The Coronavirus Job Retention Scheme

Coronavirus job retention scheme

The UK Government have announced a new scheme called The Coronavirus Job Retention Scheme. This scheme will cover 80% of the salary of PAYE employees who would have been laid off during the pandemic. As an employer you can claim back 80% of gross pay of the employee, which is up to £2,500 and also 80% of employees’ NIC. Employers Pension Contribution is added on top of this. The Scheme is available to any employer in the country, no matter the size or type of the business. The scheme will cover the cost of wages from 1 March 2020. This will continue for a minimum of three months. This will include workers who were in work on the 29 February 2020.

Eligibility

To qualify for the scheme, employers will need to designate employees as furloughed, which essentially means that the employee is permitted to be absent from work for a designated period of time. They are not permitted to carry out any work for the employer during this time, nor are they permitted to work for anybody else. Employees must be furloughed for a minimum of 3 weeks at a time to qualify. If your employees continue to work, they will not be deemed furloughed and you are unable to claim anything from the government.

Can a company director be Furloughed?

The simple answer is Yes. If you have found yourself in a position where you have no work and you believe that situation will last for at least 3 weeks, you must send a letter from your limited company to yourself clearly detailing and showing the furloughing. You may claim for 80% of your salary only but not any income from dividends. Whilst furloughed you are only allowed to carry out duties of a director. You can find a full list of what you are allowed to do here. These guidelines were not issued with furloughing in mind, so are open to interpretation. However, we believe that maintaining the company’s statutory and financial records are the responsibility of the directors and can therefore be kept up to date. We recommend that, if funds allow, you continue to pay yourself your normal salary. If you’re the sole director and only paid employee and are unable to furlough yourself for the scheme you may be able to claim a grant. A business premise is required for a grant to be claimed.

The claims process

HMRC is still working to set up a system for reimbursement and we expect the first grants to be paid within weeks. HMRC have said that they aim to get it done before the end of April at the very latest. If your business needs short-term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.

At some point there will be some kind of online portal which employers will need to use to access the scheme. Employers will need to designate affected employees as ‘furloughed workers’, and notify their employees of this change. it is important to note that changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. If you’re in doubt, please contact an employment lawyer or HR specialist. Once the new online portal is live, employers will need to submit information to HMRC about the employees that have been furloughed and their earnings. HMRC will set out further details on the information required in the coming days. The following information is required:

 

  1. Your PAYE reference number
  2. The number of employees being furloughed
  3. The claim period (start and end date)
  4. The amount claimed
  5. Your bank account details
  6. Your contact name
  7. Your phone number

As soon as the new online portal is live, employers must submit information to HMRC about the employees that have been furloughed and their earnings. It’s expected HMRC will set out further details on the information required soon. We believe that you will need the following information:

  • Your PAYE reference number
  • The number of employees being furloughed
  • The claim period (start and end date)
  • Amount claimed
  • Your bank account details
  • Your contact name
  • Your phone number

We have some great news for you, our clients. Is that if we already manage your payroll, we will cover these claims and sort it all out for you at no additional cost.

 

Furlough FAQs

“Furlough” is a term that not many people have heard before. As such you may have some questions about what it means? And how it might affect you, here we have covered a few questions you may have.

  • What does ‘furloughed’ mean?

If your employer designates you as furloughed, this essentially means that you are permitted to be absent from work for a designated period of time. You are not permitted to carry out any work for your employer during this time, nor are you permitted to work for anybody else.

  • What if I work from home? Would that count as me being furloughed?

If you continue to work – whether that’s from the office or from home – you will not be deemed furloughed and your employer will be unable to claim anything from the government.

  • Which of my employees can benefit from the scheme?

Anyone on payroll at 29 February 2020, and your employees must remain employed while furloughed to benefit from the scheme.

How much will the government pay my employees who are furloughed?

The government will pay 80% of furloughed workers wage costs, up to a cap of £2,500 per person per month. You can fund the difference between the 80% funded by the CJRS and their normal salary at your discretion. For example, if your employee normally receives £1,000 a month in wages, the CJRS will pay £800 of this. You can then pay the extra £200 if you can afford to. Another example – if your employee normally receives £4,000 a month in wages, the CJRS will only be able to pay the maximum amount of £2,500 (despite 80% of £4,000 being £3,200). If you wish to make up the remaining £1,500 yourself, you can do so.

  • Do I have to continue to pay my staff as usual or can I wait until I receive the government funds to do so?

It is our interpretation that salaries should still be paid as usual and you can claim a business interruption loan if needed to cover the costs while you’re waiting for reimbursement from the government.

  • What happens if my employee was furloughed part way through the month?

You work out their normal basic pay up until the date they are furloughed and then pro rata the 80% pay from that date.

What about employees who’s pay varies month to month If the employee had been employed for a full twelve months prior to the claim, you can claim for the higher of either:

  • The same month’s earnings from the previous year
  • 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, work it out on a pro rata basis from when they started.

What if I have taken on a new employee? Can I furlough them?

  • Only if they were on the payroll as at 29 February 2020.

Which of my employees can benefit from the scheme?

Anyone on payroll at 29 February 2020, and your employees must remain employed while furloughed to benefit from the scheme.

What about employees on maternity leave?

If your employee is entitled to SMP then the normal rules apply and they are still entitled to it as usual. The only difference is if you offer enhanced contractual pay to women on maternity leave, in which case you can include this and claim it through the scheme.

Updates:

  • [17th April 2020]

The Chancellor has extended the furlough scheme to the end of June. This has been to reflect continuing social distancing measures. This move will allow firms from across the UK to continue to protect millions of jobs.

The Chancellor said that he would continue to review the scheme so it is supporting recovery. Find more information on this update here.

For more COVID-19 related updates, visit our COVID-19 News Page here

 

If you have any more questions in regards to the Coronavirus Job Retention Scheme, contact us here.

 

Disclaimer:
Whilst every reasonable endeavour has been made to ensure that all information provided on Our Site will be accurate and up to date, We make no warranty or representation that this is the case.

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