The Government has announced a series of measures aimed to protect the jobs of those who are unable to work due to the coronavirus.
A Coronavirus Job Retention Scheme will pay a contribution to the wages of employees unable to work due to the COVID-19 pandemic.
For a period of four (extended from three) months from 1 March 2020, all employers can obtain grants from HMRC to cover up to 80% of the wages, for retained workers who have been “Furloughed” up to a cap of £2,500 salary per month per Employee.
The scheme can be backdated to 1 March 2020 and Chancellor Rishi Sunak will extend the scheme if required to do so.
What do we know?
- This is not a scheme for employers to recover 80% of the wages of any active employees that continue to work in the business.
- Employees will need to be “Furloughed” which will result in formal contract changes and official paperwork to be put in place for all employees, which they will need to formally approve.
- The online portal to record the data for these employees has just gone live (20 April).
- Employers will not be expected to pay the additional 20% or more of the salary lost, however they can if they chose to do so, this would be subject to normal PAYE and pension deductions.
- The announcement refers to 80% of the wage cost up to a cap of £2,500 per month plus the related Employer NIC and basic Pension contributions under the workplace pension rules to make it as cash neutral to business as possible. (Businesses that pay enhanced pension contributions will still have to fund this element).
- It has been backdated to 1 March – we are currently unsure how previous payrolls run will be unravelled for staff terminated after 1 March and before the official announcement.
- The employer will receive the grant directly.
How will it work?
Full guidance has now been published setting out how businesses can claim through the coronavirus job retention scheme. Some key details are as follows:
- The scheme has just been extended to cover new starters who were on payroll for 19 March 2020 (previously 28 February 2020)
- The employee must have been notified to HMRC through an RTI submission notifying payment in respect of that employee on or before 19 March 2020.
- Only employers that created and started a PAYE payroll scheme on or before 19 March 2020 are eligible.
- The scheme covers full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts.
- Employees made redundant after 19 March 2020 but rehired by their employer can be furloughed.
- Employees hired after 19 March 2020 cannot be furloughed.
To make a claim, employers will need to provide:
- ePAYE reference number
- number of employees being furloughed
- the claim period
- amount claimed
- bank account number and sort code
- contact name and number.
What is a Furloughed Worker?
A “Furloughed” worker is someone who will remain on the businesses payroll, rather than being laid off or made redundant. By making employees furloughed this means that the employer will be able to access grant funding via the Coronavirus Employee Retention Scheme stated above. Employees will be subject to a formal contract amendment in respect of the status change and this needs to be documented correctly.
During the furlough period the Employee is not able to work for the business at all which would include dealing and checking with a simple process such as work emails. The employee is also not able to undertake any other employed work during this period as this could result in a repayment of any grant money paid to them. They are able to undertake volunteer work and training subject to additional rules highlighted on the Government guidelines. However, where income levels have reduced significantly, an employee is able to claim for support such as Universal Credit.
As part of the Government support program for businesses and employees SSP can be reclaimed for the first 14 days of Sick Leave as a result of the Coronavirus where employees are unable to work. Whilst this has been in place for several weeks we have still not been given guidance on how this will be reclaimed via the payroll process.
As usual, the Government website contains a lot of useful guidance on this complex issue.
More to follow as details are released – alternatively you can submit any questions to your usual Lambert Chapman contact.
(Important Notice – Details correct at time of publication. It is recommended that you always check the GOV.UK website for the very latest information)
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.