Increasingly we are hearing of more employers concerned that they are not getting things right in terms of the Coronavirus Job Retention Scheme (CJRS), particularly following the introduction of the flexible furlough scheme in July 2020. As the scheme has now been extended until September 2021, you may wish to make use of this, even if you have not previously.
Below are the steps that need to be taken to make a furlough claim, in the order you need to take them and some pointers within those steps to stop you falling foul of the HMRC rules on the CJRS.
- Who is eligible to make a claim under the CJRS?
- Which employees can you furlough?
- What is flexible furlough?
- What do you need to do before calculating a claim under the CJRS?
- What records do you need to keep to claim under the CJRS?
- How to calculate how much you should claim under the CJRS
- How and when to report a payment in PAYE Real Time Information
- When are the claim deadlines under the CJRS and what if I submit my claim late?
- Worked examples of calculations under the furlough scheme
- Common mistakes to avoid whilst an employee is furloughed
- What if you have claimed the wrong amount under the CJRS?
- How might the Finance Bill 2020 affect claims made under the CJRS?
Who is eligible to make a claim under the CJRS?
If your business is an employer that has been affected by coronavirus and you cannot maintain your workforce, you can furlough employees and apply for a grant to cover a portion of their usual monthly wage under the CJRS if:
- There was a UK PAYE scheme in place on or before 30 October 2020 or for periods on or after 1 May 2021 a scheme set up on or before 2 March 2021
- You have enrolled for PAYE online
- Your business has a UK bank account
You may not be eligible under the CJRS scheme if you receive public funding to pay your staff (even if you are not in the public sector), as that public funding must still go towards paying your staff. If you are not fully publicly funded you should contact your sponsor for further guidance as to whether you can make a claim, though. There is no right of appeal if you are deemed to be ineligible under the CJRS.
Which employees can you furlough?
If you are eligible as an employer to make a claim under the CJRS, who can be furloughed?
You cannot now claim for any periods ending on or before 31 October 2020 under the CJRS.
For periods between 1 November 2020 and 30 April 2021, you can claim for employees who were employed on 30 October 2020, if you have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, even if you have not previously claimed for an employee under the CJRS before.
For periods starting on or after 1 May 2021, you can claim for employees who were employed on 2 March 2021, as long as you have made a PAYE RTI submission to HMRC between 20 March 2020 and 2 March 2021.
If an employee is on maternity leave, adoption leave, paternity leave or shared parental leave, they continue to be paid statutory leave pay. If they have not yet gone on leave, you can furlough them now and then when they are due to go on leave, move them to the terms of their parental leave.
To be eligible, employers must also have confirmed to their employee (or reached collective agreement with a trade union) in writing that they have been furloughed. The employee does not need to respond.
- Make sure that the agreement does not discriminate and is otherwise in accordance with employment law
- Record the furlough agreement for each employee for at least 5 years
- Keep clear records of how many hours your employees work and the number of hours they are furloughed
What is flexible furlough?
Since 1 July 2020 there has been the option for employers to place eligible employees on ‘flexible furlough’. This has meant that employers that are eligible can bring furloughed employees back to work for any amount of time and any work pattern and can claim the grant under the CJRS for the hours not worked by the employee. Flexible furlough agreements can last any amount of time but unless otherwise specified the period that you claim for must be for a minimum claim period of 7 calendar days.
Employers cannot make claims that cross calendar months, and employees can enter into a flexible furlough agreement more than once but any terms of furlough and changes in those terms should be recorded in writing.
What do you need to do before calculating a claim under the CJRS?
Before you can calculate how much you can claim under the CJRS you will need to work out your employees’ wages looking at:
The length of your claim period
The claim period refers to the days you are claiming a grant for under the CJRS. A claim period must start and end within the same calendar month and must last at least 7 days unless you’re claiming for the first few days or the last few days in a month and have claimed for the month immediately before. Preferably you should match your claim period to the dates you process your payroll. You can claim before, during or after you process your payroll as long as your claim is submitted by the relevant claim deadline. You cannot submit your claim more than 14 days before your claim period end date but you do not have to wait until the end date of the claim period for a previous claim, before making your next claim.
You can only make one claim for any period, so you must include all furloughed employees in one claim, there cannot be an overlap with other claims made and there should not be gaps in the dates where employees remain furloughed and have not returned to work. When claiming under the CJRS for employees who are flexibly furloughed you should not claim until you are sure of the exact number of hours they will have worked during the claim period.
What you can include as wages
To calculate 80% of your employees’ wages for hours not worked, you should include any regular payments you are obliged to make, which might include regular wage payments, non-discretionary contractual payments such as overtime, non-discretionary fees, non-discretionary commissions and piece rate payments.
Where pay is less than the employee’s minimum wage entitlement, the employer will need to pay additional amounts to ensure at least the appropriate minimum wage is paid for working time and 100% of any training time whilst they are furloughed. Where employees would receive fixed pay apart from having been on paid or unpaid statutory leave or sick leave, wages should be calculated based on their salary, before tax, not the pay they received whilst on family-related statutory leave. If pay was variable, either 80% of the same month’s wages from the previous year (up to a maximum of £2,500 a month) or 80% of the average monthly wages for the tax year 2019 to 2020 (up to a maximum of £2,500 a month) should be used to calculate the employee’s wages.
Your employees’ usual working hours and furloughed hours
Employees who are fully and not flexibly furloughed should just receive the full amount offered under the CJRS for the claim period.
If your employee is flexibly furloughed, you’ll need to work out your employee’s usual hours and record the actual hours they work and the furloughed hours that you are claiming for.
You should not claim for employees who are flexibly furloughed until you are sure of the exact hours that they have worked during the claim period to avoid the employee working more hours than declared to HMRC and you having to pay back some of the grant already claimed under the CJRS.
If an employee usually works fixed hours for your business but was on annual leave, off work sick or on family related statutory leave during the pay period, the hours used for the calculation should be the hours the employee worked prior to the leave.
What records do you need to keep to claim under the CJRS?
As well as correspondence with employees and terms of furlough and flexible furlough, if applicable, agreed in writing with your employee, certain other records will need to be kept by your business for at least six years for tax purposes, including:
- The amount claimed and claim period relating to each employee
- The claim reference number
- Your calculations for claims made under the CJRS
- Calculations and records of usual hours worked, and actual hours worked by employees who were flexibly furloughed on and following 1 July 2020
How to calculate how much you should claim under the CJRS
HMRC has an online calculator which can be used to calculate claims under the CJRS, apart from:
- for employee’s returning from family-related statutory leave in the 3 months prior to the claim period, and the claim period is in July 2020 or earlier;
- for director’s payments;
- for payments relating to employee’s transferred under TUPE;
- for employee’s employed at separate times throughout the year, not continuously before furlough started or who receive pensions outside of auto enrolment or have an annual pay period;
- if your employees have variable pay, were not on their employer's payroll on or before 19 March 2020 and have been on more than one period of furlough where any part of any of the periods of furlough was in the 2019 to 2020 tax year or after 1 November 2020;
- if your employee started a notice period or went back off a notice period in the same claim period on or after 1 December 2020;
- if your employee started employment with you during a calendar period in the 2019 to 2020 tax year which corresponds with part or all of the period being claimed for;
- if your employees are on fixed pay and have had a change in payment frequency, for example from monthly pay to weekly pay.
In these circumstances you will need to calculate the claim manually. It is your responsibility to claim the correct amount and so you should seek professional advice from an accountant or tax adviser if you are unsure.
From 1 July 2021, the level of grant will be reduced each month and employers will be asked to contribute towards the cost of furloughed employees’ wages.
Work out the maximum wage amount
First you will need to work out the maximum wage amount. To work out the maximum amount you can claim, you multiply the daily maximum wage by the number of calendar days your employee is furloughed for in your claim. Below are the daily maximum wage amounts up to April 2021:
|Month||Daily maximum wage amount|
|November 2020||£83.34 per day|
|December 2020||£80.65 per day|
|January 2021||£80.65 per day|
|February 2021||£89.29 per day|
|March 2021||£80.65 per day|
|April 2021||£83.34 per day|
If you’re claiming for different pay periods in one claim, you can calculate the total maximum using a mixture of the daily maximum wage amount, weekly maximum wage amount and monthly maximum wage amount.
Calculate 80% of your employee’s usual wages
You will then need to calculate 80% of your employee’s usual wages to work out how much you must pay your employees whilst they are furloughed and how much you are able to claim under the CJRS.
To do this for a fixed salary, you will need to work out which is the correct reference period for the employee’s usual wages. You should look at your employee’s last pay period before 19 March 2020 for employees who were on your payroll on 19 March 2020 and if you made a claim under the CJRS any time on or before 31 October 2020. For all other employees who were on your payroll on 30 October 2020, the reference period is the last pay period ending on or before 30 October 2020; this will only apply for periods starting after 1 November 2020.
You will then need to multiply by 80% for a full pay period or if calculating for part of a pay period divide by the number of days in the pay period, multiply by days in the furlough period and multiply by 80%.
Employees who were first reported on your payroll between 31 October 2020 and 2 March 2021 can be furloughed from 1 May 2021.
For all other employees who were on your payroll on 30 October 2020, you should calculate 80% of the average wages payable between the later of employment starting and 6 April 2020 and the day before they were first furloughed on or after 1 November 2020. Employees who were first reported on your payroll between 31 October 2020 and 2 March 2021 can be furloughed from 1 May 2021.
If the employee’s pay is variable, you should calculate 80% of the higher of either the wages from the corresponding calendar period in the tax year 2019 to 2020 (by taking the amount earned in the same period last year dividing that by the number of days in the pay period, multiplying by the furlough days in the pay period and multiplying by 80%) or the employee’s average wages for the tax year 2019 to 2020 (by starting with the amount the employee earned this tax year up to the day before they were furloughed, divide that figure by the number of days in the tax year to the point when they were furloughed, or 5 April 2020 if earlier and multiply by the furlough days in the pay period and multiply by 80%). This applies for any claim period before 31 October 2020.
For employees on your payroll on 30 October 2020, you should calculate 80% of the average wages payable between the later of the start date of employment and 6 April 2020, and the day before they were first furloughed on or after 1 November 2020.
Employees who were first on your payroll between 31 October 2020 and 2 March 2021 can be furloughed from 1 May 2021.
Calendar lookback method
When you calculate 80% of the wages from the corresponding calendar period in a previous year, here is the information you need:
|Claim month||Lookback period|
|November 2020||November 2019|
|December 2020||December 2019|
|January 2021||January 2020|
|February 2021||February 2020|
|March 2021||March 2019|
|April 2021||April 2019|
Start with the amount your employee earned in the lookback period, divide by the number of days in that pay period including non-working days, multiply the number of furlough days in the pay period claimed for and multiply by 80%.
When calculating 80% of the wages in February 2020, you may use the full amount earned in that month or 28/29ths to reflect the leap year.
To calculate 80% of the average monthly wages for tax year 2019 to 2020 start with the wages payable to the employee in the tax year up to the day before they were first furloughed, divide that number by the number of days from the start of the tax year, including non-working days up to the earlier of the day before the employee was first furloughed, or 5 April 2020. Then multiply by the number of furlough days in the pay period claimed for and multiply by 80%.
To work out 80% of your employee’s average earnings for an employee who started working for you on or after 6 April 2019 you use the same steps but divide by the number of days the employee has been employed since the start of the tax year – including non-working days, not from the start of the tax year.
To work out 80% of your employee’s average wages between the later of the employment start date and 6 April 2020 and the day before they are furlough on or after 1 November 2020, you start with wages that were payable to the employee from 6 April 2020 and up to and including the day before the employee’s first day spent on furlough on or after 1 November 2020. You then divide by the number of days the employee has been employed since the start of the tax year, including non-working days, until the day before they were furloughed, multiply by the number of furlough days in the pay period and multiply by 80%.
You may be eligible to claim Employment Allowance to reduce your annual Class 1 National Insurance liability by up to a maximum of £4,000 each tax year.
You will not be eligible to claim Employment Allowance if you work mainly in the public sector or if you’re a company with only one employee paid above the Class 1 National Insurance secondary threshold; and that employee is also a director of the company.
Even if your business is eligible to claim, you cannot claim the Employee Allowance in relation to someone whose earnings are within IR35 ‘off-payroll working rules’ or for someone you employ for personal, household or domestic work.
How and when to report a payment in PAYE Real Time Information
This will be dependent on what you are using the grant for. If you are using the grant to pay wages, this should be paid in the same way and at the same time as any wage payment and is subject to all usual payroll deductions. The amount of the grant received must be included in pay reported to HMRC via your payroll filing software of a Full Payment Submission, on or before the date that it is paid to your employees.
If you are using the grant to pay you back for wages you have already paid to your employees you do not need to make another Full Payment Submission for this amount as you have already paid and reported those wages.
If you have not paid your employees in a tax month you must submit an Employer Payment Submission to HMRC stating that fact. You should try not to send the Employer Payment Submission no later than 19th of the following tax month. If you have part paid your employees when the grant payment is received you must make statutory deductions on the reduced salary payment amounts and when you pay the remaining wages to your employees after receiving the grant payment, you must send another Full Payment Submission showing that payment.
If you reported wages to HMRC in March 2020 that you did not pay to your employees you will need to submit an Earlier Year Update or a Year-To-Date Full Payment Submission that shows what you paid in wages. You should also submit a Full Payment Submission for 2020 – 2021, on or before the date you make the payments to your employees.
When are the claim deadlines under the CJRS and what if I submit my claim late?
The deadlines to make a claim under the CJRS are:
|Claim for furlough days in||Claim must be submitted by|
|November 2020||14 December 2020|
|December 2020||14 January 2021|
|January 2021||15 February 2021|
|February 2021||15 March 2021|
|March 2021||14 April 2021|
|April 2021||14 May 2021|
|May 2021||14 June 2021|
|June 2021||14 July 2021|
|July 2021||16 August 2021|
|August 2021||14 September 2021|
|September 2021||14 October 2021|
If any of the submission dates fall on a weekend or Bank Holiday, the claim should be submitted on the next working day, at the latest.
You cannot now make a claim for any period before 1 November 2020. However, if you miss a submission date for November 2020 onwards, and have a reasonable excuse, took care to claim on time and claimed without delay as soon as you were able, HMRC may accept your late claim.
A reasonable excuse might include a close relative dying shortly before the claim deadline, a serious illness preventing you making a claim, a technical failure, fire, flood or theft amongst other emergencies. If you have submitted a claim late and believe that you have a reasonable excuse for this, you can make a request to submit a late claim through HMRC’s website, after the deadline, but as soon as you’re ready to make your claim.
Worked examples of calculations under the furlough scheme
Whilst we have covered how to calculate pay and the amount of your claims under the CJRS in this article, this only covers some of the more common calculations for employees. If you would like to see further worked examples on the more common or more obscure situations see examples provided by the government.
If you are unsure about your calculations, please seek the professional advice of an accountant or tax adviser, but ensure you are informed, as you are responsible for the amount claimed and for repayment of any overpayment to you by HMRC under the CJRS.
If you require any further information about the CJRS, our specialist employment solicitors would be happy to help.
Common mistakes to avoid whilst an employee is furloughed
Now that the furlough scheme is becoming more complex with the introduction of flexible furlough, below are some common mistakes to avoid:
- You must not allow an employee to carry out any work for you whilst they are on furlough before the flexible furlough scheme starts. Once the flexible furlough scheme starts, work should only be carried out by the employee as arranged and agreed between the employer and employee.
- Ensure that you have carried out all your calculations accurately and double checked these and taken professional advice if you are unsure, before making a claim under the CJRS.
- Employers must ensure that before the flexible furlough scheme the furlough leave is for a minimum of 3 weeks on each occasion for each employee and after the flexible furlough scheme, the furlough for a particular individual must be for at least a week.
- If a former employee approaches you asking if they can be re-employed and furloughed you should ensure that you do not provide a response which could be construed as discriminatory or related to any other unlawful detriment. If you are approached by a former employee you may wish to seek specific advice from our employment solicitors.
- You should ensure that there is a genuine case for re-employment if you do choose to re-employ, so that there is not a risk that HMRC will later see this as fraudulent and not pay the grant in respect of that individual.
- You must top up an employee’s salary to 100% when paying for annual leave or paying notice pay to avoid breach of contract or wrongful dismissal claims. If an employee wishes to leave your employment during furlough, you pay the employee’s contractual notice period. The government will pay the employee the furloughed amount for their notice. If their notice period spans them being furloughed and coming back to work, they will be paid in part by government furlough and partly by you when they are back in employment.
- The entirety of the grant received to cover an employee’s subsidised furlough pay must be paid to them in money, not by way of benefits or a salary sacrifice scheme – these benefits should be in addition to the wages.
What if you have claimed the wrong amount under the CJRS?
If you wish to delete a claim, you can use the online service to delete a claim within 72 hours of submitting it. Ig you are outside of that time frame, the options will depend on whether you have claimed too much or too little under the CJRS.
If you have claimed too little money, you will still need to make sure you pay your employees the correct amount. However, provided that the claim is for a period after 31 October 2020, you can contact HMRC to amend your claim within 28 days of the month the claim relates to (or next working day if this is a weekend or Bank Holiday). HMRC may require additional evidence given that you are increasing the amount of your claim.
If you’ve claimed too much through the CJRS, or would like to make a voluntary repayment, you can reduce your next claim and keep a record of the adjustment for 6 years, or, if you’re not making another claim, you can apply to HMRC for a payment reference number and pay HMRC back within 30 days.
If you’ve overclaimed a grant and have not repaid it, you must notify HMRC by the latest of 90 days after the date you received the grant; 90 days after the date you received the grant that you were no longer entitled to because your circumstances changed; or 20 October 2020. If you do not do this, you may have to pay a penalty. If you do repay any overclaimed grant, this will prevent any potential tax liability for an overpayment under the CJRS.
How might the Finance Bill 2020 affect claims made under the CJRS?
The Finance Bill 2020 includes powers for HMRC to check grants made under the CJRS as well as the Self-Employment Income Support Scheme (SEISS), the Small Business Grant Fund (SBGF), the Retail, Hospitality and Leisure Grant Fund (RHLGF), the Discretionary Grant Fund (DGF), or their parallel schemes in the devolved administrations as well as other payments made by public authorities to businesses in response to COVID-19.
This will include checking if the payments have been used correctly to pay workers’ wages, and to ensure employers have not been over reimbursed for furlough pay made to their employees. Employers that think they may have accidentally misused the furlough scheme could be given a 30-day amnesty to admit their mistake.
If overpayments are found to have been made to employers, HMRC could reclaim furlough money through income tax assessments under the new legislation. If any business fraudulently overclaimed or used furlough money for anything other than its intended purpose, there would be a financial penalty if no notification is made to HMRC within 30 days. The government said it had received 1,868 reports of furlough fraud by the end of May 2020, which amongst other things related to employers forcing staff to continue working despite paying them through the furlough scheme, or by claiming furlough funding for staff without their knowledge, while they were still being asked to work. By June 2020, the cost to the taxpayer of the CJRS was £20.8bn and by mid-way through February 2021 this was £53.8bn, so it is important that investigations are carried out to ensure that this money has not been misspent deliberately or otherwise.