The Coronavirus Job Retention Scheme is a temporary scheme. It’s open for all UK employers for at least three months starting from 1 March 2020. We expect the scheme to be up and running by the end of April.
It’s designed to support employers whose operations have affect a 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. Enroll 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.
Who can claim
Any UK organization with employees can apply, including:
- Recruitment agencies (agency workers paid through PAYE)
- Public authorities
You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme.
Public sector organizations
The government doesn’t involve many public sector schemes, but the majority of employees are involved in good public service schemes.
The majority of public sector employees provide essential public services. This also helps you contribute to the coronavirus outbreak.
If employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion not furlough them.
This also applies to non-public sector employers who receive public funding for staff costs.
What’s Necessary to Respond to Covid-19?
Organizations that are receiving public funding to provide services necessary to respond to COVID-19 are not expected to furlough staff.
In a small number of cases, for example where organizations are not funded by the government. Whose staff cannot redeploy to assist with the coronavirus response? The scheme may be appropriate for some staff.
What employees can claim this?
Furloughed employees must have been on your PAYE payroll on 28 February 2020. Can be on any type of 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 are made redundant since 28 February 2020. They might even be rehired by the employer.
To be eligible for the subsidy, when on furlough. An employee can not undertake work for or on behalf of the organization. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to the usual income tax and other deductions.
This scheme is only for employees on agency contracts who are not working.
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.
Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process. Including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
To be eligible for the subsidy employers should write to their employees confirming. That they have been furloughed and keep a record of this communication.
Employees hired after 28 February 2020 cannot be furlough or claimed for in accordance with this scheme.
You do not need to place all your employees on furlough. Those employees who you do place on furlough cannot undertake work for you.
If your employee is on unpaid leave
Employees on unpaid leave cannot be furlough. Unless they are placed on unpaid leave after 28 February.
If your employee is on Statutory Sick Pay
Employees on sick leave or self-isolating get statutory sick pay. They’re furlough after this. Employees who shield in line with public health guidance place on furlough.
What if your employee has more than one job
If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer.
What if your employee does volunteer work or training?
A furloughed 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 your organization.
What if the workers complete online training courses whilst they are furloughs?
Then they must pay at least the NLW/NMW for the time spent training. Even if this is more than 80% of their wage that will be subsidized.
If your employee is on Maternity Leave. Thus, contractual adoption pay, paternity pay or shared parental pay
Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work. 4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety need it. In practice, most women start their Maternity Leave before they give birth.
If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance. The normal rules apply and they are entitled to claim up to 39 weeks of statutory pay or allowance.
Employees who qualify for SMP. Which will still be eligible for 90% of their average weekly earnings in the first 6 weeks. Followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate. The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.
If you offer enhanced (earnings-related) contractual pay to women on Maternity Leave. This is included as wage costs that you can claim through the scheme.
The same principles apply where your employee qualifies for contractual adoption. Thus, maternity or shared parental pay.
Work out what you can claim
Employers need to make a claim for wage costs through this scheme. You’ll 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. Least automatic enrolment employer pension contributions on that subsidized wage. Fees, commission, and bonuses should not be included.
At least, employers must pay their employees 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.
We will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions. Min automatic enrolment employer pension contributions, before the scheme, becomes live.
Full time and part-time employees
For full time and part-time salaried employees, the employee’s actual salary before tax. As of 28 February should use to calculate 80%. Fees, commission, and bonuses should not be included.
Employees whose pay varies
If the employee has employed (or engaged by an employment business) for a full twelve months before the claim. you can claim for the higher of either:
- The same month’s earning from the previous year.
- Average monthly earnings from the 2019-20 tax year.
If the employee is employed for less than a year, you can claim an average of their monthly earnings since they started work.
If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Once you’ve worked out how much of an employee’s salary you can claim for, you must work out the amount of Employer National Insurance Contributions. At least you’re entitled to claim enrolment employer pension contribution.
Employer National Insurance and Pension Contributions
All employers remain liable for associated Employer National Insurance contributions. least automatic enrolment employer pension contributions on behalf of their furloughed employees.
You can claim a grant from HMRC to cover wages for a furloughed employee. Equal to the lower of 80% of an employee’s regular salary or £2,500 per month.
Plus the associated Employer National Insurance contributions. Least automatic enrolment employer pension contributions on paying those wages.
You can choose to provide a pop-up salary to the grant. Employer National Insurance Contributions and automatic enrolment contribution on any extra top-up salary. which will not be found through this scheme. Nor will any voluntary automatic enrolment contributions above the least mandatory employer contribution of 3% of income. Which is above the lower limit of qualifying earnings. (Which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).
National Living Wage/National least Wage
Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.
Furloughed workers, who are not working. Must pay the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.
If workers need, for example, complete online training courses whilst they are furloughs. Then they must pay at least the NLW/NMW for the time spent training. Even if this is more than 80% of their wage that will be subsidized.
What you’ll need to make a claim
Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If enough numbers of staff are involved. It may be necessary to engage collective consultation processes to get agreement.
To claim, you will need:
- your PAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 weeks)
- your bank account number and sort code
- contact name
- your phone number
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
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.
What to do after you’ve claimed
Once HMRC has received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll
You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted. Should choose to sum up the wages of the employee. So, you don’t have to.
When the government ends the scheme
When the government ends the scheme, you must make a decision, depending on your circumstances. As to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
Employees that have been furloughed
Employees that have furlough the same rights as they did. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights. Rights against unfair dismissal and redundancy payments. Once the scheme has closed by the government. HMRC will continue to process remaining claims before terminating the scheme.
Income tax and Employee National Insurance
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings. Unless they have chosen to opt-out or to stop saving into a workplace pension scheme.
Employers will be liable to pay Employer National Insurance contributions on wages paid. As well as automatic enrolment contributions on qualifying earnings unless an employee has opted out. Or has ceased saving into a workplace pension scheme.
Tax Treatment of the Coronavirus Job Retention Grant
Payments received by a business under the scheme made to offset these deductible revenue costs. They must be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes under normal principles.
Businesses can deduct employment costs as normal. When calculating taxable profits for Income Tax and Corporation Tax purposes.