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 do notify HMRC of the furloughed employees and their wages is not yet available.

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.

The aim of the scheme is to cover as many people as possible, but there is not yet any clarification with regard to employees on zero hour contracts.

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, 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.

As soon as we receive more information, we shall post it.