How to claim the 80% of salaries under the Coronavirus Job Retention Scheme

On 20th March the Chancellor announced the introduction of the Coronavirus Job Retention Scheme. 

The aim of the scheme is to protect peoples jobs and wages during the outbreak and for employees to retain their jobs even when employers cannot afford to pay them. 
Rishi Sunak said: “Let me speak directly to businesses: I know it’s incredibly difficult out there – we in Government are doing everything we can to support you,” he said.

“The Government is doing its best to stand behind you and I’m asking you to do your best to stand behind our workers.”

All employers are eligible to join the scheme which will cover up to 80% of employees salary (to a maximum of £2,500 per month). Employers can also chose to top up this amount if they wish. 

Claims can, however, only be made for those employees that you would have otherwise terminated. The term being used is furloughed employees. Therefore with that in mind, we believe (and this is also supported by ICAEW) that this will not apply to payments to directors either, as typically would not be laying off yourself. As a director you have fiscal duties and these do not go away when your revenue drops. 

The scheme is to be backdated to 1st March 2020 and initially will be in place for 3 months. 
The grant scheme also applies to workers who may have been laid off after February 28. Former employees would have to request for their former employer to apply for the grant on their behalf.
 

How to claim the 80% of salaries under the Coronavirus Job Retention Scheme

In order to claim this employers will need to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.

HMRC are working urgently to set up a system for reimbursement.

It is planned that this can be quickly put in place and that first payments will be made towards the end of April. 

There are no limit on the number of jobs that the government will cover for this scheme.

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

Note – this is for employees who are on a leave of absence – your employees cannot work during this time if you are claiming this grant for them. 

What about the tax etc on salary?

The associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage are also claimable by employers. 

 

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.

Can they do training whilst they are furloughed?

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.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the National Minimum Wage for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

How to calculate what wages actually are 

Full time and part time employees
For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.

Employees whose pay varies
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

  • the same month’s earning from the previous year
  • 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.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.

What do you need to make the 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 weeks)
  • your bank account number and sort code
  • your contact name
  • your phone number

You will need to calculate the amount you are claiming.

And remember – HMRC will retain the right to retrospectively audit all aspects of your claim.