1 July heralds the start of CJRSv2 (the second phase of the Government’s Coronavirus Job Retention Scheme) or the ‘furlough scheme’ as it’s more commonly referred to. Phase 1 of the scheme ran from 1 March 2020 to 30 June 2020.

From 1 July until the scheme ends permanently on 31 October 2020, only employees who have been previously furloughed at any point during Phase 1 of the scheme, can be furloughed under Phase 2.  In addition, the number of employees who can be claimed for in a single claim is limited to the maximum number ever claimed for in a single claim for that payroll under Phase 1. This may restrict claims for some employers, especially those who have rotated teams of staff on and off furlough.

On the plus side, there is a lot of flexibility in this phase: no minimum furlough period; employees can be brought back part-time for any number of hours, any combination of days, different hours from one week to the next and so on. Of course, that flexibility also brings more complexity in calculating both what to pay employees and what can legitimately be claimed. Any working periods must be paid at their full normal rate, as must any periods which the employee is allowed or required to take as annual holiday.

Other important things to note about the claims themselves:

  • information required is more specific and must contain details of usual hours (based on calendar days) and usual hours worked, with hours furloughed being the difference
  • each claim made by an employer should normally be for at least one calendar week
  • no claim period can extend across a calendar month-end
  • 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
  • employers have until 30 November 2020 to submit their final claim.

From 1 August, employers must also pay employer’s NI and employer’s pension contributions on furlough payments. Then from 1 September, whilst furloughed employees must still receive 80% of their reference pay whilst on periods of furlough, employers can only claim back 70% and this reduces further to 60% in October.

HMRC has now released guidance about how to correct errors in prior claims. If there has been an overclaimed amount in respect of a prior period, this can be adjusted for within the next CJRS claim; or, if no further claims will be made, the employer should contact HMRC and will then receive a payment reference number in order to make a correcting payment. If an employer has previously underclaimed, then they must contact HMRC directly to amend the claim. HMRC point out that as the employer is increasing the amount of the claim, they need to conduct additional checks.

Records of all claims, employee agreements, hours worked and calculations, together with any amendments to claims must be kept for six years.

In summary, the basic principle remains the same from Phase 1 of the furlough scheme: the employer must continue to pay a furloughed employee in accordance with the employment contract and is then able to claim back some of that cost under CJRSV2.  Whilst the employment contract was probably renegotiated when an employee was furloughed under Phase 1, it may also need to be further amended and agreed if that employee is to be brought back for part of their normal hours under Phase 2.

Please contact your usual Sagars team member for help with this, or get in touch with our payroll manager, Andrew Senior.

Ali Jones
Ali Jones
Consulting & Corporate Finance Partner

Ali provides strategic business planning, consulting and corporate finance advice and support to SMEs, professional practices and not-for-profits.

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