The Chancellor announced that “a new Coronavirus Job Retention Scheme” would be set up to help pay people’s wages. Employers will be able to contact HMRC for a grant to cover most of the wages of their workforce who are on the payroll but temporarily not working due to the coronavirus outbreak.
These are ground-breaking measures in unprecedented times; further to our blog posted on 25th March 2020, more detailed guidance was provided by the government, published on 26th March 2020. Therefore, we wanted to share the detail of this update with you.
Which employers are eligible?
It was announced that any UK organisation with employees can apply including businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities. The employer must have created and started a PAYE payroll scheme on or before 28th February 2020 and have a UK bank account.
What will the employer need to do?
- Designate affected employees as ‘furloughed workers,’ with the appropriate consent and notify them. 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.
- Inform HMRC of the furloughed employees and their earnings through a new online portal. To claim the employer will need their ePAYE reference number, the number of employees being furloughed, the claim period (start and end date – the employer can only make one claim every three weeks), the amount claimed (per the minimum length of furloughing of 3 weeks), bank account and sort code, contact name and phone number. The employer will need to calculate the amount that they are claiming. The employer may be audited on all aspects of their claim. The claim should be made in accordance with actual payroll amounts at the point at which payroll is run.
What is a furloughed worker?
A worker sent home by the employer because the employer cannot provide him or her with work but is kept on the payroll rather than being dismissed.
Therefore, an employee not working for another reason would not be “furloughed”, e.g. if currently on sick leave due to either having symptoms of COVID-19 or due to advice to self-isolate. However, the guidance says that employees who are shielding in line with public health guidance can be placed on furlough.
Whilst the extension of furlough to those in the extremely vulnerable category is welcome, it is a little disappointing that it is not also extended to those who remain vulnerable and are being “strongly advised” to stay at home and may feel obliged to have to try to attend work in order to protect their financial position. Employers will need to take a pragmatic and reasonable approach to such situations on a case by case basis.
The employee should not do any work for his or her employer whilst furloughed. An employee who is still working but has agreed to reduce their hours and pay would not be furloughed. A furloughed employee can take part in volunteer work or training, if it does not provide services or generate revenue for, or on behalf of your organisation.
How much will the Government pay?
The employer will receive a grant from HMRC to cover the lower of 80% of furloughed employees regular wage capped at £2,500 per month plus the associated Employer National Insurance contributions and minimum automatic enrolment pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
For employee’s whose pay varies, if they have been employed for a full twelve months prior to the claim, you can claim the higher of either.
- The same month’s earnings from the previous year.
- Average monthly earning 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.
Does the employer have to “top up” the employee’s pay?
The employer could choose to fund the differences between the payment that they receive under the scheme and their salary but does not have to. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme.
How quickly will the employees be reimbursed?
There is currently no detail setting out when the reimbursements will be made. The expectation is that the online service will be made available by the end of April 2020.
If you would like further guidance or support on this matter or require advice on other people management matters please contact Clover HR on 0121 516 0299 or email us at info@cloverhr.co.uk
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