COVID-19 Job Retention Scheme
With what will be welcome news for many, the government have now announced further guidance on the Covid-19 Job Retention Scheme.
Announced by the Chancellor last Friday as part of wider support measure, the crux of the scheme is a government commitment to paying 80% of employees’ wages that have been ‘furloughed’ (i.e. stood down from their roles temporarily) as an alternative to redundancy in the wake of business disruption due to the Coronavirus outbreak.
All UK businesses with employees on a payroll that was operational as at 28 February 2020 can apply for the scheme, which will run for an initial 3 month period effective from 1 March 2020.
Employers can claim for 80% of furloughed employees’ usual monthly wage costs up to £2,500 a month (plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage) through a portal system.
Full details on the portal have yet to be announced, however the government expect the process to be live by the end of April (and to be able to deal with retrospective claims on that basis).
As noted in previous correspondence, we cannot stress enough that a formal process to furlough employees must take place which includes two-way communication and the completion of documents confirming the action. Please contact us if you need any support in this respect.
The scope of the scheme is wide-ranging given the varying nature of the employed workforce, however we’ve tried to answer some of the common questions we’ve receiving in recent days or those we think might be most relevant to you and/or your employees here:
How does it work for company directors?
In response to a point we’ve received a number of enquiries about, directors can be furloughed in the same way as other employees but a condition of this is that they cannot undertake work of any kind for the company during this time.
Whilst in some cases it may be feasible, it may be difficult to justify particularly for a sole director as work for the business includes anything that lends itself to income generation - therefore in addition to actual ‘trading’, if any potential downtime is used for administrative purposes, contacting clients/suppliers etc. the furloughing rules and thus eligibility for the scheme would not apply.
Who is eligible?
The scheme is designed to cover the wages of employees on any type of contract (including full-time, part-time, agency and flexible/zero-hours), and includes those made redundant since 28 February 2020 if rehired.
Those employed since 28 February 2020 are not eligible for the scheme, likewise those on unpaid leave since that date or those on reduced hours or pay – for example an employee cannot work one day a week and be furloughed for the remaining four.
As with the note regarding directors above, furloughed employees are not permitted to undertake work for the employer of any kind during that period.
There is still no specific guidance on taking holiday while an employee is furloughed – we’d therefore recommend caution or avoidance if possible should this negate the availability.
Do I have to furlough all employees?
You do not have to furlough all employees - it is at the discretion of the employer who is and who isn’t, however normal equality and discrimination laws will apply in the usual way to decisions in relation to the furloughing process.
Furloughed staff can be made redundant during furlough or afterwards, but likewise will retain their normal employment rights.
Can an employee be furloughed for more than one job?
Employees with more than one employer they can be furloughed for each. Each job is considered separate, and the cap applies to each employer individually.
How much can I claim?
Employers must pay their employee the lower of 80% of their regular wage or £2,500 per month (therefore 80% of £3,125 gross monthly wages).
Employers can also choose to top up an employee’s salary beyond this but is not obliged to.
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 shouldn’t be included.
For 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 the higher or either the same month's earning from the previous year or the 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 since they started work. If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Can I claim Employers’ National Insurance and Pension Contributions?
The obligation remains for the employer to remain liable for both of these, however the scheme covers the cost of them levied on the salary costs of furloughed employees.
What if I currently pay employees the National Minimum Wage?
Individuals are only entitled to the National Living/Minimum Wage for the hours they are working – therefore it is permissible that through these measures furloughed workers may receive less than this.
How does it work with Maternity Leave?
Employees who are on or plan to take Maternity Leave must take at least 2 weeks off work (or 4 weeks if they work in a factory or workshop) immediately following the birth of their baby which is a health and safety requirement.
Essentially if your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance the normal rules apply - they are entitled to claim up to 39 weeks of statutory pay or allowance and are unaffected by this scheme.
If you offer Maternity pay to employees in excess of SMP, this is included as wage costs that would be eligible through the scheme.
How do I make a claim?
Claims can be made via the portal every three weeks (the minimum furlough period) and the details required will include:
- Your ePAYE reference number
- The number of employees being furloughed
- The claim period (start and end date)
- The amount to be claimed
- Your bank account number and sort code
- Your contact name
- Your phone number
Once HMRC have received the claim and confirmed eligibility they will remit it to you via BACS.
Is the grant taxable to the business?
Yes – as the grant is designed to offset the costs to the business, amounts received in respect of the scheme will need to be included in the calculations for corporation or income tax of the business.
We appreciate this note will not answer all queries but have sought to summarise the main points - therefore please do contact us if you have further questions. Full details of the scheme can be found here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Unfortunately recent support measures have also lent themselves to an increase in scam emails and correspondence and this scheme is unlikely to avoid that. Please contact us or HMRC if you have any concern as to the genuine nature of correspondence relating to this or any other government scheme
If you have any questions regarding this or anything else please get in touch, and for regular updates, announcements and news please check our website (www.dsaprospect.co.uk) and make sure you’re following our LinkedIn page: https://www.linkedin.com/company/dsa-prospect-ltd