On Friday 12 June further complex guidance was published on the CJRS. This is likely to cause a headache for many payroll managers given how complicated the scheme has now become coupled with the pressure of getting the calculations right.

The key points to note are:

• You must claim for all periods up to and including 30 June 2020 by 31 July 2020 at the latest.
• This will include a claim for those furloughed for a minimum of 3 weeks before 30 June, so those furloughed by 10 June 2020.
• From 1 July 2020 onwards, you can only claim for periods falling in each calendar month – you cannot cross calendar months.
• This means that for those that have four weekly or fortnightly payrolls, you are going to have to claim for periods separate from your payroll dates.
• You can claim for periods of 7 days or more, but you can only make one claim per calendar month.
• You can claim up to 14 days in advance, but you must also know the hours your staff will work, so this becomes tricky and cash flow consequences need to be considered carefully.
• Your claim has to be limited to the maximum number of staff claimed in a previous claim to 30 June 2020. There are some exceptions to this for those returning from parental leave.
• You still have to identify employees by fixed or variable pay, to then work out their furlough period versus worked periods.
• From 1 August the employer has to pay the Employer National Insurance and pension costs –
  • This gets tricky for those that run fortnightly or four weekly payrolls which stagger July and August, and even more complicated if you also have monthly paid staff as well all on the one PAYE scheme.
• From 1 September employers will have to fund 10% of the furlough pay in addition to the full costs of working days.
• From 1 October this increases to 20% of furlough pay, plus the full costs of working days.

Employers will also have the ability to pay back claims if amounts have been overclaimed, coupled with making corrections for the claim periods to 30 June 2020. Across all of the above, it remains imperative that full records are maintained, including an audit trail of which version of HMRC’ guidance you applied at the time of each claim, along with any subsequent adjustment made. All correspondence, communications and guidance issued to employees should be retained, along with their formal changes to their contracts and working versus furloughed hours.

HMRC have provided 30 examples of how the new scheme is to be applied in practice, which illustrates just how complicated it is becoming. Having to de-couple the payroll calculation from the furlough claims, but also ensuring the right amounts are paid to staff, is going to be a challenge for anyone with anything but the simplest of payrolls. Add into that the likelihood of employers paying for holidays to help prevent accruals of large holiday balances, and you can envisage the need to run payroll calculations 3 to 4 times each pay period to arrive at each separate pay element: e.g. worked hours, furlough hours, holiday pay worked, holiday leave taken etc. Let alone if you are also in the unfortunate position to have to serve notice on staff, and pay for this, or pay in lieu too, along with any redundancy payments due which the employer has to fund. All of which may require averaging calculations to be performed over differing pay periods and taking into account separate rules. Communicating these various criteria to staff will be critical to help avoid misunderstandings or disputes. 

What is clear is that the amount of work required to support, calculate and submit claims is increasing, at the same time that the logistics of bringing staff back from furlough are also increasing. The pressure this will put on operations, HR, health and safety teams, finance and payroll teams is immense, as well as the impact it will have on staff returning to work when there remains uncertainty over access to public transport, childcare and related support provisions. 

How can A&M Taxand help?

At A&M Taxand we can assist with the complex calculations of CJRS, future modelling of wage costs and the impact of the CJRS changes, provide wider support to businesses on managing cashflow and restructuring services, along with advice and support should you need to reduce headcount. 

Please do contact your usual A&M point of contact, or Louise Jenkins or Tracey Norton from our Reward & Employment Tax Solutions team, should you require any assistance with the points raised above.