Five things that are now clearer about the Job Retention Scheme (and five things that are not)

1. The claim period

There has been a lot of confusion about the claim period – is it the same as the furlough period? What if employees are furloughed over different periods? How long should it be? How often can claims be made? Can I make more than one claim in each period?

The claim period is simply the period from the date that the employer's first employee went on furlough to either the date the last employee finishes their furlough or a date of the employer's choosing – whatever comes first. Although the minimum furlough period is 3 weeks, so the initial claim period must be for at least 3 weeks, thereafter there is quite a lot of flexibility as to the length of subsequent claim periods. However, if your employee returns to work, they must be taken off furlough. They can be placed back on furlough multiple times, but each separate instance must be for a minimum of 3 consecutive weeks.

Many employers will have had to undertake a big 'catch up' exercise as part of their first claim. But from then on, the claim period will probably become more regular and could be whatever period suits the employer depending on their payroll processes, cash flow, time/inclination to make claims etc.

This might be on a weekly basis for employers with weekly paid employees – monthly for those with monthly paid employees, although it doesn’t have to be for the same period each time. Some employers may even just decide to make one big claim towards the end of the Job Retention Scheme. Also, you do not have to wait until the end of a claim period to make your next claim.

Example: James is gardener. He has two variably, weekly paid employees, Hester and Simon. Simon was furloughed on 23 March, and Hester was furloughed on 30 March 2020.

James made his first claim for a JRS grant on 20 April. His first claim period was from 23 March 2020 (as this was the date Simon was furloughed) to 26 April 2020 (the end of the week in which he makes the claim). If he'd wanted to, he could have made his first claim period to 3 May 2020 as it is possible to make a claim for up to 14 days in the future.

His first claim period will cover both employees: Simon from 23 March to 26 April, and Hester from 30 March to 26 April. As their furlough is ongoing, James makes another claim on 27 April for the week 27 April to 3 May, and then again on 4 May for the week from 4 May to 10 May and so on.

By doing this, he is able to match up the timing of the grant being paid to him with his weekly payroll process, so that the grant money comes in before he has to pay it out again in wages which protects his cash flow. But there is nothing to stop James putting a in a claim for two weeks at a time say, if he finds the claim process burdensome, provided he is confident his employees will remain furloughed for that period and the end of the claim period is not more than 14 days from the date of the claim being made.

⚠️ Tip: You need to keep excellent records of each claim you make. This should include making a note of the start and end dates of your claim period so you have them to hand when you make the next claim as there is no prompt built into the system to remind you what the end date of the last claim period was.

Still unclear: It is not currently possible to amend claims once they have been submitted. Also, you cannot make another claim for the same claim period. It is therefore unclear how HMRC want employers to deal with any errors/omissions that have been made in any given claim period. (One option is for employers to deal with errors in employee payments/furlough claims by adjusting for over/under payments in the next period, however HMRC have not confirmed in guidance if they are happy for employers to do this.)

2. Variable pay calculations

For employees whose pay varies and were employed from 6 April 2019, you can work out their furlough pay based on the higher of their 2019/20 average earnings (to the 5th April or the date they were furloughed) or by looking at the same period last year. Now that HMRC's calculator is up and running for this group, it is clear that these calculations are unfortunately, more complex than expected.

Firstly, many employers will have prepared their employee's furlough pay calculations before HMRC's detailed guidance was issued, meaning that there may be a mismatch in the figures from the start.

Example: Shan is the employer of David, a variably paid worker, who she pays weekly. Shan furloughed David on 30 March 2020. As at 29 March 2020 (week 51 in the tax year), Shan had paid David £14,133. To work out David's average pay for the 2019/20 tax year, she divided £14,133 by 51 to get £277.11, of which 80% is £221.69.

However, HMRC calculator comes out with figures of £275.57, of which 80% is £220.45, because the HMRC calculator works on a calendar day basis -there were 359 days from the start of the tax year up to the day before he was furloughed (6 April to 29 March (inclusive)), which is actually just over 51 weeks (51.28 to be exact).

But secondly, it would appear to be the case that the 'higher of' calculation should be done each and every pay period. Moreover, it appears that HMRC expect employers to extrapolate a figure of earnings for exactly the same period last year – even if this spans two tax weeks for example.

Example continued: Shan worked out David's furlough pay as £221.69, on the basis that this gave the highest result when compared to looking at what his pay was in the same period of the 2018/19 tax year. She has continued to pay David £221.69 a week ever since as she understood the original furlough calculation to be a reference point for pay for the entire furlough period.

However, the calculator says that for the week 27 April to 3 May 2020, she shouldn't pay him £221.69 or even £220.45. But £360.60. This is based on the following figures from the previous tax year:

• 2/7 of week 3 2019/20 pay of £225 (which ran from 22 April to 28 April 2019)
• 5/7 of week 4 2019/20 pay of £541 (which ran from 29 April to 5 May 2019)

So, it is working out the exact amount earned in the same period in 2019/20 – even though in 2019/20 the period was split over 2 weeks.

The upshot of all of this is that Shan will have over claimed £1.24 for all the weeks were she paid David £221.69 but should have only paid him £220.45. But worse – in the week then she paid him £221.69 but should have paid him £360.60, she won’t have paid him out enough in 'qualifying costs' meaning that strictly, she isn’t entitled to claim any reimbursement from the scheme.

⚠️ Tip: We assume many employers will be in this situation – either because they produced their calculations before the guidance/calculator were available, or have simply not seen what has now been published by HMRC. If you have made errors like Shan, you should comply with the correct way of doing things going forward and make any adjustments as necessary, once HMRC have confirmed how to do this.

Still unclear: While we would hope that HMRC would take a pragmatic approach to mistakes such as these, we would urge HMRC to advise employers on their compliance strategy for the JRS and what the ramifications are for employers in terms of clawbacks/penalties for errors such as this as soon as possible.

3. Employment Allowance

We have received a few questions on whether you should claim for employer's National Insurance if the Employment Allowance would usually cover it.

This was covered in the 17 April update to the official guidance:

Working out what you can claim

The total grant for employer National Insurance contributions cannot exceed the total amount of employer National Insurance contributions you are due to pay.

In calculating the total employer National Insurance contributions paid in any pay period, the employer should subtract any Employment Allowance used in that pay period. If you have not, or do not expect to pay any employer National Insurance contributions in a pay period as a result of the Employment Allowance, you should not claim any employer National Insurance contributions costs for furloughed employees in that pay period. If you expect to exhaust any Employment Allowance in a pay period then you should claim the lower of the employer National Insurance contributions grant calculation, and the employer National Insurance contributions costs that you paid, or expect to pay across your entire payroll.

It is therefore clear that if you only have one or two employees and so are a small employer entitled to the Employment Allowance of £4,000, there will be no Employer NIC for you to pay at all over the tax year because of the Employment Allowance, and so you should not make a claim for the reimbursement of any Employer NIC.

Still unclear: If you usually do pay some Employers National Insurance over the course of the tax year, then there is a question as to whether an employer can choose not to claim the Employment Allowance and defer this until later in the year. This would mean employers claiming the JRS grant for their Employers National Insurance but then also offsetting the Employment Allowance later in the year; in effect receiving government help twice with their Employers National Insurance bill.

We would like HMRC to issue further guidance on this. Although the Employment Allowance does allow for it to be claimed at any point in the year, it is certainly questionable whether this is within the spirit of the rules.

4. Statutory Sick Pay interaction

In our original article we highlighted there was some ambiguity as to whether it was possible to furlough employees who are currently on sick leave where Statutory Sick Pay is payable or liable to be payable, because of inconsistencies in the wording of the Treasury Direction and the guidance.

HMRC previously told us that they felt the legislation and guidance were consistent and that employers should be relying on the guidance in this area which states that it is possible to furlough workers who are currently on sick leave (at which point their sick pay would end and their furlough pay begin). However we were concerned that many advisers/employers would not feel reassured by this and may not be putting workers on furlough for fear of making Job Retention Scheme (JRS) claims incorrectly.

HMRC have now helpfully explained their position further. HMRC's view is that where an employer and employee agree to commence furlough, such an agreement will amount to a variation of the employee’s contract. Under this agreement, the employee cannot reasonably be expected to do any work under that contract for the duration of the agreement. Consequently, under s151(4) of the Social Security Contributions and Benefits Act 1992, the employee cannot be incapable or deemed incapable of doing work which he can reasonably be expected to do under that contract. There is therefore no employer’s liability to pay SSP and JRS becomes claimable.

We think this is a useful clarification and should give employers and advisers the reassurance that they need to progress with claims.

Still unclear: We are aware there are other examples where employers are worried about getting things wrong and feel unable to make a decision about whether to furlough workers. We look, for example, at some of the issues that may be preventing umbrella companies from furloughing their staff in our recent article for Contractor UK.

We urge HMRC to expressly clarify the position for these employers (and thus, their workers) as soon as possible.

5. Digitally excluded or otherwise unable to prepare or submit claim

If you can't use the online system for whatever reason (for example, you are a care and support employer who usually files their RTI returns by paper), then it is possible to phone HMRC on 0800 024 1222 and have them process your claim by phone. However, please note, the telephone advisers will need you to have all the information ready for them to enter into the system for you. They will not be able to prepare any calculations for you.

Still unclear: It is unclear as yet what support HMRC might be able to offer employers with furloughed staff (including if you are the director of your own limited company) with the actual calculations.

Of course if you have an accountant that assists you with payroll or with other aspects of your tax affairs, they should be your first port of call. They may be happy to help with the calculations (or may even be able to manage the whole process for you) although they may charge a fee.

However where will be some employers that don’t have accountants and there will be some that have accountants but who are not willing or able to help with the JRS. Some employers will be wanting to try and do things themselves to keep costs down (even though we understand a lot of accountants are helping for free or a minimal amount).

If you are an employer, and have nowhere to turn for help with your payroll calculations, do contact us and tell us of your experiences. Although we can’t offer individual advice, we are keen to hear of your experiences so we can feed these into our discussions with HMRC and improve our guidance and information for website users.