Coronavirus Job Retention Scheme
The Government have launched an initiative called the Coronavirus Job Retention Scheme, intended to help employers fund the wages of staff that they have had to Furlough (put on a leave of absence), to run for a period of up to at least three months starting from 1 March 2020. It will be available to all employers provided the payroll scheme was set up before 28 February 2020 and they have a UK bank account.
The scheme will enable employers to claim 80% of the furloughed employees’ usual monthly wages costs, up to a maximum of £2,500, plus the employers National Insurance and minimum employer pension contributions. The claim will be made to HMRC through an online service, which is not currently available but which HMRC hope to have up and running by the end of April.
The main points to note about the scheme are:
Employees must have been on the payroll on 28 February 2020
The furloughed employee cannot work for the employer, which includes generating revenue or providing services. Directors can continue with their statutory duties and be furloughed, but in most circumstances directors will need to be doing more than this to ensure the continuation of the business.
The scheme is not available for employees on reduced hours or reduced pay.
To be eligible to claim, employers should notify the employee in writing and keep a record.
A furloughed employee can still undertake training in the period.
The employer must pay the employee the lower of 80% of the wages or £2,500 but can top up the salary if they wish but won’t be able to claim the top up from HMRC.
Fees, bonuses and commissions are not included in the calculation of the wage.
For employees with a variable wage you can claim based on the higher of either the same month’s earnings in the previous year or the average earnings for the 2019/20 tax year.
The minimum period that an employee can be furloughed is three weeks
Furloughed workers are not entitled to the National Minimum Wage if the 80% falls below the level
In addition to the above for the purposes of the claim, it is important to note that employment law and employment rights are still in place. Furloughed employees have the same rights as if they are working and will continue to accrue holiday. If the right to furlough an employee is not in the contract of employment the employer will need to obtain consent from the employee. If you are unsure of anything you should get specialist HR advice.
The above covers the basics of the scheme for most employers but you can find more detailed guidance from HMRC here, which is regularly updated.