The Coronavirus Job Retention Scheme: updated guidance
The Government has now updated its guidance on this scheme.
Our earlier blog on 27 March 2020 set out the basic idea of the scheme (https://crozierjones.co.uk/blogs/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme/).
Key points from the new guidance include:
- If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.
- Any employees you place on furlough must be furloughed for a minimum period of 3 consecutive weeks. Those employees who you do place on furlough cannot undertake work for you.
- To be eligible for the grant employers must confirm in writing to their employee that they have been furloughed. A record of this communication must be kept for five years.
- Company directors can be furloughed but if so, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
- The HMRC portal to make claims is not yet available.
This is what the Government has to say:
If you cannot maintain your current workforce because your operations have been severely affected by coronavirus (COVID-19), you can furlough employees and apply for a grant that covers 80% of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
This is a temporary scheme in place for 3 months starting from 1 March 2020, but it may be extended if necessary and employers can use this scheme anytime during this period. It is designed to help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy. However, all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus.
Who can claim
You must have:
- created and started a PAYE payroll scheme on or before 28 February 2020
- enrolled for PAYE online – this can take up to 10 days
- a UK bank account
Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities.
Employees you can claim for
You can only claim for furloughed employees that were on your PAYE payroll on or before 28 February 2020.
Employees hired after 28 February 2020 cannot be furloughed and claimed for in accordance with this scheme.
Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed.
To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation. This includes providing services or generating revenue. Employers are free to consider allocating any critical business tasks to staff that are not furloughed. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
If you made employees redundant or they stopped working for you after 28 February
If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme.
If your employees are working reduced hours
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.
If your employee has more than one job
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.
Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.
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.
Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
This also applies to salaried individuals who are directors of their own personal service company (PSC).
Agreeing to furlough employees
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 grant employers must confirm in writing to their employee confirming that they have been furloughed. A record of this communication must be kept for five years.
You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.
How much you can claim
You’ll need to claim for:
- 80% of your employees’ wages (even for employee’s on National Minimum Wage) – up to a maximum of £2,500. Do not claim for the worker’s previous salary.
- minimum automatic enrolment employer pension contributions on the subsidised wage
You can choose to top up your employee’s salary, but you do not have to. Employees must not work or provide any services for the business while furloughed, even if they receive a top-up salary.
Grants will be prorated if your employee is only furloughed for part of a pay period.
Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to confirming their furloughed status.
The way you work out your employees’ wages is different depending on what type of contract they’re on, and when they started work.
Full or part time employees on a salary
Claim for the 80% of the employee’s salary, as of 28 February 2020, before tax.
Employees whose pay varies
If the employee has been employed for 12 months or more, you can claim the highest of either the:
- same month’s earning from the previous year
- average monthly earnings for the 2019-2020 tax year
If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.
If the employee only started in February 2020, work out a pro-rata for their earnings so far, and claim for 80%.
Employer National Insurance and Pension Contributions
You’ll still need to pay employer National Insurance and pension contributions on behalf of your furloughed employees, and you can claim for these too.
You cannot claim for:
- additional National Insurance or pension contributions you make because you chose to top up your employee’s salary
- any pension contributions you make that are above the mandatory employer contribution
Past Overtime, Fees, Commission, Bonuses and non-cash payments
You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.
What you’ll need to make a claim
Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.
To claim, you will need:
- your ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- your bank account number and sort code
- your contact name
- your phone number
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
You should make your claim using the amounts in your payroll – either shortly before or during running payroll. Claims can be backdated until the 1 March where employees have already been furloughed.
If appropriate, worker’s wages should be reduced to 80% of their salary within your payroll before they are paid. This adjustment will not be made by HMRC.
Minimum furlough periods
Any employees you place on furlough must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.
After you’ve claimed
HMRC will check your claim, and if you’re eligible, pay it to you by BACS to a UK bank account.
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.
When your employees are on furlough
You cannot ask your employee to do any work that:
- makes money for your organisation
- provides services for your organisation
They can take part in volunteer work or training.
Your employees will still pay the taxes they normally pay out of their wages.
This includes pension contributions (both employer contributions and automatic contributions from the employee), unless the employee has opted out or stopped saving into their pension.
Employees still have the same rights at work, including:
- Statutory Sick Pay
- maternity and other parental rights
- rights against unfair dismissal
- redundancy payments
Grants cannot be used to substitute redundancy payments. HMRC will continue to monitor businesses after the scheme has closed.
Working for a different employer
If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough.
The full guidance is here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme