At the beginning of lockdown back in March this year, the government announced the Coronavirus Job Retention Scheme (CJRS). Its purpose was to support employers with the cost of wages at a time when businesses were forced to close or were operating on a smaller scale. In an unprecedented move in the UK, 80% of each furloughed employee’s wage (up to a cap of £2500/mo) will be paid by the government until 31st August. After August these contributions will drop, to 70% in September, then 60% in October. The remaining ten and twenty percent must be paid by the employer for the respective month, so that the staff member receives 80% of their usual wage in total each month.
So far, the scheme has cost the treasury more than £25bn and has supported the furlough of over nine million workers. The CJRS will finish at the end of October 2020, however from July employers have the option of bringing people back to work with more flexibility, whilst still benefiting from government support.
The new flexible furlough rules allow individual employers to make decisions about the working patterns that their businesses now need. Whereas some companies have resumed activity throughout the pandemic, others may have seen a reduction in customers or may have needed to implement safety measures that reduce the capacity that their premises can hold. In these cases, the employer can bring employees back from furlough on part time hours or on different shift patterns to ensure that the needs of the business continue to be met.
Where eligible, the employer will be responsible for paying their employee for the hours they physically work and the government will keep contributing to ensure that the employee continues to receive 80% of their salary (capped at £2500 per month).For the employer to make a claim, the staff member needs to meet the following criteria:
- The employee must have spent at least three consecutive weeks on furlough between the 1st March and the 30th June this year.
- The period of furlough must have begun before the 10th June 2020.
- Where other employees have been off under the CJRS, employees that should be returning from parental leave (including maternity, paternity, shared parental and adoption leave) or parental bereavement leave after the 10th June can be claimed for, as long as they were on the payroll on or before the 19th March 2020 and this will be their first period of furlough.
It is down to the employer to make sure they are claiming the right amount of CJRS for their employees. To do so, they will need to make a calculation to work out how many hours the employee will continue to spend on furlough.
This calculation starts with the number of hours that the employee is contracted to work (or usually works if the figure is different). Next, the employer will need to work out how many hours they are asking the employee to return to work for. The difference between these figures is the number of furlough hours. For example, if you usually work 100 hours a month but your new flexible working pattern will only have you working for 80 hours, you will have 20 furlough hours a month. Further calculations will then take place to ensure the amount claimed stays below the 80% payment level and the maximum payment threshold of £2500 per month.
By giving employers additional flexibility over their wage expenditure, the CJRS will continue to protect employees and provide job security.
To understand how to correctly record government grants in your bookkeeping, read our previous blog post, “How To Account For Covid-19 Furlough Scheme”.
For practical advice that really helps your business during these trying times, get in touch with the experts at Neil Smith Accountancy. Whether you’re an entrepreneur with a small business start up or an established company, we have the experience to guide you and ensure that your business is working effectively and compliantly.
Updated 10th July 2020:The chancellor has announced a Plan For Jobs, which aims to incentivise employers to retain furloughed staff into the next calendar year.