How to Claim and What to Claim for Wage Costs Through the Coronavirus Job Retention Scheme

The government published initial guidance on 26 March 2020, and has updated its guidance a number of times since. The portal to claim the grant through, opened on 20 April 2020. This note has been updated since the opening of the portal.

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least four months, starting from 1 March 2020. The government expects the scheme to be paying out by the end of April 2020. It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19).

The Coronavirus Job Retention Scheme – The Basics.

Employers will be able to use a portal to claim 80% of furloughed employees’ (employees on a leave of absence), usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions, on that wage. Employers can use this scheme anytime during this period. In practice, we expect that whoever runs the payroll will provide this service. We intend to do this for our clients.

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 19 March 2020.

How to Make a Claim through the Coronavirus Job Retention Scheme

You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated to 1 March 2020, if applicable.

You should make your claim in accordance with actual payroll amounts, at the point at which you run your payroll, or in advance of an imminent payroll.

To claim, you will need:

  • your ePAYE reference number
  • the number of employees being furloughed
  • each employee’s National Insurance Number
  • each employee’s payroll or employee number (optional)
  • the claim period (start and end date)
  • the full amount you are claiming for, including employer National Insurance contributions and employer minimum pension contributions
  • 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.

Once HMRC has received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.

You must pay the employee all of the grant that you receive for their gross pay, no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.

What you can Claim though the Coronavirus Job Retention Scheme

Employers need to make a claim for wage costs through this scheme. Furloughed employees must have been on your PAYE payroll on or before 19 March 2020.

You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage, or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.

At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%.

What you Cannot Claim though the Coronavirus Job Retention Scheme

You cannot include the following when calculating wages:

  • payments made at the discretion of the employer or a client where the employer or client was under no contractual obligation to pay, including:
    • tips
    • discretionary bonuses
    • discretionary commission payments
  • non-cash payments
  • non-monetary benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay

Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th  April and will be £520 per month from 6th April 2020 onwards).

The employer cannot claim any additional costs for running the scheme.

How the Employer will pay the Employee

Although the furloughed individual can no longer work for the employer, they remain an employee and will be paid by the employer through the normal payroll system. The employee will be subject to PAYE and Employee National Insurance, as usual.

All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions, on behalf of their furloughed employees. Employees will pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out, to cease saving into a workplace pension scheme. If they opt-out, there will then be no payment from the employer either, and therefore no claim to be made under the scheme for the minimum automatic enrolment employer pension contribution.

The employer can choose to provide top-up salary in addition to the grant.

Since the scheme was first announced, there have been a number of updates to the guidance on how to calculate the claim and who you can claim for. You should check this on the government website here, or ask us to assist. 

The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.