The government’s Coronavirus Job Retention Scheme went live on Monday, April 20 with small businesses able to claim up to £2,500 a month towards staff wages.
Employers can apply for direct cash grants through HMRC’s new online portal – with the money expected to land in their bank accounts within six working days.
The job retention scheme, announced by Chancellor Rishi Sunak as part of a package of support to protect jobs and businesses, allows employers to claim for a cash grant of up to 80 per cent of a furloughed employees wages, capped at £2,500 a month.
Up to 5,000 HMRC staff will be manning phone lines and webchat services to answer any questions about the scheme, which runs until the end of June. HMRC has said it can cope with 450,000 users an hour.
Last week, the government extended the Coronavirus Job Retention Scheme (CRJS) until the end of June.
The scheme was originally going to run for three months until the end of May, but was extended in light of the April 16 lockdown extension announcement. The CJRS will cover the cost of wages backdated to 1 March 2020.
The government also announced that the scheme was now open to 200,00 more workers at risk of losing their jobs.
The Treasury said employees are now eligible to receive money under the scheme if they were on a small business’s payroll on March 19, having previously set the cut-off date for February 28.
Announcing the scheme, chancellor Rishi Sunak said there was no limit on how much this job-retention scheme might cost, which will be financed through the national debt.
On March 27 the government improved the CJRS offer by covering employer national insurance contributions – which amount to about 13.8 per cent of the majority of a worker’s salary – as well as minimum auto-enrollment pension contributions. The move could save businesses an extra £300 per month per employee under the scheme.
How to access Coronavirus Job Retention Scheme
You will need to:
- Designate affected employees as ‘furloughed workers’, and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
- Small businesses need to classify employees as a furloughed worker, which means they should not undertake any work for the company while furloughed, including answering calls or emails
- Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)
How businesses should prepare – the financials
- Set up the payroll with a furloughed pay element to identify the amounts for reclaim
- Calculate furloughed pay based on the 12 weeks up to the end of February. Use regular basic pay but not overtime or bonuses
- For employees off sick during that 12 weeks, base furloughed pay on the amounts excluding sick pay
- Assume this is still pay and that PAYE tax and NIC deductions will be due
Applying for JRS – a practical guide
A 15-point action plan for small businesses that want to put staff on furlough and subsequently claim through the JRS:
- Identify those employees ‘at risk’ and earmarked for lay-off
- Analyse pay from the last 12 weeks up to the end of February (estimated time frame, government still to confirm)
- Establish base pay that qualifies for 80% furloughed grant
- Identify employees where £2,500 cap will apply
- Calculate additional pay required to get to ‘normal’ pay
- Model options to manage any top up outside of the grant
- Identify employees required to remain in employment
- Model options to flex remuneration for those employees not furloughed, including establishing new ‘base’ pay in line with national minimum wage and employment related loans
- Commence communication with all affected employees including illustrations of proposed payments
- Obtain employee/union buy-in using our template
- Implement changes to payroll and pay elements
- Prepare application to HMRC
- Register and log-on to new HMRC portal (timing TBC)
- Submit required information to HMRC
- Receive reimbursement via new system