Undoubtedly you have seen or heard details in relation to the Coronavirus Job Retention Scheme that is available to UK business to support employers. Under this scheme all UK employers will be able to access support from the Government to continue paying part of their employees salary for those employees that would otherwise have been laid off or made redundant during this crisis. This scheme commenced on 1 March and will initially run for 4 months in its current format. The chancellor has announced an extension to 31 October but there will be some changes made to the scheme from July (more details about this are expected in due course).
The criteria to qualify for the Scheme are:
- The business has employees who are not provided with work for a minimum of three weeks
- The business is a UK employer that had started a PAYE payroll scheme on or before 19 March 2020.
Employers will need to designate those employees that will not be provided with work as “furloughed workers”. Furloughed employees must have been on your PAYE payroll on 19 March 2020 (must have processed an RTI submission notifying HMRC of payment of that employee on or before 19 March 2020), and can be on any type of contract, including; full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts.
Employees that were employed as of 28 February 2020 (notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for you after that, and prior to 19 March 2020, can also qualify for the scheme if you re-employ them and put them on furlough.
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 can use a portal to claim for 80% of furloughed employees' 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.
To make your claim using your government gateway PAYE services account follow the claim portal link
The employer will be required to pay the employees in the normal fashion, PAYE, National Insurance and minimum automatic enrolment employee pension contributions will be deducted in the usual manner, HMRC will then reimburse your business via a claim on the HMRC Coronavirus Job Retention Scheme Portal, with claims being paid within 6 working days. The portal can be accessed by employers using their government gateway login credentials assuming they are registered for PAYE services, if they are not they can sign up here. If an agent deals with your PAYE affairs and payroll then, assuming the correct authority is in place, they should be able to make the claim on your behalf.
Where there is no existing contractual right to place employees on lay off or short-time working, employers will require written consent from the employee for them to be place on furlough leave. Where the employee does not agree to go on furlough leave, employers may decide to consult with those staff for redundancy. 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.
Employers will have discretion over whether or not to top up the workers' salaries from the 80% grant in line with their normal salary expectation. In most cases, the employer must seek agreement (in writing) with the employee with regards the topping up payment or lack of it, but once more in many cases it will boil down to a discussion over acceptance or dismissal. Ideally the employee should be made aware that they may be eligible for financial support through the welfare system, including universal credit, should they receive any reduction in their wages.
If the outcome of the matter may result in the dismissal of an employee (including a dismissal on the grounds of redundancy), you should ensure you seek advice at all relevant stages of the procedure and, as a minimum, prior to effecting any dismissal.
As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. 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.
Working for a different employer
If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough. Your employee will need to be able to return to work if you decide to stop furloughing them (zero hours contract is likely to be the most suitable). If they do take on new employment, Statement C is appropriate on the New Starter Checklist form with their new employer.
Working out what to pay (and to claim)
For a full or part time employee the amount to pay will be a simply calculation, the lower of 80% of their salary at 28 February 2020 or £2,500 per month.
For employees whose pay varies, If the employee has been employed twelve months, you can claim for the higher of either; the same month's earning from the previous year or an 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, use a pro-rata for their earnings so far to claim.
To work out how much Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim remember that any contributions on any amounts voluntary topped up from the 80% of the basic salary level will not be eligible.
The employer must pay all of the grant claimed to the employee(s) without deduction of administration or any other similar fees.
Some specific scenarios:
If your employee is on unpaid leave
Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
If your employee is on Statutory Sick Pay
Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this. Employees who are shielding in line with public health guidance can be placed on furlough.
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.
If your employee does volunteer work or training
A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.
If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay
Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.
If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.
Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.
If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.
The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.
The information needed to make a claim
- your employer PAYE reference number
- the number of employees being furloughed
- National Insurance Numbers for the furloughed employees
- Names of the furloughed employees
- Payroll/employee number for the furloughed employees (optional)
- your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
- 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. You can only submit one claim at least every 3 weeks (and only one in any pay period). HMRC will retain the right to retrospectively audit all aspects of your claim.
Rights of employees that have been furloughed
Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
Tax Treatment of the Coronavirus Job Retention Grant
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.
Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
Effectively the position is a nil net effect with both income taxable and expenditure tax deductible, if you opt to top up wages from the 80% required then naturally you will have a higher amount to claim against your taxable profits.
For more detailed information read the full government guidance on the scheme