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.
“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.
Directors are eligible for the scheme, however, like employees, will not be allowed to work during the period they are furloughed (other than their legal duties as directors) therefore, it is expected that this will be of little use to directors who will want to continue working in order to keep their business going during this time.
Claiming the 80% of salaries under the Coronavirus Job Retention Scheme
HMRC are working urgently to set up a system for reimbursement and have stated that this system will be available from 20th April.
There are no limit on the number of jobs that the government will cover for this scheme.
And if an employee has more than one job, they can be furloughed in one or both.
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 for 5 years.
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. Doing so would be benefit fraud and HMRC have stated that they will criminally prosecute anyone who’s employees continue to work whilst furloughed.
Apprentices are entitled to furlough.
What About The Tax etc on Salary?
Who Can Claim?
Any UK organisation with employees can apply, including:
– 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 PAYE 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.
Recent May 12 Update for Coronavirus Job Retention Scheme
Extension Announcement for About 4 Months to UK Furlough - Job Retention Scheme
An update for UK Scheme was recently released. It was announced that the job retention scheme which is commonly known as furlough scheme is extended for four months that is until October; which Chancellor Rishi Sunak has said.
According to the chancellor, he confirmed that employees of a company will continue to receive the 80% of their monthly wages up to £2,500.
He also included that the government will ask companies to “start sharing” the cost of the scheme starting August.
Starting August, the furloughed scheme will continue for different business sectors and regions of the country, but it should have greater flexibility to support and cooperate with the transition for getting back to work.
As planned, the chancellor will also attempt to slowly reduce the cost of the taxpayer of the subsidy scheme and the full details still need to be finalized.
According to some sources BBC was told about the Treasury should still be expecting to pay more than half of the costs between August and October.
In addition to the interview that happened last Tuesday, May 12, 2020, the chancellor said that “The number of jobs losses, breaks my heart. That is why I’m working night and day to limit the amount of job losses”