The Coronavirus Job Retention Scheme
What is the Coronavirus Job Retention scheme?
Under this new scheme, the government has announced that is will cover 80% of the salary of PAYE employees who would have been furloughed – or laid off- during the pandemic.
As an employer, you will be able to claim back 80% of the gross pay of the employee per month, up to a maximum of £2,500. You will also be able to claim back 80% of employers NIC and Employers pension contribution on top of this.
This scheme is available to any employer, whether small or large, charitable or non-profit, and it will cover the cost of wages dating back to 1st March 2020. It will continue for 3 months, or longer if deemed necessary, and can include workers who were in employment on 29th February 2020.
Who is eligible?
To qualify, employers will need to designate employees as furloughed, which basically means that the employee is permitted to be absent from work for a designated period of time. They are NOT permitted to complete any work during this time, nor are they allowed to work for anybody else. Employees must be furloughed for at least 3 weeks at a time to qualify. If your employees continue to work, either from the office or from home, then they will not be deemed furloughed and you will be unable to claim anything back from the government.
Can a Company Director be furloughed?
The simple answer is yes. If you have found yourself in a position where you have no work, and you believe this is likely to continue for at least 3 weeks, you must send a letter to yourself from your limited company clearly detailing the furloughing. You may claim for 80% of your salary, but no income from dividends.
Whilst furloughed, you can only carry out your duties as a director. What these duties include are listed here. This set of guidelines were not created with furloughing in mind, and are therefore open to interpretation. However, we believe that maintaining the company’s statutory and financial records are the responsibility of the director(s) and can be kept up to date.
We do recommend that, if money allows, you continue to pay yourself your normal salary. If you’re the sole director and only paid employee, and are unable to furlough yourself for the scheme, you may be able to claim a grant, a loan or universal credit.
The claims process
HMRC are still working to set up a system for reimbursement, and currently, we are expecting the first grants within the next few weeks. They have said that their aim is to get it done before the end of April. If your business needs short-term cash flow support, you may be eligible for a Business Interruption Loan.
As far as we know, there will be an online portal which employers will need to use to access the scheme.
Employers will need to designate affected employees as ‘furloughed workers’ and notify those employees of this change. It should be noted that changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. If in doubt, you should contact an employment lawyer or HR specialist.
Once the new online portal is live, employers will need to submit information to HMRC about the employees who have been furloughed and their earnings. We believe that you will need the following information:
- Your PAYE reference number
- The number of employees being furloughed
- The claim period (start and end date)
- Amount claimed
- Your bank account details
- Your contact names
- Your phone number
What does ‘furloughed’ mean?
If your employer designates you as furloughed, this means that you are permitted to be absent from work for a designated period of time. You are NOT permitted to carry out any work for your employer during this time, nor for anyone else.
If I work from home, would that count me as furloughed?
If you continue to work, either from the office or at home, you are not deemed as furloughed.
Which of my employees can benefit from the scheme?
Anyone on payroll at 29th February 2020, and your employees must remain employed while furloughed to benefit from the scheme.
How much will the government pay my employees that have been furloughed?
The government will pay 80% of a furloughed workers wage, up to a cap of £2,500 per employee, per month. you can fund the 20% difference between the 80% funded and their usual salary at your discretion.
Do I have to continue to pay my staff as usual or am I able to wait until I receive the funds from the government?
We believe that employees should still be paid as usual and you can claim a business interruption loan if needed to cover the costs whilst you’re waiting for the reimbursement.
What happens if my employee was furloughed part way through the month?
You work out their normal basic pay up until the date they are furloughed, and then pro rata the 80% pay from that date.
What about employees whose pay varies every month?
If the employee had been employed for a full year prior to the claim, you can claim for the higher of either:
- The same month’s earnings from the previous year
- The average monthly earnings from the 2019/20 tax year.
If the employee has been employed for less than a year, you should be able to claim for an average of their monthly earnings since they started working for you.
If the employee only started in February 2020, you should work it out on a pro rata basis from when they started.
If I have taken on a new employee, can I furlough them?
Only if they were on payroll as at 29th February 2020.
Can an employee be furloughed if they are receiving SSP?
Employees who are sick, or are self isolating, should be receiving SSP, but they cannot be furloughed at the same time. They can be furloughed after this period.
If your employee is already entitled to SMP then the normal rules
What about employees on maternity leave?
apply and they are still entitled to this as usual.
What happens to my PAYE and pensions bill?
Pay for furloughed employees is still subject to the same tax and National Insurance as normal. This will still be due as normal by the usual pay date; however, you can call and arrange a payment plan with HMRC to assist you until the reclaim is received. You will be able to reclaim 80% of the employer’s National Insurance once the scheme is live.
Do I need to worry about National Minimum/Living Wage Legislation if/when I furlough someone?
The simple answer is no. When an employee is furloughed, they are not working and so, NMW doesn’t apply. The only time NMW does apply is if an employee is training and you are paying them. in this case, you need to make sure that the 80% amount doesn’t drop below this.
Can I furlough someone, the un-furlough them, then furlough them again?
Yes, you can as long as they have been furloughed for a minimum of 3 weeks each time.
Do furloughed employees have employment rights?
Yes, they have the same employment rights as previously.
Is the money receivable back from the Government taxable?
Can I amend February’s payroll to bump the figure up?
No, this is fraud.
I’m the sole director of my limited company and pay myself a salary each month. can I benefit from this scheme?
If you are a director of a limited company, withdrawing a salary, you can claim 80% of your salary via the job retention scheme, providing you do NO work.
As an employer, am I under obligation to furlough employees?
You are under no obligation to furlough anyone.
If my furloughed employees, or myself, want to do training and/or personal development whilst furloughed, is this allowed?
This is fine, providing you’re doing no actual work for the company. This includes marketing, sales etc.
Which of my employees can benefit from the scheme?
Anyone on payroll at 29th February 2020, and these employees must remain employed while furloughed to benefit from this scheme.
Can I wait until I receive the government funds to pay my staff?
Salaries should be paid as normal, and you can claim a business interruption loan if needed to cover the costs whilst you are waiting for reimbursement from the government.