Coronavirus Job Retention Scheme – further guidance from the Government
The Government has issued further guidance on the Coronavirus Job retention scheme, which was announced on Friday 20 March 2020. Based on this recent guidance, we address a number of questions, which have arisen in relation to this scheme, some of which are addressed in this note.
Does this scheme apply to small employers?
It applies to all UK employers, irrespective of size. The employer must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
What does “Furlough” mean?
The definition of “furlough” is to allow or force someone to be absent temporarily from work. The recent guidance has stated “employees on leave of absence”
When does this scheme start?
The scheme is backdated to 1 March 2020 and will last for three months, i.e. end of May and may be extended if necessary.
Who is eligible?
Employees and workers subject to PAYE and who were in employment on 28 February 2020.
How much will be paid?
The Government has confirmed that HMRC will provide a grant to cover the lower of 80% of an employee’s regular wage or £2,500 per month plus the associated Employer National Insurance contributions and minimum auto enrolment employer pension contribution on the subsidised wage.
How do I calculate costs where the employee’s pay is variable?
If the employee has been employed for more than 12 months, then it is the higher of:
- The same month’s earnings from the previous year
- The average monthly earnings since they started work.
If it is less than 12 months, then it will be the average of their monthly earnings since they started work.
What about the national minimum wage (NMW) / national living wage (NLW)?
Workers are entitled to the NMW and NLW for the hours that they are working. Accordingly, furloughed workers must be paid the lower of 80% of their salary, or £2,500 even if this falls below the NLW / NMW.
Can I simply write to the employee and tell them that they are on furlough?
No – this amounts to a variation of the terms and conditions of employment and therefore you will need to seek agreement with the employees. You should be mindful not to discriminate when selecting which staff you should offer furlough to. You should document the outcome of your discussions and ensure you keep a record of it, as it may be required for audit purposes.
What about employees that are on Statutory Sick Pay (SSP)?
Employees who are on sick leave (or self-isolating) should continue to receive SSP but can be furloughed if they are well enough to return to work.
Does the employer have to make up the additional 20%?
No – this is entirely at the employer’s discretion
Can employees work whilst being furloughed?
No. In order for the employees to be eligible, an employee cannot undertake work for or on behalf the organisation. An 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 the employer. If workers are required to complete on line training courses whilst on furlough then they must be paid at least the national minimum wage.
Is the portal open yet?
No – HMRC are working on this. However, to make a claim employers will need:
- The ePAYE reference number
- The number of employees being furloughed
- The claim period (start and end dated)
- Amount claimed
- Bank account number and sort code
- Contact name
- Phone number.
The employer will need to calculate the amount claimed, although HMRC will retain the right to retrospectively audit all aspects of the claim.
When will the Company receive payment after making the application?
The Government hopes to have processed the grants by the end of April, and will make payments via BACS into a UK bank account. If a business needs short term cash flow support, it may be eligible for a Coronavirus Business Interruption Loan.
Further updates will be published as and when further information becomes available. If in the meantime, you have any questions then please contact firstname.lastname@example.org.
This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.