Coronavirus Job Retention Scheme (CJRS) and Holiday Pay
Workers who have been placed on furlough continue to accrue statutory holiday entitlements, and any additional holiday provided for under their employment contract.
If employers wish to reduce holiday entitlement below the 5.6 week legal minimum this needs to be done as an amendment to the worker’s contract.
Requesting or changing holiday
- require workers to take holiday
- cancel a worker’s holiday, if they give enough notice to the worker
The required notice periods are:
- double the length of the holiday if the employer wishes to require a worker to take holiday on particular days
- the length of the planned holiday if the employer wishes to cancel a worker’s holiday or require the worker not to take holiday on particular dates
Employers can ask workers to take or cancel holiday with less notice but need the workers’ agreement to do so.
These notice periods are in advance of the first day of the holiday, and the notice must be given before the notice period starts. For example, if an employer wanted to prevent a worker taking a week’s holiday, they would have to give notice earlier than 1 week before the first day of the holiday. For the purposes of calculating the notice period, any uninterrupted period of holiday counts as a single period. These rules on notice periods can be altered by a binding written agreement between the employer and the worker.
Requesting or changing holiday – Furloughed workers
Workers on furlough can take holiday without disrupting their furlough. The notice requirements for their employer requiring a worker to take leave or to refuse a request for leave continue to apply. Employers should engage with their workforce and explain reasons for wanting them to take leave before requiring them to do so.
If an employer requires a worker to take holiday while on furlough, the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday.
There is no statutory right to time off for bank holidays. Employers can include bank holidays as part of a workers’ statutory holiday entitlement if they choose, but do not have to do so.
Where necessary, employers can require workers who would usually take bank holidays as holiday to work instead, using the standard notice periods. Employers must still ensure that the workers receive their statutory holiday entitlement for the year.
Bank holidays – Furloughed workers
Where a bank holiday falls inside a worker’s period of furlough and the worker would have usually worked the bank holiday, their furlough will be unaffected by the bank holiday.
However, if the worker would usually have had the bank holiday as annual leave, there are 2 options.
- The bank holiday is taken as annual leave: If the employer and the worker agree that the bank holiday can be taken as annual leave while on furlough, the employer must pay the correct holiday pay for the worker. Employers may also require workers to take the bank holiday as annual leave with the correct notice periods.
- The bank holiday is deferred: If the employer and the worker agree that the bank holiday will not be taken as annual leave at that time, the worker must still receive the day of annual leave that they would have received. This holiday can be deferred till a later date, but the worker should still receive their full holiday entitlement.
The amount of pay that a worker receives for the holiday they take depends on the number of hours they work and how they are paid for those hours. The principle is that pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work and working.
Holiday pay, whether the worker is on furlough or not, should be calculated in line with current legislation, based on a worker’s usual earnings. The underlying principle is that a worker should not be financially worse off through taking holiday. Where a worker has regular hours and pay, their holiday pay would be calculated based on these hours. If they have variable hours or pay, their holiday pay is calculated as an average of the previous 52-weeks of remuneration excluding weeks in which there was no remuneration.
Holiday pay – Furloughed workers
An employer should not automatically pay a worker on holiday the rate of pay that they are receiving while on furlough, unless the employer has agreed to not reduce the worker’s pay while on furlough.
If a worker on furlough takes annual leave, an employer must calculate and pay the correct holiday pay in accordance with current legislation. Where this calculated rate is above the pay the worker receives while on furlough, the employer must pay the difference. However, as taking holiday does not break the furlough period, the employer can continue to claim the 80% grant from the government to cover most of the cost of holiday pay.
If an employer cannot afford to fund the top up for holiday pay it would be reasonable to refuse a request to take holiday at this time. As the working time regulations have been amended, annual leave can now be carried forward over the next two leave years. Salary in lieu of holiday is not permitted in any circumstances other than termination of employment.
Coronavirus Job Retention Scheme (CJRS) Extended
The Chancellor has announced the Coronavirus Job Retention Scheme will remain open until the end of October.
In a boost to millions of jobs and businesses, the Chancellor said the furlough scheme would be extended by a further four months with workers continuing to receive 80% of their current salary.
From the start of August, furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of their furloughed staff.
The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month.
The scheme will continue in its current form until the end of July and the changes to allow more flexibility will come in from the start of August. More specific details and information around its implementation will be made available by the end of this month.
The government will explore ways through which furloughed workers who wish to do additional training or learn new skills are supported during this period.
Updated Coronavirus Job Retention Scheme (CJRS) as of 20 April 2020
The government has announced a major change to the (CJRS), extending the scheme to 4 months, which means the scheme will now be available up to 30 June 2020 as opposed to 31 May 2020 as originally announced.
The scheme start date remains as of 1 March 2020.
The claim will be made online via an online portal which is now opened for submissions.
HMRC will check claims made through the scheme. Payments may be withheld or need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information or found to be fraudulent.
HMRC has put in place an online portal for employees and the public to report suspected fraud in the Coronavirus Job Retention Scheme.
Updated Coronavirus Job Retention Scheme (CJRS) as of 15 April 2020
The government has announced a major change to the (CJRS), moving the cut-off date from 28 February to 19 March. To qualify for the grant, the employer must now have created and started a PAYE payroll scheme on or before 19 March 2020.
Under the change, employers are now able to claim for furloughed employees that were on their payroll scheme on or before 19 March 2020 and who were notified to HMRC on an RTI submission on or before 19 March 2020.
Employees who were employed on 28 February 2020 and on payroll (ie notified to HMRC on an RTI submission on or before 28 February) and who were made redundant or stopped working for the employer after that and prior to 19 March 2020, can also qualify for the scheme if the employer re-employs them and puts them on furlough.
Updated Coronavirus Job Retention Scheme (CJRS) as of 6 April 2020
How much your business can claim depending on the type of employees you have
Following from the guidance issued by HMRC on the CJRS, further guidance has now been issued in respect of further clarification on how to calculate a claim and clarification of what constitutes wages.
How much can you claim under CJRS?
You will need to claim for:
• 80% of your employees’ wages (even for employee’s on National Minimum Wage) – up to a maximum of £2,500. Do not claim for the worker’s previous salary.
• minimum automatic enrolment employer pension contributions on the subsidised wage
You can choose to top up your employee’s salary, but you do not have to. Employees must not work or provide any services for the business while furloughed, even if they receive a top-up salary.
Grants will be prorated if your employee is only furloughed for part of a pay period.
Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they are written to confirming their furloughed status.
The way you work out your employees’ wages is different depending on what type of contract they are on, and when they started work.
Full or part time employees on a salary
Claim for the 80% of the employee’s salary, as of 28 February 2020, before tax.
Employees whose pay varies
If the employee has been employed for 12 months or more, you can claim the highest of either the:
• same month’s earning from the previous year
• average monthly earnings for the 2019-2020 tax year
If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.
If the employee only started in February 2020, work out a pro-rata for their earnings so far, and claim for 80%.
Employer National Insurance and Pension Contributions
You will still need to pay employer National Insurance and pension contributions on behalf of your furloughed employees, and you can claim for these too.
You cannot claim for:
• additional National Insurance or pension contributions you make because you chose to top up your employee’s salary
• any pension contributions you make that are above the mandatory employer contribution
Past Overtime, Fees, Commission, Bonuses and non-cash payments
You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.
Benefits in Kind and Salary Sacrifice Schemes
The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary. Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.
Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.
Apprenticeship Levy and Student Loans
Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the Job Retention Scheme do not cover these.
National Minimum Wage
Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW)/ Apprentices Minimum Wage (AMW) for the hours they are working or treated as working under minimum wage rules.
This means that furloughed workers who are not working can be paid the lower of 80% of their salary or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage. However, time spent training is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage, taking into account the increase in minimum wage rates from 1 April 2020. As such, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. Where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.
Where a furloughed worker is paid close to minimum wage levels and asked to complete training courses for a substantial majority of their usual working time employers are recommended to seek independent advice or contact ACAS.
What you will need to make a claim
Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.
To process the claim, HMRC will need:
• your ePAYE reference number
• the number of employees being furloughed
• the claim period (start and end date)
• amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
• your bank account number and sort code
• your contact name
• your phone number
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
You should make your claim using the amounts in your payroll – either shortly before or during running payroll. Claims can be backdated until the 1 March where employees have already been furloughed.
If appropriate, worker’s wages should be reduced to 80% of their salary within your payroll before they are paid. This adjustment will not be made by HMRC.
Minimum furlough periods
Any employees you place on furlough must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.
After you have claimed
HMRC will check your claim, and if you are eligible, pay it to you by BACS to a UK bank account.
You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted.
What happens when the government ends the scheme
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
HMRC will process all claims made before the scheme ends.
How ansteybond can help?
If you have agreed with your employees that they will be classed as “furloughed workers”, ansteybond will be able to assist with the reporting of this change to HMRC via their new portal for this scheme. Please contact Jennifer Gordon further information.
Anstey Bond HR Limited can provide assistance in respect of negotiating the change in the employees’ status, review of contracts of employment, drafting of letters to opt for the CJRS , advice on employment law related issues with working from home, GDPR issues and any other HR and employment law related query you may have. We offer a fixed rate subscription which can be paid monthly with interest free payments. Please contact Claudia Rowell for further information.
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