Coronavirus Job Retention Scheme HMRC update 27/03/20

The HMRC have published more details on the above scheme, and how it will work.

The full details are on the link below but, in summary:

  • Any UK business with employees can claim, including charities, recruitment agencies and public authorities
  • You must have created and started a PAYE payroll scheme on or before 28th Feb 2020 and have a UK bank account
  • Any businesses still being paid with public money for staff costs cannot use the scheme.

Which Employees can be furloughed?

  • Full-time and part-time employees
  • Employees on agency contracts
  • Employees on flexible or zero hours contracts

What are the rules to furlough staff?

  • Employees must be told in writing that they have been furloughed, and the date it applies from. Employers need to get their agreement in writing to the furlough if it reduces the pay as per their employment contract. Evidence of this needs to be retained. A template letter attached at the bottom of this post.
  • Employees hired after 28th Feb 2020 cannot be furloughed.
  • Employees cannot undertake any work for the employer whilst on furlough. This includes providing services or generating income.
  • Company directors are eligible to claim their PAYE income, but only if as above they do not undertake any work whilst on furlough. This includes providing services or generating income.
  • If an employee is working but on reduced hours or reduced pay they are not eligible for the scheme.
  • You can just furlough some of your workers, but anyone furloughed cannot undertake any work.
  • Staff must be furloughed for a minimum of 3 weeks. If bought back to work, they can be furloughed again, but again the minimum is 3 weeks.
  • Employees already on unpaid leave cannot be furloughed, unless they were placed on leave after 28th Feb 2020.
  • Employees on Sick Leave or self-isolating should get SSP, but can be furloughed after this.
  • If your employee has more than 1 job they can be furloughed for each job separately i.e. they can be furloughed from one but continue working at another. Each job is separate and the cap applies to each job.
  • Furloughed employees can take part in volunteer work or training, as long as it does not provide services to, or generate income for, your business.
  • If workers are required to do online training, they can remain furloughed but would need to be paid in full for any time they took training.
  • Normal rules apply for Statutory Maternity Pay
  • All grant money paid to furloughed workers will be subject to income tax and National Insurance as usual. It will also have to be declared as income for those on benefits.

How Much can you Claim?

Employers will be able to claim the lower of 80% of an employee’s regular wage, or £2,500 per month plus the associated Employer NI and minimum Auto Enrolment employers contribution. Fees, commissions and bonuses must be excluded. For directors, it would be any amount put through PAYE – dividends are not included.

Employers may choose to “top up” the other 20% of salary, but they don’t have to.

This has been set up for 3 months from 1st March, but may be extended.

You can claim:

  • For salaried employees i.e. those on a set annual salary, their salary in February 2020 should be used to calculate the 80% (excluding fees, bonuses and commission)
  • For staff on hourly rates or with variable pay, you need to claim the higher of the same month’s pay from last year, or their average monthly earnings from the 2019-20 tax year
  • If an employee has been employed for less than 1 year, you can claim the average since they started work.
  • Once you have calculated this pay, you can then add the amount of relevant NI and pension contributions to this figure.
  • If you chose to “top up” to 100% of their salary you can only claim the NI and pension payments relating to the 80% grant.

In this situation, furloughed workers are not entitled to the National Living Wage or the National Minimum Wage as they are not working.

Full calculations of the claim made must be kept, and can be audited by the HMRC to ensure compliance with the rules.

How can you Claim?

  • The HMRC expect the new portal for claims to be open by late April. You will be able to claim by providing basic information regarding your payroll, and a bank account for payment
  • You will be able to submit a claim every 3 weeks (the minimum furlough period) Claims can be backdated to the period you stopped working (as far back as 1st March.)
  • Once your claim has been received and agreed, the HMRC will pay the money into your account via BACS
  • You must pay the employee all of the grant money you receive, and cannot charge them fees.
  • Any grant money received must be treated as income for accounting purposes, to offset the staff costs in the accounts.

When the current situation is over, and the scheme ends, you must decide whether to take back your workers or consider redundancy as per your usual terms.

Whilst employees are furloughed they maintain all of the same rights that they had previously including SSP, maternity rights etc.

Now that the rules have been released, we will re-calculate staff wages and will be completing claims for any of our clients that we run payroll for. If any other clients need help with this we will assist.

If anyone – client or not – needs help or advice please get in touch.

Guidance for Employees:

Template letter for furloughed workers:

Download Staff Furlough Letter