Coronavirus Job Retention Scheme
a;; If you have employees and are struggling to give them work, pay their salaries, or if they are having to stay at home to look after their children or are self isolating for several weeks then this scheme is for you. You can “furlough” employees and apply for a grant to cover some of their salary.
There is also some limited help available to limited company directors who are paid via a payroll.
Who can claim
Anyone with a UK payroll can apply, including businesses, charities, and people who pay their nanny via a payroll. In order to claim you need to check the following:
- Did you have a PAYE payroll scheme that was in existence on or before 19 March 2020
- Are you enrolled for PAYE online?
- Do you have a UK bank account?
Agents are able to claim behalf of our clients’ behalf using our agent access.
Which employees can you claim for
Employees had to be on your payroll on or before 19 March 2020, and had to be notified to HMRC on an RTI submission on or before 19 March 2020, so you cannot currently claim for anyone that was hired after that date, or anyone who was hired before then but where an RTI submission had not been made that included them. Full-time, part-time, flexible hours, and zero-hour contracts are all eligible.
When on furlough an employee cannot do any work for you, even if you top up their pay – this applies up until the end of July. This includes providing services or generating revenue. They can however do training and this could be a great opportunity to get your employees to upskill. If they do training then you need to ensure that they are paid at least the National Minimum Wage during that time, which may mean that you have to top up the amount paid by government.
From July onwards (originally expected to be from August) it will be possible to bring back an employee part time with the employer being asked to pay a percentage towards the salary of the furloughed staff. These flexible furlough options are optional. Employers will be able to have furloughed employees back for any number of days per week and pay their normal (100%) salary for those days. The employees would then remain on furlough leave for the other days of the week and receive 80% of pay (or whatever you have agreed to top up by) with the furlough pay being reclaimed by employers for furlough days set at the amounts as above depending on the month.
Furloughing an employee is not something that the employee can tell you to do, this is a decision to be made by you as the employer.
If an employee left your employment after the cut-off date you are able to rehire and furlough them. This is the case whether you made them redundant, or they resigned, or left for a different reason. You can then consider terminating their employment when the government ends the scheme. We do however recommend that you carefully check the implications of doing this – for example the additional continuous service could mean that they gain additional employment rights. If this is something you are considering doing then it would be worth getting HR advice before doing so.
An employee with more than one job can be furloughed from each job.
When does this apply from
The scheme started with effect from 1 March 2020 and will run until the end of October 2020. Employers will be asked to contribute from August onwards.
You should furlough employees from the date that they stopped work, not from when the decision is made or when it is communicated to your employees. This means you could quite likely have different furlough dates for different employees.
What can be claimed
The grant will cover 80% of your employees’ usual monthly wage costs up to a maximum of £2,500 per month. You will also be able to claim the associated Employers National Insurance contributions together with the minimum workplace pension employer contributions on that wage.
Calculating the 80% if an employee is on a fixed salary is relatively straight forward. If they are on variable pay then it is calculated based on the same month last year, or the monthly average over the 2019-20 tax year, whichever is higher. If they have been employed for less than 12 months then the 80% is based on their average monthly earnings since they started work.
If you want to you can top up your employees’ pay, but you don’t have to.
The minimum length you can furlough an employee for is 3 consecutive weeks, you can also furlough an employee multiple times.
This will apply up to the end of July. From August to October employers will be expected to contribute:
- For August HMRC will pay 80% of salary with employers being required to cover Employer’s National Insurance and pension contributions;
- For September HMRC will pay 70% of salary with employers being required to cover the other 10% together with the employer’s National Insurance and pension contributions;
- For October HMRC will pay 60% of salary with employers being required to cover the other 20% and the Employer’s National Insurance and pension contributions.
Which payments can I include
You can claim for any regular payments that you have to pay your employees, including base salary, past overtime, compulsory commission payments, etc. However any discretionary bonus including commission and tips should be excluded, as should any non-cash payments.
What about tax and National Insurance
Normal deductions should still be made from your employees’ salary including PAYE and National Insurance, together with Student Loans.
Employees still have the same rights including:
- Statutory Sick Pay
- Maternity and other parental rights
- Rights against unfair dismissal
- Redundancy payments
You can also claim through the scheme for enhanced pay for employees who are on maternity, adoption, paternity or shared parental pay.
Is this grant taxable
Yes! This will have to be included as taxable income in your accounts and tax return, but will of course be offset by the amounts you pay to your employees etc.
Do I need to get written agreement
You will need to discuss furloughing your employees with them and get their agreement. You have to confirm in writing to your employees that they have been furloughed, and keep a record of this for five years. We recommend getting HR or legal advice to make sure that you go about this correctly, as equality and discrimination laws apply in the usual way.
What about limited company directors
Limited company directors who are paid through a payroll and were on a PAYE scheme on or before 19 March 2020 and notified to HMRC on an RTI submission on or before 19 March 2020 could potentially also be eligible to be furloughed. Unfortunately this only covers amounts paid through a payroll and currently you will not receive anything to replace normal dividend payments.
You also need to be careful as you cannot do any work while on furlough until the scheme changes after the end of July. This includes providing services or generating revenue. If you are a sole director and the business still has any revenue being generated then you cannot be furloughed. If your business has completely stopped then you can be furloughed, and you are still able to perform statutory duties owed to the company, so long as these cannot be viewed as revenue generating. At a minimum this means that you will be able to deal with duties such as ensuring that statutory filings are made, and payroll payments are approved.
As HMRC have the right to retrospectively audit all aspects of your claim make sure that you are only furloughed where genuinely appropriate.
What do I need to make a claim
To claim you will need:
- Your ePAYE reference number
- The number of employees being furloughed
- The period you are claiming for (start and end date)
- The amount being claimed
- Your bank account number and sort code
- A contact name and phone number
It is up to you to calculate the amount being claimed, however HMRC have the right to retrospectively audit all aspects of your claim so make sure you do it carefully!
When will the funds be paid
Claims are being paid within 6 days.
We have tried to cover as many areas as possible here, but if in doubt you should refer to the full guidance from HMRC.