Further guidance for NI businesses
To protect jobs and support businesses beyond the expected end of lockdown, the JRS will now run for a further five months. Eunan Ferguson of our Belfast office explains below.
As was widely trailed and welcomed the Job Retention Scheme (JRS) has been extended from 30 April 2021 until the end of September 2021. The scheme will continue in its present form until the end of June 2021 with a phased reduction in the level of funding from 1 July 2021.
Furlough claims from 1 May 2021 onwards
For claims made from 1 May 2021 onwards, the updated Eligible employee guidance confirms furloughed employees must have been employed by the claiming employer and on their PAYE payroll on 2 March 2021. The employer must also have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying payment of earnings for those employees. Employers do not need to have previously claimed for employees before 2 March 2021 to claim for periods on or after 1 May.
How the scheme currently operates
Currently, participating employers can claim grants equal to 80 percent of a furloughed worker’s ‘reference pay’ for the hours they are on furlough. Grants for each employee are capped at £2,500 per month, an amount that is pro-rated where the employee undertakes some work in the relevant claim period.
This will continue to apply to claims for periods ending on or before 30 June 2021.
How the scheme will change from 1 July
For claim periods beginning on or after 1 July 2021, the grant will reduce to 70 percent of an employee’s reference salary with the monthly cap reducing to £2,187.50.
For claim periods beginning on or after 1 August 2021, the grant will reduce further to 60 percent of reference salary with the monthly cap reducing to £1,875.
Regardless of these prospective reductions, employees must continue to receive at least 80 percent of reference pay, subject to a monthly cap of £2,500, for their furloughed (i.e. non-working) hours.
From July 2021, the employer must therefore fund the difference between the reducing JRS grants and the minimum furlough payments it is required to make to employees. If this requirement is not met, the entire grant related to an underpaid employee could potentially become repayable to HMRC.
Employers must also pay all associated employer’s NIC and pension contributions, as well as meet all costs relating to hours employees work.
What should employers who participate in the JRS do?
Employers should consider how the extension to the JRS will affect their cashflow and the practical implications for return to work preparations over the next seven months, as the UK expects to move out of lockdown. In particular, they will need to consider how the additional furlough costs due to the reduction in the level of grants will impact those plans.
HMRC’s enforcement activity
The Government also announced they will invest over £100 million in a special taskforce of 1,265 HMRC staff to target fraud within COVID-19 support packages, including the JRS. Whilst this focus is on illegitimate claims, the complex and evolving nature of the scheme since its introduction in March last year means it is important that employers generally ensure their JRS claims are robust and supportable.
Get in touch
If you have any queries on this extension to the Job Retention Scheme, please contact Eunan Ferguson of our Belfast office.
KPMG in Northern Ireland