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CJRS V2 – grant calculations

Courtesy of the Institute of Chartered Accountants in England and Wales (ICAEW)

From 1 July the Coronavirus Job Retention Scheme is changing to allow flexible furlough and part-time work. The ICAEW has written a series of example calculations to support organisations making claims. This is based on a simple, but common scenario.

CJRS from 1 July

The ICAEW outlines the changes that will be happening to the Coronavirus Job Retention Scheme from 1 July, including the introduction of flexible furlough.

Find out more

ABC Ltd has been furloughing Bob who previously earned a salary of £37,500 until being furloughed full time from April 2020.

Bob’s employment contract requires him to work a standard five day week, seven hours each day. 

In July 2020, Bob agrees to return to work on Tuesdays and Wednesdays. 

Calculations for July

ABC Ltd’s CJRS grant claim for July is based on 14 furlough days.

 DAYS HOURSTOTAL HOURS
Actual working hours (to be reported) 9763
Expected furloughed hours 14798
Total usual hours (to be reported)  161

ABC Ltd will incur a cost for employing Bob in July as follows:

COSTCALCULATIONTOTAL
Bob’s salary£37,500/12£3,125.00
Employer’s NIC(£3,125 – £732) x 13.8%   £330.23
Employer’s minimum pension contribution(£3,125 – £520) x 3%     £78.15
Total cost £3,533.38

ABC Ltd’s CJRS grant claim for July will be as follows:

1. SALARYTOTAL:
Lower of:
£37,500/12 x 80%, and
£2,500
 x Furlough hours (98)/total hours (161)£1,521.74
2. EMPLOYERS’ NIC ON THIS PAYTOTAL: 
(£1,521 – Secondary threshold for furloughed hours/total hours) x 13.8%
(£1,521 – £732 x 98/161) x 13.8% £148.41
3. EMPLOYERS’ PENSION CONTRIBUTION ON THIS PAYTOTAL:
(£1,521 – lower limit qualifying earnings for period for furloughed hours/total hours) x 3%  
£1,521 – 520 x 98/161) x 3% £36.13 

Total grant claim for July £1,706.28

The CJRS grant claim for this amount can be submitted at any time from 14 days before pay day, so from 18 July onwards.

Net cost to business of employing Bob in July is

Employment cost £3,533.38
Less CJRS grant£1,706.28
Net cost£1,827.10

HMRC’s calculator on gov.uk has already been updated to calculate claims for July, so can be used to calculate claims for future periods to assist budgeting until 31 July 2020. It also gives a detailed breakdown of calculations for each pay period. It explains how the calculated figures for the claim we’ve arrived at.

The calculator works for most employees paid weekly, 2 weekly, 4 weekly or monthly.

Costs for August to October

Our calculations for the period August to 31 October indicate the following costs.

COSTCALCULATIONTOTAL
Bob’s salary£37,500/12£3,125.00
Employer’s NIC(£3,125 – £712) x 13.8%£330.23
Employer’s minimum pension contribution(£3,125 – £520) x 3%£78.15
Total cost£3,533.38

Calculations for August 2020

ABC Ltd’s CJRS grant claim for August based on 12 furlough days

DAYSHOURSTOTAL HOURS
Actual working hours (to be reported) 
[Assume bank holiday is paid as a working day]
9763
Expected furloughed hours 12784
Total usual hours (to be reported)217147

The grant is now only in respect of salary.

   Total:
Lower of:
£37,500/12 x 80%, and
£2,500
x Furlough hours (84)/total hours (147)£1,428.57

Net cost to business of employing Bob in August is

Employment cost£3,533.38
Less CJRS grant£1,428.57
Net cost£2,104.81

Calculations for September 2020

ABC Ltd’s CJRS grant claim for September, based on 12 furlough days:

DAYSHOURSTOTAL HOURS
Actual working hours (to be reported) 10770
Expected furloughed hours 12784
Total usual hours (to be reported)227154

The grant is only in respect of salary but recovery percentage is reduced to 70%.

   Total:
Lower of:
£37,500/12 x 70% (£2,187.50), and
£2,500 x 7/8 
x Furlough hours (84)/total hours (154)£1,193.18

Net cost to business of employing Bob in September is

Employment cost£3,533.38
Less CJRS grant£1,193.18
Net cost£2,340.20

Calculations for October 2020

ABC Ltd’s CJRS grant claim for October, based on 14 furlough days

DAYSHOURSTOTAL HOURS
Actual working hours (to be reported) 8756
Expected furloughed hours 14798
Total usual hours (to be reported)227154

The grant is only in respect of salary but recovery percentage is reduced to 60%.

   Total:
Lower of:
£37,500/12 x 60% (£1,875), and
£2,500 x 6/8 
x Furlough hours (98)/total hours (154)£1,193.18

Net cost to business of employing Bob in October is

Employment cost£3,533.38
Less CJRS grant£1,193.18
Net cost£2,340.20

Note for those interested in numbers: An interesting accident of arithmetic and the calendar means that the net cost in September and October remains the same because the proportion of hours worked to hours furloughed changed inversely in proportion to the decrease in recovery percentage from 70% to 60%.

Further support: