Background
The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. HMRC expect the scheme to be up and running by the end of April. The purpose of the scheme is to support employers whose business activities have been severely affected by coronavirus (COVID-19).
Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.
The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020.
Eligibility
Any UK entity with a PAYE payroll scheme started on or before 28 February 2020 with employees can apply, including:
- businesses
- charities
- recruitment agencies (agency workers paid through PAYE)
- public authorities
Employees you can claim for
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any contract, including:
- full-time employees
- part-time employees
- employees on agency contracts
- employees on flexible or zero-hour contracts
The scheme also covers employees who were made redundant since 28 February 2020, if their employer rehires 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. We have provided you with a template letter to send to your employee. Highlighted documents will need changing to your needs.
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme, and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
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. We have provided you with a downloadable template letter which can be sent to your employee. Highlighted documents will need changing to your needs.
Employees hired after 28 February 2020 cannot be furloughed or and are not eligible for this scheme.
You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.
Work out what you can claim
Employers need to claim wage costs through this scheme.
You will receive a grant from HMRC 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 automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
More guidance will be issued on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions before the scheme becomes live.
Points of Note
You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.
HMRC will pay the grant directly into your bank account via BACS. Your claim should be made on the basis of the actual payroll amounts, preferably on a date before you are due to pay your employees. And you are not allowed to claim any fees from the money granted. It is at your discretion to top up your employee’s salary.
Depending on your business’s circumstances once the scheme ends. You will have to decide as to whether employees can return to their jobs. If they are not able to, you may have to consider terminating their employment (redundancy).
Furloughed employees have the same rights as they did if they before. Statutory Sick Pay, Maternity Pay and other parental rights, rights against unfair dismissal and to redundancy payments are still accessible to the furloughed employee.
Wages paid to employees from the grant will still be subject to Income Tax and Employee National Insurance. Pension contributions and thresholds will still apply unless the employee has chosen to opt-out or to cease their contributions into a workplace pension scheme.
The grant received from the scheme will be treated as business income as they are made to offset the gross payroll costs. Therefore it will be subject to Income Tax and Corporation Tax as any other income would be.