As the Coronavirus Job Retention Scheme is scheduled to go live on 20th April, we have put together a brief guide based on the questions that our clients have been asking over the last couple of weeks since the scheme was announced.
Who is the Coronavirus Job Retention Scheme aimed at?
Businesses severely impacted by COVID-19 who would otherwise have had to reduce their current workforce.
What is an eligible business under the scheme?
Any entity that had created and started a UK PAYE payroll on or before 28th February 2020 including companies, charities, recruitment agencies and public authorities.
What else does a business need to have in place?
The business must have a UK bank account and be enrolled for PAYE online, this can take up to ten days for HMRC to set-up.
What can a business claim?
For ‘furloughed’ employees, a business can apply for a grant that covers 80% of their 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.
What is a furloughed employee?
To be eligible, a furloughed employee must be on the business PAYE payroll on or before 28th February 2020. Employees hired after 28th February 2020 cannot be furloughed and claimed for under this scheme.
An employee can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts.
Foreign nationals are eligible to be furloughed.
An employee whose hours or pay have been reduced but continues to work cannot be furloughed.
What does furlough mean?
Furlough means a leave of absence.
As a result, to be eligible for the grant, when on furlough, an employee cannot undertake work for or on behalf of the business.
Is a furloughed employee’s pay taxed?
Yes, while on furlough, the employee’s pay will be subject to usual income tax and other deductions.
Are there eligible individuals that are not employees?
Yes, the grant can be claimed for any of the following groups so long as they are paid through a PAYE payroll:
- office holders (including company directors and salaried individuals who are directors of their own personal service company)
- salaried members of Limited Liability Partnerships (LLPs)
- agency workers (including those employed by umbrella companies)
- limb (b) workers in the gig economy.
Detailed guidance for these groups can be found at http://cooperfaure.co.uk/covid-19-business-support-coronavirus-job-retention-scheme-eligible-individuals-that-are-not-employees/
What can someone on furlough do?
A furloughed employee can take part in volunteer work or training so long as this does not directly provide services to or generate revenue for the business during the period of furlough.
When does the furlough period start?
The eligible period for the grant starts from the date that the employee finishes work not when the decision is made or when they are written to confirming their furloughed status.
How are a furloughed employee’s usual monthly wage costs calculated?
This includes wages, overtime, fees and compulsory commission payments. However, discretionary bonus including tips, commission and non-cash payments are excluded.
For employees whose pay varies, the higher of either same month’s earnings from the previous year or the average monthly earnings for the 2019-2020 tax year can be claimed.
Non-monetary benefits provided to employees, including taxable Benefits in Kind, and benefits provided through salary sacrifice schemes that reduce an employee’s taxable pay should not be included in monthly wage costs.
How much is the furloughed employee paid?
A furloughed employee must be paid at a minimum the amount received as a grant under the scheme from HMRC. The business can opt make up some or all of gap between this and the employee’s full pay.
How is the grant claimed?
HMRC are scheduled to launch an online portal on 20th April 2020 and, for this, a business will need the following information:
- the online PAYE reference number;
- the number of employees being furloughed;
- the claim period start and end date;
- the amount claimed;
- a UK business bank account number and sort code;
- a contact name; and
- a contact phone number
Claims should be made either shortly before or during running the payroll although the first claim can be backdated to 1st March where employees have already been furloughed.
HMRC have built in a four to six working day review period before the grant is paid to combat potential abuse of the scheme. If the claim is eligible, HMRC will make the payment by BACS.
This portal is separate from the main PAYE system. As a result, if an employee’s pay is reduced to 80% of their salary, this must be adjusted in the business payroll before they are paid.
How long will the scheme last?
This is a temporary measure that is in place for three months starting from 1st March 2020 and employers can access the scheme anytime during this period. However, the minimum furlough period for an employee is three consecutive weeks. The scheme may be extended if necessary.
What happens when the Coronavirus Job Retention Scheme ends?
At this point, the business must take the decision, depending on circumstances, as to whether furloughed employees can return to their duties. If not, it may be necessary to consider termination of employment respecting an employee’s rights under Employment Law.
Please email email@example.com if you have any questions or would like any other information.
At CooperFaure, we understand the profound impact of COVID-19 on businesses from our conversations both with clients and others that have reached out at this time of need. Now is the time for the government to consider new and innovative routes of immediate support in terms of direct cash payments into businesses.