Employee eligibility conditions, as well as some reference pay calculations, will change from 1 May 2021. This is what you need to know.
The Treasury published the latest Coronavirus Job Retention Scheme (CJRS) direction on 15 April. This sets out the legal basis of how the scheme will operate from 1 May 2021 until it is expected to end on 30 September 2021. It extends the scheme and confirms previously announced changes. It also makes key changes to how ‘reference salary’ is calculated for certain categories of employee. Employers should confirm whether these changes will affect their furloughed workforce and, if so, act now to ensure they hold the information needed to calculate the revised ‘reference salary’. Employers should also consider how they might need to communicate this change to affected workers.
What’s changing from 1 May 2021?
Previously announced key changes to the CJRS confirmed in the new direction are that:
There is also an important change to the averaging calculation used when determining ‘reference pay’ for variably paid employees. This now removes periods of statutory leave, as well as periods of reduced rate paid leave immediately following a period of statutory leave where employees have been absent for part of the average pay period.
What should employers do to prepare?
These changes now mean that:
Employers should take steps now to identify individuals who will be affected by these changes, where relevant, source the data needed to calculate individuals’ ‘reference salaries’ on a revised basis, and factor any increase in costs into their budgeting in light of the reduction in CJRS support from July 2021.
Although the change to the ‘reference salary’ calculation will be welcomed by employees who may see an increase in furlough pay, employers may not relish the requirement to change their calculations going forward, explain to employees why their furlough pay has changed, and assure them they were not underpaid in prior periods.
What else should employers consider?
These changes illustrate the nuances and complexities associated with the CJRS.
When the scheme started last year, few would have expected the number of different directions and iterations of HMRC’s guidance – or that the scheme would run until September 2021.
A considerable number of employers have now made substantial claims under the CJRS based on complex and changing provisions. They must demonstrate these claims are robust to stakeholders including:
In addition, employers have an obligation to report any overclaimed CJRS grants to HMRC within 90 days of the date on which they arise, and are required to disclose and confirm the CJRS claims they were eligible to claim when submitting their corporation tax returns.
Employers should therefore continue to review and, where necessary, correct their CJRS claims to ensure compliance. For more information, see our Job Retention Scheme audit roadmap and Finance leader’s guide to Job Retention Scheme claims for more guidance.
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