What Is It?
- In order to protect jobs and avoid redundancy the government announced the Job Retention Scheme on 20th March 2020.
- The scheme will allow Employers to claim for 80% of furloughed employees’ wages up to £2500 per month and will be available for a 3-month period from 1st March 2020.
- The scheme will cover the cost of 80% of usual wage cost up to a maximum of £2500 per worker per month.
- Employers will also be able to claim the associated cost of Employers National Insurance Contributions and minimum auto-enrolment employers pension contribution in addition to the £2500 grant.
- It covers payments for furloughed workers and can be back dated as far as 1st March 2020. Please note furlough payments can only be made when workers are not carrying out any work.
- Workers who are shielding in line with public health advice (for example individuals considered high risk who have been advised to self-isolation or those over the age of 70) can be furloughed and would be covered by the scheme.
- Regular wage including overtime.
- Workers who are still completing work even if they are on reduced hours.
- Agency workers not paid via PAYE.
- Employees who were on unpaid leave before 28th February 2020.
- Employees on SSP due to sickness or self-isolation notice. They can be furloughed after this.
- Bonus and commission.
Which Employers Are Eligible?
In summary all Employers.
This time there are no restriction of size of company based on either turnover or number of employees (unlike the reimbursement of COVID-19 related SSP). Employers need to meet the following criteria to be eligible.
- Registered and started PAYE payroll scheme on or before 28th February 2020.
- Any UK organisation including business, charities, recruitment agencies and public authorities.
Which Workers Are Included?
- Full time employees
- Part time employees – if a worker has 2 jobs, they can be furloughed by one or both jobs and each employer can claim up to £2500 per month for the same employee.
- Employees on agency contracts
Can Employees Work on Furlough?
To put it simply no – if they do any work, they become ineligible for the scheme.
They can however complete any training or volunteer work if it does not provide services to the employer or generate any revenue for the employer.
Be careful – all training is subject to NMW so ensure the furlough payments covers NMW for the training hours. If not, the employer must top up the employees pay to avoid NMW non-compliance. This top up is not reclaimable under the job retention scheme.
Employees on Enhanced Contractual Family Leave
For example, employees on Maternity Leave who are receiving contractual pay in addition to the statutory amount can also be furloughed to allow the enhanced earnings to be claimed though the job retention scheme.
How Do You Claim?
- You will need to claim the grant from HMRC via a new online portal which is currently being built. You can submit one claim at least every 3 weeks. Claims can be backdated until 1st March 2020.
- The claim must be based on actual payroll amounts so should be done at the point at which you run your payroll or in advance of an imminent payroll. To assist with cash flow for clients we will be processing April payroll early for clients to speed up the recovery time.
- All grants received for the workers gross pay must be paid to the workers – you cannot charge any fees from the money that is granted.
What Evidence Do You Need?
You must keep a record of the written communication you have made to your employees to confirm they have been put on furlough.
You’ll also need the following information.
- PAYE Reference number
- Number of employees being furloughed
- The claim period (start and end date)
- Amount claimed
- Bank account details
- Contact name and number
What Do You Pay?
Employers must pay employees at least 80% of their normal wage (excluding bonus and commission) up to a maximum of £2500 per worker.
We’re working on putting together a definitive list, but this would include their usual gross payments excluding bonus and commission;
- Basic hours
- Shift premiums / enhancements
- Holiday pay
- Statutory payments
- Enhanced contractual payments for family leave
- Car Allowance
The 80% should be based on their actual contracted salary as of 28th February 2020. For part time workers this should be pro-rated as usual.
Workers with Variable Pay
For an employee who started over 12 months ago, the 80% should be based on the higher of;
- The same month’s earnings from the previous year
- The average monthly earnings from the 2019-20 tax year.
For workers who started within the last 12 months you can claim for an average of their monthly earnings since their start date. For workers who started part way through February you can pro-rata their earnings for February to base the 80% on.
What Happens at the End of the Job Retention Scheme?
Hopefully workers will be able to return to their normal duties. Under certain circumstances this may not be possible, and employers may need to consider redundancy options. This will not impact the eligibility of the scheme.