (to keep step with the extension of social distancing measures announced separately by the government). The CJRS may potentially be extended further, if lockdown and/or social distancing measures continue.
To assist employers with their submissions, the government has published new, detailed guidance on performing furlough pay calculations; How to work out 80% of your employees’ wages to claim through the CJRS. This is also accompanied by a practically focussed step by step guide to making a claim.
Updated employer guidance
The fifth iteration of the government’s general CJRS scheme guidance for employers, published on 20 April, is substantively similar to previous versions. However, small changes have been made to reflect the claims portal opening date and the extension of the scheme.
The updated guidance also seeks to clarify a concerning discrepancy between the fourth iteration of the guidance and the Treasury Direction (a set of detailed instructions setting out how the scheme should be technically administered by HMRC). All previous versions of the government guidance stated that, to furlough employees, an employer must write informing them that they had been placed on furlough and should not do any work (retaining that communication for 5 years). However, the later Treasury Direction confusingly stated that employers must secure the written agreement of employees not to do any work during furlough. This led to concern that employers who had not insisted on or chased for a response to their furlough instructions might not be technically compliant with the scheme rules (and might have to go back and seek fresh consent from their employees).
The fifth, most recent, iteration of the government guidance reassures employers that “there needs to be a written record [of furlough] but the employee does not have to provide a written response”. This is consistent with feedback received from the government by the CBI during recent consultation sessions.
Crucially, the government guidance makes clear that any changes to an employee’s contract (including placing them on furlough at a reduced rate of pay) must be effected “in a way that is consistent with employment law”. This means that employees must still agree to be placed on furlough. The updated guidance simply seeks to reassure employers that a failure to secure written confirmation of agreement from each employee will not defeat an employer’s claim. Please do not hesitate to contact your usual Weightmans advisor if you need support with the complex process of placing employees on furlough.
Calculating wages and making a claim
Crucially for employers who are currently preparing their furlough refund applications, the government has produced detailed guidance around how to calculate the 80% of employee wages payable under the scheme. There is a calculator tool available, although this was reportedly taken down on the first day of live use of the scheme as it was crashing frequently and producing inconsistent results. In any event, this is only suitable for the most straightforward cases.
The guidance confirms that an employer may claim for 80% of an employee’s regular wage including any contractual or non-discretionary payments (such as overtime, fees or commission). Any discretionary payments (such as tips and discretionary bonuses or commission) should be excluded. The value of non-cash payments and non-monetary benefits should also be disregarded. The refund sum is subject to a maximum of £2,500 per month or £576.92 per week (depending on whether the employee is paid weekly or monthly).
The refund sum should be calculated after any salary sacrifices (including pension contributions) that reduce the employee’s taxable pay. However, the employer should claim the refund on a gross basis, and the employee will pay tax and NI on the sum received as usual.
Both the Apprenticeship Levy and Student Loan repayment should continue to be paid as usual and will not be covered by the CJRS grant.
The guidance confirms that, where employees are returning from family-related statutory leave, sick leave, or unpaid sabbatical, their furlough pay should be calculated against their regular salary, and not the pay they received while away from work.
A number of complex worked examples are provided to demonstrate how the refund sum should be calculated in practice, although some of these are very difficult to follow. If you need assistance to apply these to your own employee calculations, please get in touch with your usual Weightmans advisor.
The government’s separate ‘step by step’ guide provides further general information about the scheme and a helpful, more intuitive five-point summary of the claims process.
Furlough and holiday
Whether holiday can be taken during a period of furlough, and how employees should be paid for that holiday, has been a persistent area of uncertainty since the CJRS was first announced on 20 March.
This has now been clarified by the government’s newly issued calculation guidance (above) and changes to the CJRS guidance for employees.
The calculation guidance confirms, as we suspected, that employees on furlough will continue to accrue annual leave. Employees can take holiday during a period of furlough, although employers have the flexibility to restrict when leave can be taken if there is a business need.
While on holiday, employees should “be paid at [their] normal rate of pay” in accordance with the Working Time Regulations (WTR). Our interpretation of the guidance is that, during holiday, employees should receive 100% of their pre-furlough salary (including any additional elements that would ordinarily be factored into holiday pay such as commission and regular overtime). Remember that, as of 6 April 2020, the reference period for calculating normal remuneration for holiday pay purposes is 52 weeks.
Employers can claim 80% of the employee’s pay under the CJRS for periods of holiday, but must ‘top-up’ pay for these periods to 100% of the employee’s normal pay. The fact the CJRS grant payments will continue during periods designated as holiday suggests that annual leave will not ‘break up’ a minimum 3-week period of furlough.
If an employee usually works on bank holidays, then the employer can agree that this will be included in the CJRS grant payment. If an employee would usually take bank holidays as leave, then the employer must either ‘top-up’ these days to normal pay, or award a day of holiday in lieu at a later date.
The new guidance does not directly address the issue of whether employers can compel employees to take leave during furlough. Our view is that this is possible, provided that notice requirements are complied with, although it may not necessarily be desirable, given that 100% pay must be provided. We would not advise employers to compel employees to take amounts of annual leave that are disproportionate to the time they will spend away from work on furlough.
Reclaiming Statutory Sick Pay
The Coronavirus Statutory Sick Pay Rebate Scheme will reimburse employers with fewer than 250 employees for the costs of up to 2 weeks SSP where an employee has been off sick due to coronavirus (including employees who are self-isolating or shielding). For coronavirus related cases, SSP will be payable from Day 1 (rather than Day 4 as is usual).
Although the online service employers must use to reclaim SSP is not yet available, the government has issued limited guidance to confirm the scope and terms of the scheme. SSP rates changed on 6 April 2020. However, the guidance states that the current rate of SSP (£95.85 per week) will be paid for the absence (presumably even if part of the absence was incurred before the change in rate). Claims for SSP rebate can be backdated to 13 March 2020.
The guidance confirms that the scheme will cover all types of employment contracts and sets out the records that must be kept to make a claim. These include the reason why an employee could not work; the start and end dates of the period when the employee could not work; details of the SSP qualifying days when the employee could not work; and the employee’s National Insurance number. Further, more detailed, guidance is anticipated before the scheme becomes operational.
While navigating a lot of new guidance can be onerous for employers, it is comforting to have more detail on how the CJRS scheme will operate to close some of the gaps evident in earlier versions of scheme guidance.
Clarity in the overlap between furlough leave and annual leave is reassuring and arguably overdue, as we know this was a pressing concern for many of our clients. The requirement to ‘top-up’ pay during annual leave may be an unwelcome additional cost at a difficult time, but it may also assist in limiting the extent of an increased accumulation of accrued annual leave during the furlough period Further developments as the scheme progresses cannot be ruled out. Specifically, the government has stated that “during this unprecedented time, we are keeping the policy on holiday pay during furlough under review” suggesting that the position may change. We will keep you updated.
Ben Daniel is Head of Employment, Pensions and Immigration at Weightmans LLP. If you have any questions or concerns, please do not hesitate to contact Ben at firstname.lastname@example.org or speak to your usual Weightmans advisor.