The government have announced the Coronavirus Job Retention Scheme to avoid job losses and/or redundancies. The details have been published by HRMC last night 26th March 2020 and the link to the guidance is here https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
This provides some much needed detailed guidance although I’m sure there are some questions we don’t know yet.
About the Scheme:
The government has announced that to avoid job losses and/or redundancies, they will fund 80% of staff salaries who would otherwise have lost their employment.
Who is eligible?
Any employee who has been employed on or before 28th February 2020 and has been placed on furlough leave. All businesses in the UK irrespective or size or sector will have access to the scheme. This includes:
- Recruitment agencies (agency workers paid through PAYE)
- Public authorites
Who can you claim for?
Furloughed employees 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
- employees on agency contracts
- employees on flexible or zero-hour contracts
The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
This scheme is only for employees on agency contracts who are not working.
If an employee is working, but 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 you agreed.
Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
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. If you do select who is to be furloughed, you need to follow a fair selection process, as you would in a redundancy situation. Remember, employment law still applies.
If your employee is on unpaid leave
Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
If your employee is on Statutory Sick Pay
Employees on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this.
Employees who are shielding in line with public health guidance can be placed on furlough.
If your employee has more than one job
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.
If your employee does volunteer work or training
A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.
However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay
Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.
If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.
Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.
If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.
The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.
How does the scheme work?
Employers need to make a claim for wage costs through this scheme.
You will receive a grant from HMRC 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, commission and bonuses should not be included.
At 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 obliged to under this scheme.
More guidance will be issued on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.
Full time and part time employees
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%. Fees, commission and bonuses should not be included.
Employees whose pay varies
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, 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
What happens when Furlough status has been agreed
Once furlough status has been agreed, it will remain the responsibility of the employer to pay their staffs wages at a rate of 80% and claim this back from HMRC. Employers will be able to submit their claim through a new HMRC portal. Further information on this will be released shortly (end of April 2020 at the moment) and as it may take some time to set up, employers should look at a Coronavirus Business Interruption Loan to cover salaries in the meantime. Please be aware that should employers chose not to pay salaries, this is a breach of the employment contract and an unlawful deduction of earnings, which could result in a tribunal claim. Employers are able to pay the additional 20% if they so wish but are under no obligation by the government to do so.
How long will it last and do I have to pay it back?
The government have advised that the scheme will initially run for 3 months, starting from 1st March 2020. Employers will not have to pay the funds back. This is a grant, not a loan. Please be aware that the scheme runs during March, April and May and not for 3 months from the employee being furloughed. This may be extended should there be a requirement.
How much are my employees entitled to?
Employees will be entitled to either 80% of their normal salary or £2500 per month. Whichever is lower. It is worth noting that the £2500 cap also includes employer NIC and pension contributions.
Will my employees still accrue holiday if they are on furlough leave?
The simple answer is yes. As furlough leave is designed to help employers retain their employees and continuity of employment will apply, holiday during leave will be accrued in the usual way and as if the employee is still working.
How long will it take to receive the funds?
The government are advising that the scheme will be up and running by the end of April. Once the application has been made for funding, it is unclear how long the funds will take to release. The optimist in us hopes that the funds will be available to employers straight away but with the volume of applicants accessing this scheme, employers may need to be a little bit patient.
What will I need to make a claim under the scheme?
To claim, you will need:
- your ePAYE 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 will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
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.
What to do after you’ve claimed
Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
You should make your claim 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. You can choose to top up the employee’s salary, but you do not have to.
If you need to discuss further contact Ashley@heeleyresourcing.co.uk or call 07841255480.