Tuesday, 31 March 2020



LAST UPDATED 1700 14 May 2020 - CJRS version 2.56. 

The Chancellor announced on 12 May that the Scheme will continue under the present rules until the end of July and then will continue with some changes from August to October. Currently 7.5 million people are being paid on furlough at a cost of £14 billion a month. 

HMRC has confirmed to me that the very revised guidance published on 15 April merely explains how the rules were intended to work in the first place. In other words it is no more than a clarification of the faulty guidance that was originally issued. 

The clarification has been made as the full legal details of the scheme were published. They set the scheme in stone and almost certainly mean there will be no more changes until the end of July. 

The Coronavirus Job Retention Scheme allows an employer to 'furlough' some or all of their employees who are on PAYE and pay them 80% of their regular pay - subject to an upper limit - for up to three months - or longer if the crisis lasts longer.

The scheme is described in these official documents. They were both updated on 1 May and include extra details. If this blog does not answer your question look there or in the full legal details above.

Can your employer use the scheme

Guidance for employers 

There is also separate guidance for public sector 'contingent workers' see below.

This blogpost looks at the fiddly bits which people have asked me about and sets out at who is left out of the Scheme. A separate blogpost sets out the rules for the Self-employment Income Support Scheme.

Tweet or DM me @paullewismoney with corrections and questions. I may not be able to answer them all personally.

The date
To qualify for the Coronavirus Job Retention Scheme you must meet a key time condition.

Originally HMRC said that people who were employed and on their firm's PAYE system on 28 February 2020 were eligible. The 'clarification' in April is that they must in fact have been included in the Real Time Information sent to HMRC by no later than 19 March 2020. That means much the same as the previous guidance and most of those employed before 1 March 2020 should be included. But there are problems.

Despite being called 'Real Time Information' or 'RTI' employers do not send information in real time. If I take a job on 18 February my employer has to report me on the payroll to HMRC on or shortly after my next payday. As a monthly paid person that might be on or shortly after 31 March. So some people employed late in February may not be included in that return.

On the other had if I join on 5 March and I am paid weekly on Friday 13 March then that return may well be sent on or before 19 March. So I might be included.

The date of 19 March conveniently is the day before the new scheme was first announced AND is the final deadline for February pay details which were due to be sent by 5 March. But it is not the same simple rule as being employed on 28 February and it will be impossible for individuals to know if they qualify or not.

HMRC now says that this clarification merely sets out how the system was always going to work, even though earlier versions of its guidance appeared to say something else. But it means that some who were expecting to be included will not be and some who were not expecting to be included in fact will be.

It also means that the vast majority of the 260,000 people in every month who move from one job to another who were excluded because they left one job before 28 February and took another sometime in early March who were excluded will still fail the key date test needed to qualify. They are not the 200,000 people the Treasury press release referred to.

No-one - and I mean no-one outside the Treasury - understood the rules worked in this way until the announcement on 15 April.

The scheme is open to all private sector employers whose business has been damaged by the Coronavirus epidemic. However, employers are under no obligation to take part. So an employer can make you redundant or dismiss you for other reasons. In the first two years of employment you generally have no employment rights and can be dismissed without a reason. Some people such as pregnant women and disabled people may have some rights even in the first two years and some forms of discrimination are unlawful at all times.

Any employer can use the scheme - they do not have to prove adverse effects due to Coronavirus though they are supposed to have experienced them. It is a voluntary scheme and employers are under no obligation to take advantage of it.

Go home
If an employer takes part in the Scheme they can send some or all of their employees home - it's called 'furlough' - and not dismiss them. The employer will get a grant from HMRC that will cover
  • 80% of regular pay - the maximum grant for this is £2500 a month which is equivalent to regular pay of £37,500 a year.
  • Employer's National Insurance contributions due on that reduced pay.
  • Pension contributions equal to the amount due under auto-enrolment on the reduced pay, which is 3% of 'qualifying' pay ie pay between £6240 (£120 a week) and £50,000 (£962 a week).
The employer will make the payments to the employee through the payroll system. It has to be paid after the grant is received - if it has not been paid before that. HMRC tells me "You must pay the full amount you are claiming to your employee, even if your company is in administration. If you’re not able to do that, you’ll need to repay the money back to HMRC".

Income tax and National Insurance contributions will be deducted as normal from the reduced amounts. Student loan contributions will be calculated on the reduced pay and and if that is above the threshold deducted as normal.

Employers are free to pay more than 80% of wages and more than the 3% pension contribution. But the grant they get will not be increased.

The pay that is counted for the 80% calculation is that earned in the month ended 28 February 2020 (yes, I know February had 29 days this year but HMRC seems to ignore that and could not explain why 28 February was picked).

For more details see Guidance for employers and search 'pay varies'. 

If pay varies employers should use the higher of
  • earnings in February 2019
  • average monthly earnings for 2019/20 tax year 
If an employee started in February 2020 employers should pro rata the pay up to the full month.

Employers should use your pay in the month ending 28 February to calculate the 80%. They cannot deduct anything from the payment. So employers cannot cut your current pay and then use that amount to work out the 80%. If you have a complaint about the way your employer is dealing with your pay raise it with them and then go to ACAS.

The dedicated online portal for applications by employers opened on 20 April. Claims should be paid within four to six days.

Firms cannot furlough people for less than three weeks or more than three months. They can time the claim to HMRC to fit in with their normal pay cycle.

Your employer must give you notice in writing of  the plan to furlough you. You can refuse but there is nothing to stop your employer then making you redundant.

Your employer may recall you from furlough to normal work in accordance with the letter you were sent when you put on furlough. When an employee returns to work, they must be taken off furlough and any overpayment of the grant must be repaid to HMRC. If you employer recalls you before you have been on furlough for at least three weeks in that particular block of furlough, they will have to repay the grant for the whole block. Otherwise they will just have to repay it for the days you are recalled. If your employer says your pay will be cut when you return to work, you do not have to accept that. But of course that may mean you are made redundant.

If you are asked to return to work and you do not think it is safe to do so then Section 44 of the Employment Rights Act 1996 provides employees with the means to contest the adequacy and/or suitability of safety arrangements without fear of recriminations such as being sacked or facing a loss of pay.

Individuals who employ others such as a nanny or a gardener can furlough them if they pay them through PAYE and they were on payroll on or before 28 February 2020.

Other work
Employees on furlough cannot do any work at home for their employer nor be asked to go to work to do so, though there is some evidence that employers are asking workers to do that. If so they face prosecution and loss of the grant. But furloughed workers can work for another employer if they want to as long as their employment contract does not prohibit that.

Self-employed too
Someone who is self-employed and employed in a job as well can be furloughed from their job and, if they qualify, claim from the Self-employment Income Support Scheme too.

Minimum wage
If 80% of regular pay is less than the national living or minimum wage for the hours the employee used to work there is no obligation on the employer to top it up. However, if the person is an apprentice and they continue to train they must be paid at least the minimum wage appropriate to them.

Statutory Sick Pay
Someone off sick or self-isolating for a quarantine period should claim Statutory Sick Pay from their employer which is £95.85 a week from 6 April. They can be furloughed when that sickness or self-isolation has finished or during it, though they cannot get SSP and furlough pay. Employees shielding for longer periods can be put on furlough or claim SSP. 

Someone caring for someone else including their children due to the coronavirus can be furloughed.

Tax credits
The income paid on furlough counts as earned income from gainful employment and anyone in receipt of tax credits should see the credits increase as their income is reduced.

Universal Credit
If someone is in receipt of Universal Credit or claims it the income paid on furlough counts as earned income in the assessment of the benefit. As that will be lower than their pay their UC will normally go up.

Entitlement to leave continues to accrue during furlough. If an employee - with employer's agreement - takes holiday during furlough then they must be paid at 100% of their pay not 80% for that holiday period. In other words the employer must top up the wages to 100% and pay the employer's NICs and pension on that extra. Employers also have the right to tell employees to take some of their annual leave while they are on furlough. They must pay them in full for those days and must give them twice as much notice as the holiday period. So for one week's leave they must give two weeks' notice. And of course cannot treat past days on furlough as holiday.  The Government has published a new guide to holidays and holiday pay. The latest version of the HMRC guide to the CJRS says it is keeping "the policy on holiday pay during furlough under review."

Someone who was laid off or made redundant on 28 February or later and was in the RTI declaration by 19 March can be taken back on by their old employer and if they do that then the grant can claimed back to the date the individual was laid off - but not before 1 March. Employers are under no obligation to do that. Someone laid off or put on unpaid leave before 28 February and not in the 19 March RTI declaration cannot be taken back and put on furlough. Because these rules have now been complexified employers and employees are advised to check exactly how they apply.

Some employers are telling workers that they will put them on furlough but they will not pay them until the HMRC grant comes through. There appears to be nothing to ban this practice.

What is pay?
Only regular pay counts. Initially HMRC said that did not include bonuses, commission, or extra fees. However, the latest guidance says that  it is any pay an employer 'is obliged to pay' and that includes wages, overtime that has already been done, fees and compulsory commission payments. However, discretionary payments such as bonuses, tips, and commission should NOT be included. This clarification is very vague. And it seems likely that many commission payments and tips will be excluded. HMRC has confirmed that includes all tips paid to waiters and others in the catering industry whether those tips are paid through a 'tronc' or not. See LEFT OUT below. Some supply teachers are paid minimum wage and then their daily fee is topped up by a 'bonus' to the school's day rate. If that is a contractual entitlement then it is part of their pay. If it is not then it is not part of their pay which will be just minimum wage or whatever their regular pay is. Lawyers say it will normally be part of contractual pay even if the contract is not explicit.

Umbrella companies
Someone who is paid a fee per day by an umbrella company normally has 12.07% added to it to represent holiday for for leave they are due but cannot take. It is still not known if the 80% of pay is calculated on the daily fee with or without this holiday pay. Bizarrely guidance on this point is due from the Department for Business, Energy and Industrial Strategy (BEIS). My understanding having spoken to HMRC is that if an umbrella company claims for the amount including holiday pay that will be accepted and if it turns out to be wrong then the next payment will be adjusted. 

The pay of employees returning from maternity or similar leave after 28 February 2020 should be calculated on their normal salary not the pay they were receiving while on statutory leave.

Salary Sacrifice
Employees who have sacrificed salary to gain from employee benefits including pensions can now reverse that reduction in salary.  That will require cooperation from the employer and may not be done quickly enough to affect initial furloughed pay. 

If your employer says you cannot be furloughed under the HMRC rules but you disagree there will not be any appeal process. HMRC stresses that this is a voluntary scheme which no employer has to take part in so employers can make their own decisions and there will be no way to challenge them.

HMRC has confirmed there is no appeal process for eligibility for CJRS. So employers cannot appeal if the grant is less than they expect or applies to fewer employees than they expect. They can only complain under general complaint procedures about the service they have received from HMRC.

People who work for themselves and have formed a company to do that can claim under this scheme. They furlough themselves in their capacity as an employee or office holder of their company and the company can then claim a grant to cover 80% of the regular salary that they have paid themselves via PAYE, up to the cap of £2,500 a month. Those who pay themselves the typical minimum of around £8400 a year will get 80% of that or around £560 a month.

However, HMRC has confirmed to me again that if the Director was paid this amount once a year in March and that date in 2019/20 was after 19 March 2020 then it will be too late to be counted and they will not be able to claim.

If they get a year's money in a month - typically £8000 or so it will also mean they cannot claim Universal Credit for that month at least. However, it is worth applying as there may be some wriggle room. 

Directors who have paid themselves partly in dividends from the company will not get 80% of dividends as they do not count as pay. They will just get 80% of their regular pay through PAYE. There is a campaign to get this changed and dividends counted. See #forgottenfreelancers and #forgottenltd on Twitter. There is no indication that the Government is considering any change.

As a furloughed employee they cannot do any work relating to the company and that could even include tweeting from an official account or on behalf of the company. They cannot make phone calls or discuss the firm or its business.

In their role as a director they can perform their statutory duties but only those - for example, relating to filing documents to Companies House at the correct time and any reasonable work involved in doing so.

The rules about procedure for directors are very specific and anyone affected should check the latest official guidance.

These rules about directors apply equally to those who work through a Personal Services Company.

Contingent workers
There are special rules for what the government calls 'contingent workers' in the public sector. They are people on short term contracts. It applies to three groups:
  • those on PAYE,
  • those who work through an umbrella company,
  • those who work through their own personal services company.
If they can do their job from home they should do so. If they cannot work and are off due to any of the effects of coronavirus they should have 80% of their regular pay up to a monthly limit of £2500. If this affects you read the official guidance and talk to the public sector body you do work for. It applies to all central government departments, executive agencies and non-departmental public bodies. Other public sector contractor are "encouraged to apply" the same rules.

I am checking these known unknowns with HMRC.

Hairdressers: Many hairdressers are self-employed but are paid by the salon through payroll although they are paid gross without deductions. I am - still - enquiring about this group.

Holiday pay: It is still not clear how pay is calculated for someone whose income was reduced because they are on holiday. Further guidance is promised

Between jobs
The big group left out of this scheme are people who are between jobs. Someone who left one job before the end of February and has now been told that a new job is no longer available cannot turn to their old employer for help. Nor can they turn to their new employer for help. Even if they are taken on by the new employer it cannot put them on furlough. Every month 260,000 people move jobs. The change in qualifying date is unlikely to help this group. But remember that the date of '28 February' should now be read as 'included in the employer's RTI submission by no later than 19 March 2020'. There is not expected to be any further change to help this group.

If you were on payroll on 28 February - included in that key RTI submission - and subsequently left for another job which has now fallen through you can be taken back by your old employer and put on furlough. But that depends on your old employer agreeing to do so. If you were not on payroll on 28 February and in that key RTI submission that does not apply. There is a campaign to get help for this group -- see #newstarterfurlough on Twitter but now the final rules have been published it is highly unlikely there will be any change.

Another major group who are included but getting far less than 80% of what they are actually paid are those whose basic pay is very low but make the bulk of their regular income from commission on sales. One example I have been sent is a basic salary of £16,500 but potential commission of 50% to nearly 100% of that. So they will get £1100 a month on furlough instead of the £1650 to £2000 a month which would reflect 80% of their actual earnings. People who sell cars for dealerships will also be very hard hit by this - their basic pay of around £14,000 may normally be around £40,000 but no allowance will be given for that.

Employers do not have to avail themselves of the scheme. A firm can just make all its staff redundant or some of them rather than furloughing them. This a major loophole which will leave tens of thousands of workers unprotected. And the more complicated the rules are - and they are now very complicated - the more employers may just decide not to bother. 


Version 2.56
14 May 2020