Below are the steps that employers must take if you plan to utilize the CVJR to furlough employees. This is based on the latest information available from HMRC. Though the furlough process is not complete, there are steps that employers can start taking now.
Step 1: Notification
Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding to whom to offer furlough, equality and discrimination laws will apply in the usual way.
To be eligible for the furlough grant, employers must communicate in writing to their employee confirming that they have been furloughed. A record of this communication must be kept by the employer for five years.
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.
Remember that you do not need to place all your employees on furlough, and you can choose to top up your employee’s salary (but you do not have to). However, those employees who you do place on furlough cannot undertake work for you, even if they receive a salary top-up.
Step 2: Calculation
For each employee to be furloughed, the employer must know the gross pay figure which is to be paid to each employee. This figure will be used in the payroll process for the first payment and all subsequent payments under the CVJR scheme. Please note that the calculation method is different for salaried versus variable paid employees. For full or part time salaried employees, simply claim 80%of the employee’s salary (before tax) as of 28 February. However, fees, commissions and bonuses should not be included.
For employees whose pay varies, if the employee has been employed for 12 months or more, you can claim the highest of either the:
If the variable pay employee has been employed for less than 12 months, claim for 80% of their average monthly earnings (before tax) 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%.
Most employers will complete this activity themselves, however if you would like us to do this on your behalf, please ask us. Please note that, depending on the size and complexity of your payroll, there may be a charge for this service.
Step 3: Payroll Processing
Critically, employers must still pay furloughed employees via the existing payroll process. As such, there will be an impact to employer cash flow. The time delay from when you pay your furloughed employee to when you receive your CVJR grant is currently unknown.
As your payroll provider, we will continue to process your payroll as per normal for all employees (both regular and furloughed). As such, the charge for payroll processing will be unchanged.
Also, employees will still pay the taxes they normally pay out of their wages via the existing payroll process. This includes existing pension contributions (both employer contributions and automatic contributions from the employee).
As your payroll provider, we will be required to undertake a one-time set-up for every furloughed employee.
Step 4: Claiming the Grant
Employers must make their claim for the CVJR grant via an HMRC on-line portal (details of which are not yet available). The information an employer will need is:
Claims should be started from the date that the employee actually finishes work and starts their furlough, not when the decision is made, or when they were written to confirming their furloughed status.
Remember that HMRC retains the right to retrospectively audit all aspects of your claim.
After submission, HMRC will check the claim and, if deemed eligible, pay it to the employer UK bank account by Bacs. Remember that employers must have paid their employees all the grant received (no fees can be charged by the employer).
We are here to help you. As such, please contact your payroll manager with any questions that you may have.