We mentioned in our post on 21st March 2020 that the government has introduced a new scheme to help businesses retain staff during the coronavirus outbreak.
We are receiving lots of queries from clients about this scheme and whether it relates to them and whether they can apply. So we will try to explain in a bit more detail what we know so far.
The aim of the Job Retention Scheme is to help employers retain employees for an extended period of time, despite having no work for them, and to avoid lay offs.
The term “furlough” is possibly not one we have come across before. Essentially it means putting employees on a temporary leave of absence where they do no work and receive no pay, but they are retained on payroll to be brought back in when needed.
Employers who do this will be able to obtain a government grant to cover 80% of furloughed employees’ wages, up to a maximum of £2,500 per employee per month.
All employers can access it, no matter how big or small. However, the employees need to be on a company’s PAYE in order for the company to be able to claim the grant for their wages.
The employer will need to designate which of their workforce will be furloughed employees, and advise their employees that they are furloughed, and then submit that information to HMRC, along with each employee’s earnings. Following this, the employer will receive the grant to cover the 80% wages. We understand that although employers can make up the remaining 20%, they do not need to do so.
However, the new online portal on which to notify HMRC of the furloughed employees and their wages is not yet available. On the gov.uk website it states that the portal is expected to be available by the end of April 2020.
The Chancellor has stated that he hopes the first grants will be paid by the end of April 2020 and that they will be backdated to 1st March 2020.
The scheme is intended to run for three months initially but may be extended.
Who can claim
Any UK organisation with employees can apply, including:
businesses
charities
recruitment agencies (agency workers paid through PAYE)
public authorities
You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:
full-time employees
part-time employees
employees on agency contracts
employees on flexible or zero-hour contracts
The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
Unfortunately, the fact that the employee must be on the company’s PAYE means that those directors of close companies paid under the Lower Earnings Limit, and therefore not reported through a PAYE scheme, topping up with dividend income, will not be eligible for the Coronavirus Job Retention Scheme. Instead, as a business, they may be able to take advantage of the Coronavirus Business Interruption Loan Scheme
