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This article was written in June 2020 and sought to explain how to calculate CJRS claims.
Last week we posted an update on the changes to the Coronavirus Job Retention Scheme. In a nutshell, you will be able to bring employees on and off furlough from 1st July provided they were put on furlough for at least three weeks at some point prior to 10th June.
The amount the government contributes to furloughed employees’ wages is also dropping. From August, you will have to pay employers’ NI and pension contributions. On 1st September the subsidy drops from 80% of employees’ wages (or a maximum of £2,500) to 70% (or a maximum of £2,190). This goes down to 60% (or a maximum of £1,875) on 1st October and the scheme ends at the end of the month. All of these changes have left many of our clients wondering how to calculate CJRS claims.
Calculating CJRS claims can either be relatively simple or fiendishly complex, depending on your circumstances and those of the people who want to furlough.
Online CJRS calculator
At the simple end of the scale, HMRC offers an online calculator which can currently be used to work out furlough claims that end on or before 31 July.
The calculator is available here. However, you can’t use it if employees:
- Have returned from statutory leave (e.g. parental, adoption or bereavement leave)
- Receive directors’ payments
- Have been transferred under TUPE
- Have been employed at separate times throughout the year
- Receive employer pension contributions outside of an auto-enrolment scheme
- Have an annual pay period.
The calculator will probably be updated to cover more employment situations. However, the chances are that you’ll need to manually calculate CJRS claims at some point.
How to calculate CJRS claims manually
Working out how to calculate CJRS claims isn’t easy. If we are already your accountants, we strongly advise that you ask us to do the calculations for you! If you make mistakes in your claims HMRC has the power to recover payments with a 100% tax charge. Worse, if the taxman believes the errors were deliberate, the penalty can be as high as 100% of the overpayment. Don’t risk it!
However, if you are determined to calculate CJRS yourself, the best plan is to consult the official government guidance. These three pages are essential reading.
- Calculate how much you can claim using the Coronavirus Job Retention Scheme
- Changes to the Coronavirus Job Retention Scheme
- Examples of how to calculate your employees’ wages, National Insurance contributions and pension contributions.
A basic guide to CJRS calculations
Before you calculate any claim, remember that you can’t have a claim period that straddles two calendar months. You can’t claim more than 14 days before the end date of your claim. Claims from 1st July must usually be for a minimum of 7 calendar days (there are exceptions). Also, you can’t have overlapping claim periods.
To work out a claim, you need to know:
- The length of your claim period
- What to include when calculating wages (see below)
- Each employee’s usual hours, furloughed hours and actual hours worked.
To address the second point, these are the things you need to include when calculating wages:
- An employee’s normal wages
- Non-discretionary payments for time worked, including overtime
- Non-discretionary fees and commissions
- Piece-rate payments.
Working out an employee’s ‘usual hours’
This is a really complex topic and could be the topic of a blog post of its own. Essentially if your employee is flexibly furloughed, you need to work out their ‘usual’ hours. The way you do this depends on whether an employee works fixed or variable hours.
We strongly suggest you follow the government’s official guidance on calculating ‘usual’ hours. You can find it here.
Working out the furloughed hours
This is the easy bit. You simply subtract the hours an employee worked during a claim period from their ‘usual’ hours. The net figure is the furloughed hours.
Record keeping when working out how to calculate CJRS claims
No matter whether you calculate your own CJRS claims, or your accountant does it for you, make sure you keep accurate records in case HMRC come knocking. You’ll need to keep:
- Signed, dated furlough agreements
- Details of the amount claimed and the claim period for each employee
- Claim reference numbers
- Your calculations
- Evidence of how any over-claim came about and evidence of repayment
- Evidence of how any under-claim came about, the amount of ‘repayment’ and the reference number supplied by HMRC.
- Details of usual hours worked
- Details of actual hours worked.
The fact of the matter is that, while the furlough scheme now gives you more flexibility, it’s much trickier to calculate claims. If you’d rather not wade through the calculations yourself, get in touch – we’d be delighted to help.
About Samantha Rowe
Sam’s title is Operations Manager, but the title itself doesn’t truly convey the variety of what she does for THP. From administrative tasks to payroll, strategic business planning, and office systems and procedures, Sam’s primary skill lies in multitasking.
Sam’s journey began as an office junior with George Nottage (now merged with THP), and she soon learned skills in payroll and bookkeeping, and then gained experience as a PA to the Directors, and as Administration Manager.
At the moment, Auto Enrolment is an area that has a key focus for Sam, and for THP as a whole. “The question I’m asked the most by clients just now is, ‘How will auto enrolment affect me?’ And the answer is, no matter how big or small you are, you will absolutely be affected by the Auto Enrolment regulations. I’d encourage you to start thinking about it now, and to look at your payroll software to make sure you’re ready.”