⚠️ We are working hard to ensure this guidance is up to date. However, you should bear in mind that things may change as the government respond to the ongoing situation.
Coronavirus: What is the Job Retention Scheme?
The coronavirus (COVID-19) outbreak is having far-reaching financial impacts on individuals and businesses across the UK, and indeed across the world.
This page sets out some information about the Coronavirus Job Retention Scheme.
The Job Retention Scheme was due to come to an end on 31 October 2020 with a new Job Support Scheme running from 1 November 2020.
⚠️ On 31 October 2020 it was announced that the Job Support Scheme will be postponed, with the Job Retention Scheme continuing in the meantime. For more information on the Job Retention Scheme from 1 November, please see ‘Extension to the scheme from 1 November 2020’ below.
The government's guidance on the Job Retention Scheme is split over several pages, all of which can be found in the collection on GOV.UK.
The underlying scheme rules (the ‘Treasury Direction’) can be found on GOV.UK.
The Pensions Regulator have also issued guidance for employers on the pension’s element of the Job Retention Scheme grant.
If you find the government guidance confusing, you may find the following ‘explainers’ useful:
Our colleagues at the ATT, have produced a useful summary of the Job Retention Scheme.
For some hints and tips to help you do your Job Retention Scheme calculations and make your claim, see our news item: How to claim a Job Retention Scheme grant. We provide further clarification around furloughing and look at some tricky aspects of claiming a Job Retention Scheme grant in more detail, here. (These news articles reflect our understanding of the situation as at the time of writing. You can find the date they were published under the title.)
We discuss the impact of employees in salary sacrifice schemes in the context of childcare vouchers, in our Guidance for families section.
You may also find the information that we have put together for employees on the Job Retention Scheme helpful.
There is a discussion of the interaction between furloughing and Statutory Sick Pay on our page covering the Test and Trace system.
There is a useful guide to furloughing workers from an employment law perspective on the ACAS website.
The main thing to note is that the employment relationship continues through the furlough period and you will continue to have certain obligations – for example, workers may continue to accrue holiday. Therefore, you should bear in mind there may still be ongoing costs to you of ‘furloughing’ staff, over and above the employer contributions required under the Job Retention Scheme. There may also be other considerations that mean that furloughing is not appropriate and you may need to take some employment law advice.
You should also not assume that all employees will want to be furloughed in order to access the financial support available. In some instances, accepting redundancy for example, may be a better option for them. It is something that you may need to discuss and agree individually.
The scheme, open to most employers across the country, helps cover the cost of wages for any qualifying employees designated as ‘furloughed’ (this is basically anyone was on their employer's payroll and included on an RTI payroll submission to HMRC on or before 19 March 2020).
For the purposes of the 1 November extension to the scheme, the meaning of 'qualifying employees' is widened, as we explain below.
In the period 1 March to 30 June 2020, an employee could not undertake any work for their employer, including answering calls or emails.
Since 1 July 2020 employers have been able to bring their furloughed employees back to work part-time (‘flexible furlough’ – which we discuss in more detail here). Employers have to pay the employee’s wages for the hours they work as normal, as well as Employer National Insurance and employer pension contributions for those hours.
Since 1 July 2020, employees can also remain on 'full' furlough, as required.
If you are a small employer with only a handful of staff and relatively straightforward working arrangements, you may find the amount and complexity of the official guidance on flexible furlough overwhelming as it tries to cover all situations and every eventuality! We summarise the main things that small employers need to know about flexible furlough in our article: Fretting about Flexible furlough?.
The original Job Retention Scheme closed to new entrants from 30 June. For the period 1 July to 31 October, employers are only able to claim for furloughed employees that they had furloughed for a full three-week period before 30 June (with some limited exceptions). This means that the final date by which an employer could furlough an employee for the first time was 10 June 2020, for the three-week furlough period to be completed by 30 June 2020. Employers had until 31 July 2020 to make any claims in respect of the period to 30 June 2020
Claims for the period ending 31 October 2020 need to be made by 30 November 2020.
Claims under the extended Job Retention Scheme relating to November 2020 must be made by 14 December 2020. Claims relating to each subsequent month should be submitted by day 14 of the following month, to ensure prompt claims following the end of the month which is the subject of the claim.
Until the end of June, employers could claim for 80% of furloughed employees’ wages, up to a cap of £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on the wages.
For July, the government pays 80% of wages up to a cap of £2,500 as well as Employer National Insurance and pension contributions for the hours the employee doesn’t work (the cap on the furlough grant will be proportional to the hours not worked). Employers pay employees for any hours they actually work. Employers are required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked.
For August, the government pays 80% of wages up to a cap of £2,500 for the hours the employee does not work, but employers will pay Employer National Insurance and pension contributions. For the average claim, this represents 5% of the gross employment costs that they would have incurred if the employee had not been furloughed. Employers pay employees for any hours they actually work.
For September, the government pays 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will pay Employer National Insurance, pension contributions and 10% of wages to make up 80% in total up to a cap of £2,500. Employers pay employees for any hours they actually work.
For October, the government pays 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will pay Employer National Insurance, pension contributions and 20% of wages to make up 80% in total up to a cap of £2,500. Employers pay employees for any hours they actually work.
From 1 November to January 2021, in light of the increased restrictions, the government will go back up to paying 80% of wages up to a cap of £2,500 for the hours the employee does not work (the cap on the furlough grant will be proportional to the hours not worked), but employers will pay Employer National Insurance and pension contributions. Employers pay employees for any hours they actually work.
Extension of the scheme from 1 November 2020
On 31 October 2020, it was announced that the Job Retention Scheme, which was due to end on 31 October 2020, will be extended, with the UK government paying 80% of ‘usual wages’ for the ‘usual hours’ furloughed employees do not work, up to a cap of £2,500, for periods from 1 November 2020.
This means that the Coronavirus Job Support Scheme which was due to come into effect on 1 November is now postponed. Extending the Job Retention Scheme is more favourable for employers (as compared to the Job Support Scheme) and although there is no obligation on employers to put employees on furlough, it is hoped that employers will take advantage of the scheme to support their employees.
How will it work?
Employers will have flexibility to ask their employees to work on a part-time basis and furlough them for the rest of their usual working hours, or furlough them full-time.
Employers will be able to claim either shortly before, during or after running their payroll (as opposed to only in arrears under the Job Support Scheme).
There will be a short period initially when the online claims service will be closed while HMRC update the system, and employers will be able to claim in arrears for that period.
It is anticipated employers will be able to claim for periods from 1 November from 8am on Wednesday 11 November 2020.
The calculations for determining usual wages and usual hours for those employees who have been previously furloughed (or were eligible to have been previously furloughed, even if they actually were not), remain the same, which will be a relief to employers who may have only just got used to the Job Retention Scheme!
For an employee who meets the criteria of the extended scheme and so is an eligible employee but was not previously eligible for the Job Retention Scheme (for example because they were only taken on in April 2020), it is necessary to use slightly modified calculations of usual pay and usual hours, as follows:
- For employees on fixed pay employed on or after 20 March 2020, the last pay period prior to 30 October 2020 provides the basis for the usual wages calculation.
- For employees on variable pay or hours employed after 20 March, the average of the tax year 2020/21, up to the start of the furlough period, provides the basis for usual wages calculation.
If an employee was not previously eligible for the Job Retention Scheme, then usual hours for a ‘fixed pay’ employee will be the contracted hours worked in the last pay period ending on or before 30 October 2020.
For variably paid employees, the usual hours will be the average hours worked in the tax year 2020/21 up to the start of furlough.
Employers must pay all Employer National Insurance contributions and pension contributions. Employers can choose to top up their furloughed employees’ wages beyond the 80% paid by the UK government for hours not worked, but they are not required to do so.
HMRC will publish details of employers who make claims under the extended Job Retention scheme, starting from December. We are trying to find out more about this policy from HMRC and will post any updates to this website.
Employers can claim for employees who were on their PAYE payroll on 30 October 2020. Employers must have made a Real Time Information (RTI) submission to HMRC between 20 March 2020 and 11.59 pm on 30 October 2020, notifying a payment of earnings for that employee.
If employees were on an employer’s payroll on 23 September 2020 (i.e. notified to HMRC on an RTI submission on or before 23 September) and were made redundant or stopped working for them afterwards, they can also qualify for the scheme if the employer re-employs them. You should be aware that there may be employment law considerations that go along with re-hiring ex-employees.
What should employers do now?
- Employers with employees already on furlough and/or flexible furlough may simply need to extend these existing furlough arrangements.
- Some employers may have already put in place Job Support Scheme temporary working agreements with their employees to commence on 1 November. Such employers need to advise their employees that the JSS has been postponed and, if appropriate, ask them to agree to be furloughed/flexibly furloughed instead.
- Some employers may have employees who have not been on furlough and were not going to be paid under the Job Support Scheme. If you now want to furlough any such employees up until December, you will need to enter into a furlough agreement – which must be done in writing.
Further details can be found on GOV.UK. We expect that detailed guidance for employers on the scheme extension will be provided in the next few days, although it appears that largely, the extended Job Retention Scheme will operate as the previous scheme did in most respects.
Job Retention Bonus (JRB)
The Job Retention Bonus was to be a one-off payment of £1,000 per employee to employers that have used the Job Retention Scheme for each furloughed employee who remained continuously employed until 31 January 2021.
The purpose of the JRB was to encourage employers to keep people in work until the end of January. However, as the Job Retention Scheme is now being extended to 31 March 2021, the policy intent of the JRB no longer applies, so it will not be paid in February as was originally planned.
We understand that a lot of employers will have got their calculations of furlough pay/grant amounts wrong, particularly in the early stages of the scheme when there was a lot of confusion about what the rules were.
There are obvious issues if an employer pays out too much by way of furlough pay (as they will have paid out more than they can legitimately claim for under the Job Retention Scheme) but there are also serious ramifications where they do not pay out enough by way of furlough pay (that is, where they have paid out less than the ‘reference pay’ as calculated under the scheme rules). Indeed, it could mean that the employer is not actually eligible to make a claim for a grant from the Job Retention Scheme at all.
We explain this issue further and what employers should do in cases where their calculations are wrong in our article: Have you made a mistake on a claim for the Job Retention Scheme?.
If you have under claimed a grant in the period to 31 October 2020, you should contact HMRC on or before 30 November to amend your claim (you can do this even for the period 1 March to 30 June). HMRC will process your request manually, after and may undertake any checks they see fit.
If you have over claimed a grant, you may need to pay some money back to HMRC, or you can reduce your next claim by the over claimed amount. You can find HMRC's guidance on what to do, on GOV.UK.
Note, that the deadline for notifying HMRC about any overclaimed amounts of grant from before 22 July 2020 that employers haven’t managed to pay back 'informally', was 20 October 2020. The deadline for notifying HMRC about any subsequent over claimed amounts is 90 days from the date you received the overpaid grant.
If you do not meet the deadlines, you may have to pay a penalty, as set out in this HMRC factsheet.
The factsheet is quite confusing, but our understanding of the penalty position in respect of failing to notify HMRC that you need to repay some grant monies within the relevant time limit, is as follows:
- A new law has been passed that specifically means employers who knew their JRS grant was incorrect at the time they received it, and who haven’t repaid it/who don’t notify within the relevant timeframe, will be treated as having made a deliberate and concealed failure to notify (of the over claimed grant). They can be charged a penalty of up to 100% of the amount over claimed as at the end of the notification period.
- Those who didn’t know their JRS grant was incorrect at the time they received it, and who don’t notify within the relevant time frame, will fall under general ‘failure to notify a liability’ principles, and will only face penalties if the amount of overpaid grant has not been repaid by 31 Jan 2022.
We are trying to confirm our understanding with HMRC.
Note that to the extent that you paid your employee an amount which you now need to pay back to HMRC, you need to think very carefully before attempting to claw an amount back from your employee.
Whilst there is no automatic right for an employer to recover such monies from an employee under the law governing the JRS scheme, the Employment Rights Act 1996 does allow employers to make deductions from an employee’s future wages to recover overpayments of wages made by mistake, which may apply. We explain more in our news article: Need to pay back a Job Retention Scheme (JRS) grant? What employers should – and shouldn’t – do.
Care and support employers
If you are a care and support employer and have had to ‘shield’ or have been unwell during the coronavirus pandemic or if your PA has had to shield or has had caring responsibilities, and they have not been able to work for you as a result, you may have been wondering if it is possible to ‘furlough’ them so that you can claim a grant from the government to help pay their wages while they are off.
Guidance on this issue can be found in these GOV.UK pages:
- Using direct payments during the coronavirus outbreak: full guidance for people receiving direct payments and personal assistants.
- Coronavirus Job Retention Scheme: people receiving direct payments.
Any Job Retention Scheme grant received by an employer who is an individual and not employing staff in the course of a business will not be taxable on them, although the payment made to the PA will be subject to tax and NIC as normal.
In recognition of the difficult position that unrepresented, small, employers (including care and support employers) may find themselves in, in trying to understand and administer the Job Retention Scheme grant, TaxAid have also set up a helpline where you can ask a qualified, professional tax adviser for specific advice. People can call their main helpline on 0345 120 3779 and choose option 1 ‘need help accessing government support as a result of coronavirus’. Your details will be taken and a call back will be offered the following day to discuss the help you need.