Coronavirus Job Retention Scheme
27th March, 2020
One of our member businesses, Cumbria Employment Solicitors have spent over 10 years providing specialist employment advice to clients throughout Cumbria. Highly experienced in the field, you are assured of the services of a motivated, high quality and competitvely priced solicitor.
In response to the COVID-19 outbreak and the emerging legislation being issued by HM Government, Cumbria Employment Solicitors Principal, Michael Bauer, has reviewed and prepared a summary of the key facts and provided this to give you a better understanding of the scheme.
The government has published further details of the Coronavirus Job Retention Scheme.
It is unclear whether HMRC intends to rely on this guidance only or whether there will be
The full guidance is at https://www.gov.uk/guidance/claim-for-wage-costs-through-the-
coronavirus-job-retention-scheme (which you should read) but the edited highlights are below.
We have put in bold those aspects of the scheme that have been clarified and on which we have had the most queries:
1. the scheme is open to all UK employers that had a PAYE scheme in place on 28 February 2020 and, subject to point 12 below, is open to:
a. full-time employees;
b. part-time employees;
c. employees on agency contracts;
d. employees on flexible or zero-hour contracts.
2. the scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer;
3. any organisation with employees can apply, including charities, recruitment agencies and public authorities – although public authorities are not expected to do so;
4. with agency employees, the scheme is only available for agency employees who are not working;
5. to be eligible for the subsidy employers should write to their employees confirming that they have been furloughed and keep a record of this communication. The previous guidance referred to employees merely being “notified” and did not mention writing to employees;
6. employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month, plus the associated employer NICs and minimum auto-enrolment pension contributions on that wage. Fees, commissions and bonuses are not included;
7. all employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees;
8. HMRC will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employerpension contributions, before the scheme becomes live;
9. an employer can choose to top up to 100% but does not have to (subject to employment law and renegotiating any contractual entitlements. Care needs to be taken in this regard if you do not have the contractual right to lay-off staff;
10. for employees whose pay varies, the employer can claim for the higher of:
a. the same month's earning from the previous year (eg earnings from March 2019); or
b. average monthly earnings in the 2019-20 tax year;
11. individuals are only entitled to the minimum wage for the hours they work. So if they are furloughed and do not work and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working. However, they are entitled to be paid NMW for any time spent training;
12. to be eligible, the employee must have been on the payroll on 28 February 2020. If they were hired later, they are not eligible.
13. anybody who was on the payroll on 28 February 2020 and has since been made redundant can be rehired and put on the scheme;
14. furlough leave must be taken in minimum blocks of three weeks to be eligible for funding;
15. there is nothing in the guidance which prohibits rotating furlough leave amongst employees, provided each employee is off for a period of at least three weeks;
16. 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.
17. the employee must not be working at all. If they work for even an hour (presumably during their entire three week furlough period), they are not eligible. However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer;
18. when agreeing changes in hours (and acceptance of 80% pay), normal employment law applies and this means that if you do not have the contractual right to lay staff off that you will need to agree the change (including in the reduction in pay). The employer must be careful not to discriminate in deciding who to offer furlough too. It is likely that prioritising vulnerable workers is unlikely to be discrimination, as prioritising the over 70s (potentially direct age discrimination against those under 70) is almost certainly justifiable and those who do not suffer from serious health conditions are not a protected class;
19. employees on sick pay or self-isolating cannot be furloughed but can be furloughed afterwards. Employees who are shielding can be placed on furlough;
20. employees on maternity (or similar) leave can continue to draw SMP (or similar) payments. The guidance does not prohibit women on maternity leave agreeing to return to work early and then being furloughed, or electing to change to shared parental leave and then being furloughed;
21. employers can only claim once every three weeks, ie they cannot get weekly reimbursement. Claims can be backdated to 1 March 2020;
22. if your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually;
Mechanics of Claiming
In terms of the mechanics of claiming:
1. to claim, you will need:
a. your ePAYE reference number;
b. the number of employees being furloughed;
c. the claim period (start and end date);
d. amount claimed (per the minimum length of furloughing of 3 weeks)
e. your bank account number and sort code;
f. your contact name;
g. your phone number.
2. you will need to calculate the amount you are claiming. HMRC will retain the right retrospectively to audit all aspects of your claim.
3. you can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.
4. once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
5. you should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.
6. you must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.
7. wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
8. employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.
9. payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.
10. businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
We hope that helps and answers many of the questions that have been swirling around since the Scheme was announced.
We will do what we can to help with further questions and with preparing any letters/agreements needed to notify furloughed staff.
If you have any queries then feel free to contact Michael Bauer on 016974 78222 or [email protected]
We will respond as quickly as we can and do our best to help.
Look after yourselves.