PHTM COVID-19 FINANCE UPDATE CHANGES TO CJRS
From 1 October, HMRC will pay 60% of usual wages up to a cap of £1,875 per month for the hours furloughed employees do not work.
Employers will continue to pay furloughed employees at least 80% of their usual wages for the hours they do not work, up to a cap of £2,500 per month.
Employers will need to fund the difference between this and the Coronavirus Job Retention Scheme grant themselves.
The caps are proportional to the hours not worked.
For example: if your employee is furloughed for half their usual hours in October, you are entitled to claim 60% of their usual wages for the hours they do not work, up to £937.50 (half of £1,875 cap).
You must still pay your employee at least 80% of their usual wages for the hours they don’t work. So for someone only working half their usual hours you’d need to pay them up to £1,250 (half of £2,500 cap), funding the remaining portion yourself.
Employers must also continue to pay your furloughed employees' National Insurance and pension contributions from your own funds.
JOB SUPPORT SCHEME:
From 1 November until April 2021 the government will contribute to- wards the wages of employees who are working fewer than normal hours due to decreased demand.
1. Employers will continue to pay the wages of staff for the hours they work - but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.
2. This means employees who can only go back to work on shorter time will still be paid two thirds of the hours for those they can’t work
3. The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
Employees • Employees must already be on an employer’s PAYE payroll on or before 23 September 2020.
• For the first three months of the scheme the employee must work at least 33% of their usual hours.
• Employees will be able to cycle on and off the scheme and do not have to be working the same pattern each month, but each short-time working arrangement must cover a minimum period of seven days.
What does the grant cover? • For every hour not worked by the employee, both the Government and employer will pay a third each of the usual hourly wage for that employee.
• The Government contribution will be capped at £697.92 a month. • Grant payments will be made in arrears, reimbursing the employer for the Government’s contribution.
• The grant will not cover Class 1 employer NICs or pension contri- butions, although these contributions will remain payable by the employer.
• Employees who have previously been furloughed, will have their underlying usual pay and/or hours used to calculate usual wages, not the amount they were paid whilst on furlough. • Employers must pay employees their contracted wages for hours worked, and the Government and employer contributions for hours not worked.
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• Employers will be able to make a claim online through
Gov.uk from December 2020. They will be paid on a monthly basis.
• Grants will be payable in arrears meaning that a claim can only be submitted in respect of a given pay period, after payment to the employee has been made and that payment has been reported to HMRC via an RTI return
HMRC checks
• HMRC will check claims. Payments may be withheld or need to be paid back if a claim is found to be fraudulent or based on incorrect information. Grants can only be used as reimbursement for wage costs actually incurred. • Employers must agree the new short-time working arrangements with their staff, make any changes to the employment contract by agreement, and notify the employee in writing. This agreement must be made available to HMRC on request. • Employees will be informed by HMRC of full details of the claim.
Example:
• Beth normally works 5 days a week and earns £350 a week. Her company is suffering reduced sales due to coronavirus.
• Rather than making Beth redundant, the company puts Beth on the Job Support Scheme, working 2 days a week - 40% of her usual hours.
• Her employer pays Beth £140 for the 2 days she works.
• And for the other 3 days she is not working 60%, - worth £210 she will be paid 2/3 or £140, bringing her total earnings to £280 - 80% of her normal wage.
• The Government will give a grant worth £70 - 1/3 of hours not worked, equivalent to 20% of her normal wages to Beth’s employer to support them in keeping Beth’s job.
Hours Employee Worked
Hours Employee Not Working
Employee Earnings (% of normal)
Gov’t Grant (% of normal wages)
Employer Cost (% of normal wages)
33% 67% 78% 22% 55% 40% 60% 80% 20% 60% 50% 50% 83% 17% 67% 60% 40% 87% 13% 73% OCTOBER 2020 70% 30% 90% 10% 80% What does it mean to be on reduced hours?
• The employee must be working at least 33% of their usual hours. • For the time worked, employees must be paid their normal con- tracted wage.
• For time not worked, the employee will be paid up to two-thirds of their usual wage. • Employees cannot be made redundant or put on notice of redun- dancy during the period within which their employer is claiming the grant for that employee.
How can I claim?
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