Coronavirus (COVID-19) Job Retention Scheme – detailed guidance now available
Many employers are now considering their need to furlough employees perhaps from the next pay period starting 1 April. Thankfully updated and more detailed guidance on the Job Retention Scheme has now been released.
My summary of the scheme is below and I will personally help each affected client navigate their own particular circumstances. The full guidance is found here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Job Retention Scheme Summary
- Grant is available to all employers that had employees on the payroll on 28 February 2020.
- All employees can be included (full-time, part-time, agency, zero-hours) if they’re being furloughed because of the COVID-19 crisis.
- Employees cannot work whilst furloughed. Employees put on reduced hours do not qualify.
- You must have your employees agreement to designate them as furloughed. Of course put this in writing once discussed.
- The scheme is running from 1 March 2020 for at least 3 months. The minimum period for which you can furlough an employee is 3 weeks.
- Employers can choose to pay a furlough salary of 80-100% but the government is funding only up to 80% (capped at £2,500). Most employers are best advised to pay the 80%.
- If 80% of an employee’s salary equates to less than National Minimum Wage (NMW) then that’s fine under the circumstances because the employee is not actually working the hours.
- A furloughed employee may volunteer to perform work which does not generate income for the business (e.g. bookkeeping, admin type tasks) and can undertake training courses whilst furloughed.
- Once agreed the payroll runs as normal, with usual tax, NI and pension deductions.
- An employee who already has two or more jobs can be furloughed by one employer and continue to work for another.
- If your employee is already sick or self-isolating and in receipt of Statutory Sick Pay (SSP) this must run its course before they can be furloughed.
How do employers calculate the 80%?
Fixed salary employees – simply pay 80% of the fixed salary that was paid for 28 February.
Employees whose pay varies –
For those that have been employed for a full year, take the higher of:
- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 tax year
Fees, commission and bonuses should not be included in the calculation.
For those that have been employed for less than a year – use the average monthly earnings since they started work.
HMRC will also be funding the any Employer National Insurance Contributions and automatic enrolment contributions up to the minimum 3% contribution rate.
Effectively a furloughed employee paid at 80% will cost the employer nothing.
What to do now?
For many employers the best decision will be to furlough all but a skeleton staff. Discuss this with your employees now, decide when to start their period of furlough. Agree with them for how long (a minimum of 3 weeks) but you may like to do one month and reviewed monthly (up to a maximum 3 months unless extended by the government) and at what rate they’ll be paid 80-100%. Finally, and importantly, write to them to confirm. Our letter template can be downloaded Job Retention Scheme – Letter to employees.
As for claiming the grant – please don’t contact HMRC. They’re of course extremely busy and are in the process of contacting employers.
You may well experience a delay between paying your employee and receiving this grant. The claim system is expected to be working by the end of April. Plan you cash flow accordingly and consider using the Business Loan Interruption Scheme (interest free loans – just contact your bank).
What about small company directors?
UPDATE 1 Apr 2020: See my post: COVID-19 Job Retention Scheme – Advice for Company Directors
During the crisis I’ll be blogging about government help for small businesses as soon as the guidance is available. My previous COVID-19 post remain relevant and are:
What financial support is available for UK businesses? – NOW UPDATED
Can the Self-Employed go to work?
Help for the Self-Employed and other FAQ’s
Coronavirus (COVID-19): Help for the Self-Employed – PER THE 26 MARCH ANNOUNCEMENT
Enjoy saving tax?