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Latest on Furloughing from CEDAS
| Author: Duncan Mitchell | Published: 29th June 2020 08:47 |
Duncan Mitchell of CED Accountancy Services in Towcester.
CED Accountancy Services Limited the well known Towcester firm of accountants now provide their latest update in a series of guidance notes to support their clients, as we begin to see an easing of restrictions in these difficult times.
The Coronavirus job retention scheme (CJRS) is changing from 1 July 2020 to a more flexible way of furloughing. New guidance issued on 12 June covers claims for employees furloughed from that date until the scheme ends 31 October 2020.
For many of you, where we run your payrolls, we have also been assisting with your furlough grant claims. As can be seen from our latest “summary” below, the new part time furlough rules that come in from 1 July, are a lot more flexible, but potentially much more complex. Given that the basis of our payroll charges is the time we spend dealing with your payroll affairs, in order that we minimise our charges to you, can we please ask that if you use the part time furlough scheme, you keep things as simple as possible.
What you need to know:
The CJRS falls into two distinct parts with different rules applying.
CJRS V1: 1 March 2020 to 30 June 2020
Employees must be fully furloughed. No work allowed.
Minimum furlough period for each employee is 21 days.
No new employee can be admitted to the scheme after 30 June. This, combined with 30 June end date to CJRS V1, means the last date on which an employee can begin a period of furlough leave for the first time is 10 June.
31 July is final date for submitting claims under CJRS V1.
CJRS V2: 1 July 2020 to 31 October 2020
From 1 July the scheme is only available to employers that have used CJRS V1 and only for employees they have previously furloughed.
Employees can be flexibly furloughed, enabling part-time working.
No minimum furlough period.
Each claim made by employer must be for a week or more.
No claim period can extend across a calendar month end.
Flexible furlough: What is it?
Under CJRS V2 the furlough period can vary from day to day, or week to week, but accurate records must be maintained. Crucially, these records must be maintained in hours.
The overriding principles remain that employees must be paid their contractual entitlement through the payroll and the employer can then choose to apply for a CJRS government grant to offset all or part of this cost.
This increased flexibility will accommodate flexible shift patterns, although calculating claims for varying periods will be more complicated.
While furlough becomes much more flexible, it is important to note that the level of the CJRS V2 grant will be reduced and as we progress through August to October, it is less than CJRS V1.
CJRS V2 claims - who is covered?
Which employers
An employer must have accessed the scheme under CJRS V1 to claim under CJRS V2 and employers have until 31 July to make all outstanding claims for periods up to 30 June, on which date CJRS V1 closes.
Employers can make their first claims under CJRS V2 from 1 July onwards.
Which employees
From 1 July onwards, employers can only furlough employees who are already in the scheme; that is those who have completed at least one full 21 day furlough period prior to 30 June. The effect of this is that an employee cannot be furloughed for the first time after 10 June.
The qualifying 21 day furlough period does not need to be the last 21 days in June. It can have been any 21 day furlough period claimed for under CJRS V1.
CJRS V2 claims - form and content
Number of employees restriction
There is a new limit to the number of employees who can be claimed for in a single claim. This is set at the maximum number ever claimed for in a single claim for that payroll in CJRS V1.
Calendar month restrictions
Because the grant scheme calculations change monthly, from 1 July, claim periods will not be allowed to overlap calendar months.
Each claim period should normally be for at least one calendar week, although some claim periods could be for longer than a week. The days in the month falling before and after the whole week claims in the month will be “orphan days” and any furlough in those periods will have to be the subject of separate shorter claims. They can't be claimed for at the same time as days in the previous or following calendar month.
Example:
An employer wishes to make calendar week claims for July. This could be made as five claims:
1-4 July 4 days
5-11 July 7 days
12-18 July 7 days
19-25 July 7 days
26-31 July 6 days
It could equally well be three claims:
1-11 July 11 days
12-18 July 7 days
19-31 July 13 days
Or anything else convenient as long as the basic period rules are observed.
Where furlough is part-time, the calculation must factor in the cost of hours worked to hours furloughed. This must be calculated for a specified claim period and by reference to calendar days.
CJRS V2 will end on 31 October 2020.
Periods overlapping 1 July 2020
An employee who was already being furloughed under CJRS V1 may be on a period of furlough leave which includes days in the old and new schemes. For example, the 21 day period starting on Monday 15 June ends on Sunday 5 July. Flexible furlough cannot start until this 21-day period ends, so from Monday 6 July in this example.
It would appear that 16 days have to be included in a claim under CJRS V1 rules and six days in a separate claim under CJRS V2 rules.
To claim
Claims for flexible furlough will now also have to include number of hours furloughed , as opposed to hours the employee is expected to work in the claim period. For example, an employee contracted for a 35-hour week may agree to a flexible furlough to work two days a week: 35 usual hours and 14 working hours would be reported.
Time limit for submission
We understand there is to be a new time limit for claims. Any claim for a period in a calendar month must be submitted before the end of the following calendar month.
Record keeping
As with any aspect of CJRS, the employer must keep a written agreement confirming the furlough arrangement. Records of these employee agreements must be kept for until 30 June 2025.
CJRS V2 claims - how much can be claimed?
The first rule is that the employer must continue to pay an employee in accordance with the employment contract. Some employment contracts were renegotiated when CJRS V1 was first announced and employees agreed to a salary reduction to 80% of their previous salary.
July 2020
In July, the full grant will continue unchanged for fully furloughed staff.
For partially furloughed staff, the grant will only cover the relevant proportion of salary, employers’ NIC and employers’ minimum compulsory pension contribution on the part of salary cost which relates to the furlough period.
August 2020
From August onwards, some staff who were retained on full-time furlough at nil overall cost to the employer (those whose salary was below £37,500), will now give rise to a payroll cost to the business, even if they remain on full-time furlough.
Because from August onwards, the employer cannot claim any grant at all for employers’ NIC nor for the employers’ compulsory pension contribution. So whatever employers’ NIC and employers’ pension contributions are payable on the salary are a cost in full to the employer. It doesn’t matter whether the employee is furloughed or not.
Salary cost
For fully furloughed staff, the grant will continue to cover the salary cost so the monthly grant an employer can claim for salary cost is the lower of:
• 80% of salary, and
• £2,500.
For partially furloughed staff, the grant will continue to cover the relevant proportion of salary cost for the furlough period. The monthly grant an employer can claim for salary cost is the lower of:
• 80% of salary for the furloughed time, and
• £2,500, reduced pro rata for furloughed time.
September – salary cost only
For fully furloughed staff, the grant will continue to cover the salary cost, but the percentage covered is reduced to 70%, from its original 80%. The monthly grant an employer can claim for salary cost is the lower of:
• 70% of salary, and
• £2,500 x 70/80.
For partially furloughed staff, the grant will continue to cover the relevant proportion of salary cost for the furlough period. The monthly grant an employer can claim for salary cost is the lower of:
• 70% of salary for the furloughed time, and
• £2,500 x 70/80 reduced pro rata for furloughed time.
October – salary cost only
For fully furloughed staff, the grant will continue to cover the salary cost, but the percentage covered is reduced further to 60%, from its original 80%. The monthly grant an employer can claim for salary cost is the lower of:
• 60% of salary, and
• £2,500 x 60/80.
For partially furloughed staff, the grant will continue to cover the relevant proportion of salary cost for the furlough period. The monthly grant an employer can claim for salary cost is the lower of:
• 60% of salary for the furloughed time, and
• £2,500 x 60/80 reduced pro rata for furloughed time.
It can be seen that the rules have added complexity and as ever if you have any queries, we will do our very best to provide guidance so please contact Cliff, Duncan, Peter, Katie, Nigel, Adam or Paul on 01327 358866, or email us using cliff/duncan/peter/katie/nigel/adam/paul @cedas.co.uk.
On Behalf Of CED Accountancy Services Ltd
Registered Auditors and Chartered Accountants
TEL 01327 358866
FAX 01327 358355
EMAIL info@cedas.co.uk
WEB www.cedas.co.uk
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