Coronavirus Job Retention Scheme 2 (CJRS2) commences 1st July and will end 31st October. It builds on CJRS1 with notable differences:
CRJS2 – furlough but not as we know it
- No longer a limit on length of time furloughed (was 3 weeks) hence you can now be furloughed, return to work and be re-furloughed on an hourly basis. This is called flexi-furlough.
- All calculations are now based on hours (not days as used in CJRS1)
- Claim process is different – you cannot claim across a calendar month
- You no longer enter a claim start date – it is assumed to follow on from your last claim
- Additional information and calculations are required for flexi-furlough.
Who can use it?
Employer – The criteria is unchanged from CJRS1 so any employer that couldn’t or didn’t use CJRS1 cannot use CJRS2. Conversely, any employer who did use CJRS1 will be able to use CJRS2 (subject to having eligible employees – see below).
Employees – any employee that had been furloughed for at least 3 weeks by the 30th June 2020 and who cannot be fully employed thereafter is eligible for flexi-furlough under CJRS2.
Claim limitations
- The number of employees in any one CJRS2 claim cannot exceed the maximum number of employees that were claimed in the biggest single claim under CJRS1.
- The monthly cap of £2,500 of furlough pay is still in place (pro-rated for flexi-furlough)
- Pension can still only be claimed under the QE rules
- No claim can be made for less than 7 days (except orphan days at begining/end of a month)
- 80% of pay, pension and NIC was available uner CJRS1 but this is being adjusted monthly under CJRS2
- Still cannot claim more 14 days before the end of your claim period.
Ready for some numbers?
So how do we calculate all this? The good news is we think we have got it. The bad news is that in line with HMRC policy it is neither simple nor logical (consistent then).
Easy stuff first; if your employees are remaining fully furloughed (not working) then the claim is exactly the same as under CJRS1. Hurrah!
If you are getting employees back into work on a part-time or rota basis you must keep track of the hours they have worked in the pay period. You will need to report these to us via the input sheet and we will pay them at their current normal hourly rate (national minimum wage increases will be applied).
So far so straightforward; now comes the tricky bit…
Fixed pay workers
To calculate the furlough element you first have to calculate ‘usual working hours’ for the pay reference period:
Bob works 37.5 hours a week and was earning a salary of £1,800 per month as at the end of February 2020. In July he has worked 75 hours and is furloughed for the remainder. How much is his furlough pay?
Take his weekly hours and divide by the number of calendar days in a week then multiply by the number of calendar days in the month and round up/down:
37.5 / 7 * 31 rounded =166 usual working hours in July
He worked 75 of these so 166 – 75 gives 91 furloughed hours
Take his eligible pay of £1,800 @ 80% and give him 91/166 of furlough pay being £789.40.
The claimable NIC and pension are calculated by pro-rating the nil bands using the same basis:
- £789.40-(£732*91/166)*13.8% = £53.56 claimable NI
- £789.40-(£520*91/166)*3% = £15.13 claimable pension
Variable pay workers
This gets even more complicated with a range of options for deciding both ‘usual hours’ and for deciding ‘pay per usual hours’.
To avoid us all going mad we are defaulting to taking the eligible pay for the month and dividing it by the employee’s hourly rate as at February 2020 to determine the usual hours.
Example – Jon’s eligible variable pay for July was £480 being his pay for July 2019. As he is paid NMW this was paid at a rate of £8.21 an hour so his ‘usual hours’ for the month are £480 divided by £8.21 rounded to 58 hours.
He worked 20 hours in July 20 and these must be paid at the new NMW of £8.72 but the balance of his usual hours being 58 minus 20 so 38 are still available for furlough pay.
£480 @ 80% pro-rated by 38/58 so £251.58 of furlough pay for his non-working hours
Further complications
Just in case you thought that was very straightforward there are further complications for those of you whose pay periods don’t fit the claim period (which now has to start and end with the calendar month).
Where this is the case we get into the territory of part of claiming for part periods and orphans. Given that this does not affect the majority of or clients I do not propose to knife and fork it here.
If we are making your claim we will be in touch about this process and we will perform the calculations. If you are doing your own claim – particularly some of our weekly clients – do beware of this and seek clarification or use the HMRC calculator.
