The Coronavirus Job Retention Scheme closes on 31 October 2020 and all final claims must be made by 30 November 2020.
- The scheme closed to new entrants from 30 June.
- Since 1 July, furloughed employees are able to work part time. Employers are required to pay their employees for any time worked but can still claim a grant for the time they are furloughed.
- Since 1 July, employers can only furlough employees that have previously been furloughed for a full 3 week period prior to 30 June. This means that the final date by which an employer could furlough an employee for the first time was 10 June 2020.
- Throughout the period to 31 October, furloughed employees will continue to receive 80% of their salary (subject to the £2,500 cap). However, employers are now required to contribute to that amount as follows:
- August: The Government pays 80% of wages up to a cap of £2,500. Employers are required to pay any Employers’ National Insurance (if not covered by the Employment Allowance) and minimum pension contributions.
- September: The Government pays 70% of wages up to a cap of £2,187.50. Employers are required to pay any Employers’ National Insurance and minimum pension contributions PLUS 10% of wages (to make up the 80%/£2,500).
- October: The Government pays 60% of wages up to a cap of £1,875. Employers are required to pay any Employers’ National Insurance and minimum pension contributions PLUS 20% of wages (to make up the 80%/£2,500).
- Employers can agree work hours with their employees to suit their business. This must be confirmed in writing with the employees. As part of a claim the employer is required to submit data on the usual hours an employee would be expected to work as well as the actual hours worked.
How does the scheme work?
- The scheme provides funding to employers who have been severely affected by Covid-19, in order for them to continue paying employees who would otherwise need to be made redundant. It is open to all employers that had started a PAYE payroll scheme on or before 19 March 2020 and employees must have been included on a payroll “RTI” submission on or before 19 March 2020.
- Employees are entitled to receive up to 80% of their usual monthly wage, up to a cap of £2,500 per month.
- Only regular wages are included, not other earnings such as commissions or bonuses. For salaried employees, their salary from the last pay period before 19 March 2020 should be used. For other employees, the claim should be based on the higher of:
- 80% of their earnings from the same month in 2019; and
- 80% of their average monthly earnings from the 2019/20 tax year (or for the period of employment if less than 12 months).
- A claim can include any regular payments which an employer is obliged to pay e.g. wages, past overtime, fees and compulsory commission payments. However, as noted above, discretionary bonuses (including tips) and commission payments and non-cash payments should be excluded.
- Employers must have a UK bank account to access the scheme.
Which employees are eligible?
- Employers will need to designate affected employees as “furloughed workers” and notify them in writing that they cannot continue to work. A record of this communication must be kept for five years. An employee will be eligible if they were on the payroll on 19 March 2020. Employees that were on payroll as of 28 February 2020 but were made redundant or stopped working for the employer after that (and prior to 19 March 2020) can also qualify for the scheme if they are re-hired and put on furlough.
- Full time and part time employees, agency workers and those on flexible/zero-hour contracts are all covered by the scheme.
- An individual who pays someone through PAYE e.g. their nanny, can furlough that employee if they were on payroll on 19 March 2020.
- Before furloughing an employee, the employer should discuss this with them and agree any changes to the employment contract (such as a reduction in their contracted salary). Equality and discrimination laws will apply in the usual way. We would recommend seeking legal advice if there is any doubt over whether an employee should be furloughed.
- Employees who are shielding in line with public health guidance, are on long term sick leave or have caring responsibilities (including looking after children) can be furloughed.
- Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed. However, they must be paid the applicable minimum wage (Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage) for all time spent training.
- Employees who are unable to work because they are “shielding” due to being in a vulnerable category, or if they have caring responsibilities resulting from coronavirus (e.g. need to look after children) can be furloughed.
- Company directors, office holders and salaried members of LLPs can be furloughed provided that they are paid via PAYE (even if not strictly employees under employment law).
- Regarding directors, the guidance states:
- As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
How will a claim be made?
- Claims are made online through the HMRC portal.
- Employers should pay their employees in the usual way and then reclaim the amounts they are eligible for through this portal (maximum of one claim every 3 weeks).
- In order to make a claim, employers must either have enrolled for PAYE online for Employers or have authorised a PAYE Agent (i.e. us as your accountants).
What else do I need to know?
- Employee wages will be subject to the usual Income Tax and National Insurance deductions while they are furloughed.
- Employers can “top-up” employees’ wages to pay them their usual salaries (i.e. to cover the 20% not funded by the scheme and / or amounts in excess of the monthly cap) but this is not a requirement of the scheme. Employers who choose to top-up wages will not be able to claim back the additional Employer National Insurance contributions or auto-enrolment pension contributions on the extra amounts.
- Once the scheme ends, employers must decide whether employees can return to their duties or whether redundancies need to be considered.
- Furloughed employees have the same employment rights as if they were working, e.g. Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
- An employee can be furloughed more than once (each for a minimum of 3 weeks).
- Grants will be prorated if an employee is only furloughed for part of a pay period.
- Finally, grants received under the Job Retention Scheme will be taxable for the employer (Corporation Tax/Income Tax) but employment costs will still be deductible.
If you have any questions on the above, please contact your Client Manager in the first instance.