The Government has issued further detailed guidance regarding the Coronavirus Job Retention Scheme, the measure designed to support 80% of the cost of furloughed workers. The full guidance can be found here and we strongly recommend that all our employer clients read it carefully and in full: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Key points to highlight are:
- Must have created and started a registered PAYE scheme on or before 28 February 2020.
- Must have a UK bank account.
- Must be designated as furloughed, meaning that they cannot work at all during the period in which relief is claimed for. The Government has defined this as not providing services to the employer or generating income for the business. Employees on reduced hours will not be eligible – they must cease all employment duties to be eligible. Employees required by the employers to undertake training during this time must be paid at least the National Minimum Wage or National Living Wage for the time spent training.
- Employers must write to the employees to confirm that they have been furloughed.
- Must have been on your payroll on 28 February 2020.
- Can be on any contract type (e.g. full-time; part-time).
- Employees currently on sick leave or self-isolating will continue to qualify for Statutory Sick Pay and may be furloughed once their sickness period has come to an end.
How it works
- Employers will need to run their payroll through PAYE as normal, including deducting tax and national insurance as normal.
- Employers will need to submit details of furloughed workers to HMRC through the new portal – this is expected to become available by the end of April, but claims can be backdated to 1 March.
- Claims are to be submitted once every 3 weeks, as this is the minimum period for which employees can be furloughed and qualify for this scheme.
- Eligible employers will receive a grant equivalent to the lower of 80% of the employees regular wage or £2,500 per month, plus employer National Insurance and minimum automatic enrolment employer pension.
- Employers are not obliged to pay the furloughed employee their normal 100% wage and may instead elect to pay just the subsidised 80%.
- The grant will be taxable in the hands of the employer and must be included in their normal annual profits calculation.
- For employees whose wages vary each month, the eligible amount will be equivalent to the higher of the same month’s earning from the previous year or the average monthly earning for 2019/20.
The furloughing of employees represents a legal change to their employment status. Therefore, we recommend that any clients considering furloughing workers does so only after having obtained appropriate legal advice. If you need help accessing legal advice, please contact us and we can direct you to a legal professional in your area.
If you have any questions regarding this measure or any of those previously announced, please feel free to contact us.