The Job Retention Scheme & ‘Furloughing’ Employees (as per Treasury publication 26 March 2020)

• Purpose of Job Retention Scheme

(1.1) The Coronavirus Job Retention Scheme is a temporary scheme open to all UK Employers with a PAYE scheme. The scheme is designed to enable Employers access vital support to continue paying part of their employees’ salary, who otherwise may have been laid off during this crisis.

•   Who is Eligible

(2.1) The scheme is open to all UK Employers, including companies, sole-trader businesses, charities, not-for-profit organisations, as well as single director companies, that had a registered PAYE scheme at 28 February 2020.

(2.2) The scheme requires the Employer to have a UK bank account.

• What can you claim?

(3.1) Employers can claim a non-repayable grant comprising of 80% of ‘furloughed workers’ salary, up to a maximum of £2,500 per month.

(3.2) Further support up to £300 per month may be provided by the Government to assist with Employers National Insurance and Employers minimum automatic enrolment pension contributions (Treasury update 27 March 2020).

(3.3) Furloughing is allowable from 1/3/2020, therefore can be backdated if appropriate, and will last for at least 3 months. A firm will only be eligible to claim if they have genuine reason to furlough their staff, and staff are no longer working.

(3.4) For full-time and part-time salaried employees the actual salary before tax as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.

(3.5) For employees whose pay varies:

If they have been employed for 12 months prior to the claim, the higher of the following can be claimed:

• The same month’s earnings from the previous year
• Average monthly earnings for 2019/20 tax year

(3.6) If the employee has been employed for less than a year, you can claim for an average pf their monthly earnings since they started work.

(3.7) If the employee only started working in February 2020, use a pro-rata for their earnings so far to claim.

• What are furloughed workers

(4.1) Furloughed workers, are staff members who are no longer able to carry out their work, and are unable to work from home, as a result of the Coronavirus Crisis.

(4.2) Employees that can be claimed for must have been on the PAYE scheme at 28/2/2020, including those who have been made redundant since 28/2/2020 and rehired.

(4.3) This can include any employee including full-time staff, part-time staff, employees on agency contract, and employees on flexible or zero-hour contracts.

(4.4) While on furlough the employees’ wages are subject to the usual tax and national insurance deductions.

(4.5) Employees with two employments at 28/2/2020 may be furloughed in one job but continue working in another (if appropriate).

(4.6) The minimum length an employee can be furloughed for is 3 weeks.

• What action do Employers need to take and how do they claim

(5.1) Employers need to designate staff who are unable to work due to Coronavirus as ‘furlough’, this includes writing to them to notify this.

(5.2) Contracts of employment may need to be reviewed and updated to include a clause to ‘furlough’ staff.

(5.3) Employers must continue to operate their PAYE as normal, with the weekly/monthly RTI filings at HMRC.

(5.4) Staff are required to be paid a minimum of the grant received, this can be topped up to the full salary at the Employers discretion.

(5.5) HMRC will open a specific online portal for registering furloughed staff and salary details. This will be available by the end of April 2020.

(5.6) The wages grants will be paid direct into the Employers bank.

(5.7) Only one submission can be made every 3 weeks, which is the minimum length an employee can be furloughed for.

• Can director only companies claim?

(6.1) There is no reference to exclusion of directors in the scheme, the Government have made the scheme available to ‘all employees’

(6.2) Directors’ must not be able to carry out work from home. Where they are able to carry out some work from home (except statutory duties below) they will not be eligible.

(6.3) Directors’ are allowed to continue with statutory duties such as filing accounts.

(6.4) Only directors’ salaries fall under the Job Retention scheme. Dividends fall outside of this.

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme