The Coronavirus Job Retention Scheme (‘the Scheme’)was unveiled by the Chancellor as part of his emergency response to the ongoing crisis and is available to all UK employers.
So far only brief guidance notes have been issued to businesses and employees with more detail expected shortly.
The Scheme is only appropriate for employees who the business does not require to undertake any work for them whilst the Coronavirus crisis continues, referred to by the Scheme as a ‘furloughed worker’.
The Government is to “reimburse at least 80 per cent of wage costs” for employees who would otherwise be ‘laid off’ up to £2,500 a month per employee.
- Employers, including businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities, will be able to access support to continue paying part of their employees’ salary for “those employees that would otherwise have been laid off during this crisis”.
- You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account to be eligible, which means a limited number of start-ups may be affected.
- Those you choose to designate as a ‘furloughed worker’ must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including full-time employees, part-time employees, agency contracts (as long as the person is not working) and zero-hour arrangements.
- Employees who were made redundant since 28 February 2020 will also be eligible if they are rehired.
- To be eligible for the subsidy, an employee must not undertake work for or on behalf of the organisation. This includes providing services or generating revenue, but they can do training or volunteer outside of the business.
- If an employee is working, but on reduced hours or reduced pay they will not be eligible for this scheme should be paid as normal through your payroll.
- Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
- Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this period. However, vulnerable Employees who are self-isolating in line with public health guidance can be placed on furlough.
what you can claim
- Employers will receive a grant from HMRC to cover either 80 per cent of an employee’s regular wage or £2,500 per month, whichever is lower.
- Grant includes associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.
- It does not include fees, commission and bonuses.
- Employers should pay at least the minimum allowed under the scheme, but can pay more to top-up employees wages should they wish to.
- Those who are contractually obliged to enhanced maternity, adoption or shared parental pay are eligible for the scheme, but not those on statutory maternity pay.
- For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80 per cent.
- For those whose pay varies, such as those on zero-hour contracts, you can claim for the higher of either:
- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings or it can be worked out pro-rate if they have been employed for less than a month.
Employers who wish to benefit from the scheme will need to:
Identify their affected employees who should be designated as ‘furloughed workers’.
Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process.
Where a business or organisation is furloughing a large workforce, consultation may need to be done on a collective basis.
The employer must then submit the following information to HMRC:
- your PAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 weeks)
- your bank account number and sort code
- your contact name
- your phone number
You can only submit one claim at least every three weeks (the minimum length an employee can be furloughed for) and these. can be backdated until the 1 March.
The scheme will continue for three months, but the Chancellor indicated that the scheme may be extended.
Changing the status of employees remains subject to existing employment law and, depending on the employment contract.
How will I be reimbursed?
Once HMRC has received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
A claim should be made in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.
You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted.
The Chancellor has announced that he expects the first grants under the scheme to be paid before 1 April 2020, but more detail is expected soon. The is scheme just one of a number of measures that the Chancellor has announced to support businesses.
Here to Help
For advice on this or any of the other measures recently outlined by the Government, please contact us.