Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme was made available to all employers who have a PAYE payroll scheme in place on or before 19 March 2020, and for employees who were reported through RTI on or before 19 March 2020.
The scheme is available for all UK employers for four months starting from 1 March 2020 and ending 30 June 2020.
Employers can use a HMRC portal to claim for 80% of furloughed employees’ (employees on a leave of absence) to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, discretionary commissions and bonuses should not be included.
To work out how much can be claimed per employee, a calculation needs to be made based on what type of contract the employee is on, i.e. fixed pay, varied pay, zero-hours etc.
You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable. Please click here for a link to HMRC’s online calculator.
We have worked with a large number of employers covering both common issues, unique situations and reviewing employees contracts to calculate their entitlement. Please feel free to get in contact with us should you require any assistance.
You can only submit one claim every 3 weeks, which is the minimum length an employee can be furloughed for the scheme to apply. As the portal went live on 20 April, initial claims can be backdated to 1 March if employees were Furloughed at this point. Going forward, you can only make a claim within 14 days of your next payroll submission.
As a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not a requirement of the scheme and employers will not receive any Government support for topping up.
To be eligible for the subsidy, when on furlough, an employee can not undertake work (with the exception of volunteer work or training) for, or on behalf, of the organisation. This includes providing services or generating revenue. Whilst on furlough, the employee’s wage will be subject to usual income tax and other deductions.
If an employee is working in any capacity, e.g. on reduced hours or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract.
Employer must also write to their employee(s) confirming that they have been furloughed and keep a record of this communication for a period of 5 years.
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. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.
You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
If your employee has more than one employer, they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
The grants in which the business receives will be treated as other revenue and businesses can deduct the employment costs as normal. The grant should therefore not create a taxable profit and therefore won’t be subject to Corporation Tax.
The Government have stated in their guidance for the SEISS in point 1 above that a director of their own company “may” be able to get support using the Job Retention Scheme.
HMRC retain the right to retrospectively audit all aspects of the scheme, including verifying furloughed employees, calculations of the claim and ensuring correct documentation is in place.
For assistance in creating Furlough contracts for your employees, we can provide this service for a small fee.
We can also manage the HMRC Furloughed Employee Portal, including grant claims and advising thereon, for a small fee per 3-weekly claim.