Government Support: Coronavirus Job Retention Scheme

27th March 2020

Government Support: Coronavirus Job Retention Scheme

The government has issued further information about the Job Retention scheme and furloughed employees. We set out below our answers to the most common queries being asked:

Which organisations are eligible?

All UK employers are eligible, large and small, including:

  • All UK businesses
  • All UK charities and other voluntary organisations
  • Recruitment Agencies who pay agency workers through PAYE
  • Public authorities

What about companies with a single director (personal service companies)?

It applies to single director companies where they have a regular salary. However, dividends taken by directors are not taken into account.

Which employees does it apply to?

The grant applies to employees who were on the payroll as at 28th February and have been furloughed at any time from 1st March. They must be formally designated as “furloughed”. The employee does not have to accept being furloughed under employment law (unless there is a specific term in their employment contract) but they would run the risk of being made redundant.

What about staff who had already been made redundant after 28th February?

These staff can be re-employed and then furloughed.

What is the minimum period that employees have to be furloughed to be eligible?

Employees have to be furloughed for a minimum of 3 weeks.

What about staff who have more than one employment?

A furloughed member of staff can have a separate employment with a different and unconnected employer which will be unaffected. Also, an employee can be furloughed by more than one employer with the monthly cap of £2,500 applying to each employment.

What about employees who are not on permanent contracts?

The scheme applies to all types of employee including:

  • Employees on zero hours contracts
  • Employees on temporary contracts
  • Apprentices
  • Agency Staff

What about employees who are on sick leave or self-isolating

Whilst sick or self-isolating, they will be entitled to sick leave (and to other entitlements set out in their contracts of employment) and would then be eligible to be furloughed once they are ready to return to work.

Should furloughed staff continue to get their normal salary?

Furloughed staff will be on the same contract of employment and so any reduction in their salary would have to be negotiated, in accordance with employment law. In addition their holiday entitlement would continue to accrue.

Should furloughed employees continue to go through the payroll?

Yes. PAYE, NI and all other deductions continue as before with payments made to HMRC in the normal way.

What about their pension?

Both employer and employee pension contributions continue to be payable in accordance with workplace pension requirements and contracts of employment as applicable.

What if furloughed staff are periodically required to do some work?

Staff who are furloughed are not permitted to do any work (although they can undertake training) while furloughed. However, provided that they have been furloughed for at least 3 weeks they can be brought back to work and then, subsequently, furloughed again flexibly.

How will the government grant be calculated?

The grant comprises the total of the following:

  • The lower of 80% of the monthly salary or £2,500
  • Employers National Insurance on the above figure
  • The minimum Employers pension contribution under workplace pension rules (unless the employee has opted out)

For March 2020, therefore, the maximum grant would be the maximum cap of £2,500 plus Employers NI on this, amounting to £245, plus the employer’s minimum pension contribution of £59 making a total of £2,804.

The monthly salary excludes bonuses, commissions and fees.

From what date does the grant apply?

The grant applies from the date that the employee is formally furloughed. This means that the employee must have been informed and (unless the employment contract deals with this situation) the employee must have agreed to being furloughed. This must be done formally and documented.

For what period of time does it apply?

The scheme is currently operating for a 3 month period.

What about staff who have variable earnings from month to month such as those on zero hours contracts?

For those staff who have been employed for at least a year, the amount is calculated on the higher of the average monthly earnings over the previous 12 months or the equivalent earnings in the corresponding months in the previous year. For those who have not worked a full year, the average monthly earnings to date should be used.

How will it be paid?

A new on-line system is being developed by HMRC for claims to be submitted and payments made. The scheme is expected to be ready by the end of April.

It may take some time to set up this system and therefore employers may need to take advantage of other types of support in the meantime such as the Business Interruption Loan Scheme.

Information which must be provided on making a claim

  • PAYE reference
  • Number of employees furloughed
  • Claim period
  • Amount claimed
  • Bank account details

Claim Frequency

A claim for a furloughed employee can only be made after 3 weeks which is the minimum period an employee can be furloughed.

HMRC inspection

HMRC will retain the right to audit claims.

For more information on government support for businesses and charities during the coronavirus pandemic, download our guide here or contact a member of our team.

About the Author

Kevin Lally

Partner

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