Covid-19 – Job Retention Scheme

Following our previous correspondence on this matter, the Government have now released more thorough guidance in respect of the scheme and we wanted to summarise the main areas for your consideration;

  1. The scheme is running for a 3 month period from 1 March 2020. It is possible the Government may extend the scheme, if necessary.
  2. An employee can be furloughed for a minimum of three weeks at a time and for a maximum of three months from 1 March 2020.
  3. You will be able to claim 80% of the 'usual' monthly wages (plus Employers National Insurance Contributions and the minimum auto-enrolment employer pension contributions), up to a cap of £2,500 a month (plus ERS NIC and pension contributions), for any worker being 'furloughed'.
  4. You can only claim for employees who were on the payroll as at 28 February 2020. Any workers after this date will not be eligible.
  5. If the employee has been employed for 12 months or more, you can claim the highest of either the:
    • same month's earnings from the previous year
    • average monthly earnings for the 2019-20 tax year

    If the employee has been employed for less than 12 months, you should claim for 80% of their average monthly earnings since they started work.

  6. Employers can choose to pay employees above the thresholds imposed, but will do so at their own expense.
  7. If you choose to pay employees above the 80% claim or £2,500 monthly cap, you will be liable for the additional Employers National Insurance and pension contributions. Employees would also be required to pay their share of the increased pension amount.
  8. Once an employee is furloughed they cannot undertake work for, or on behalf, of the business. This includes providing services or generating revenue.
  9. If one of your employees is on sick leave or self-isolating, they will be able to claim for Statutory Sick Pay (SSP). You cannot furlough an employee receiving SSP but can claim once they are no longer in receipt of the SSP. Self-isolation certificates are available from NHS 111 online.
  10. An employee may request to take annual leave as an alternative to receiving Statutory Sick Pay or nil pay. They are entitled to request this but cannot be compelled by an employer to do so.
  11. If one of your employees has more than one form of employment income, you can furlough the employee to make a claim. They can continue to work for the other employer. This also applies the other way round where you may require your employee to work for you but they have been furloughed by another employer. An employee can also be furloughed by both employers.
  12. The eligible individuals who can claim that may not be on the payroll are as follows;
    • Office holders (including directors)
    • Salaried members of LLPs
    • Agency workers (including those employed via umbrella companies)
    • Limb (b) workers
  13. Company directors can be furloughed but the 80% claim is restricted to the salary (PAYE) income and will not take into consideration any dividends being extracted from the company.
  14. If company directors are being allocated as furloughed then you must have minutes of a meeting to document this decision. It is also important to recognise that directors can only carry out particular duties that fulfil their statutory obligations as a director. They must not carry out any work that would be done in normal circumstances to generate revenue or provide services to or on behalf of the company.
  15. LLP members must consider the LLP agreement to understand if any changes need to be made to the document. It will need to reflect that the LLP member will perform no work for the LLP during the furlough period.
  16. Employees who are furloughed are encouraged to undertake training by the Government and will not jeopardise their furlough status as long as in undertaking the training, the employee does not provide services or generate revenue on behalf of the business. There are some considerations for the National Minimum Wage (NMW) that need to be reviewed where the employer asks the employee to undertake the training.
  17. The employer must agree in writing to the employee to confirm they are being furloughed. This communication must be kept for 5 years.
  18. Payments received by a business using the scheme are included as income in the business calculation of its taxable profits for Income Tax and Corporation Tax purposes.

HMRC have advised us that they plan to launch the scheme on 20 April 2020. They will be notifying businesses directly in due course in regards to what they need to do. Businesses will be able to make claims directly via an online portal that is being put in place for this purpose.

We have provided a direct link to the Government guidance below as we have not covered every scenario above and there might be specific areas of guidance of interest to you, family or friends. It also includes more information on making a claim.

This email is an abbreviated summary of legislation announced by the Government in respect of the COVID-19 outbreak at the time of the e-mail release. Please note that this is not intended to be advice, and should not be relied upon as such. Honey Barrett will take no responsibility for any decisions or actions taken based on the information included here. You should take appropriate employment law advice, where necessary.

If you have any questions please contact your usual contact at Honey Barrett for more information.

COVID-19 - Job Retention Scheme One in five highly skilled freelancers face business closure to COVID-19 Strong economic recovery likely, but not certain Over £31 billion borrowed through coronavirus schemes Manufacturers call for coronavirus support Chancellor announces changes to Job Retention Scheme IPSE gives cautious welcome to extension of self-employed scheme Research shows 5.2 million people have fallen victim to scams during coronavirus crisis Coronavirus Statutory Sick Pay Rebate Scheme goes live Government publishes revised Coronavirus Job Retention Scheme legislation Survey suggests one in ten firms cannot implement coronavirus guidance safely IPSE urges government to extend self-employed support scheme Future Fund launches to give start-ups coronavirus support Government set to launch Coronavirus Statutory Sick Pay Rebate Scheme Loan size increased to £200 million under large business interruption scheme BCC survey suggests firms ready for gradual reopening of UK economy One million apply to self-employed grant scheme in 48 hours Close to £15 billion lent through government's coronavirus schemes Chancellor extends Job Retention Scheme until October Self-employed grant scheme to open to applications HMRC extends tax appeal deadline due to pandemic Business groups need more guidance and financial support for return to work UK Finance warns firms over Bounce Back loan repayments HMRC begins contacting individuals eligible for coronavirus income support scheme Over 110,000 businesses apply for Bounce Back loans on day one Government changes ISA rules to help individuals affected by coronavirus Business leaders eager for lockdown to ease, says IoD Lenders relax evidence requirements for business interruption loan scheme applications CIPD urges government to make Coronavirus Job Retention Scheme more flexible Government launches small business micro loan scheme FSB urges government to increase 80% guarantee on coronavirus business loans Government launches support finder tool for businesses SMEs access £2.8 billion through business interruption loan scheme BCC finds significant number of UK businesses have furloughed employees Coronavirus pandemic 'has already cost SMEs £277,000 each', research suggests Government unveils support package for innovative businesses affected by coronavirus Coronavirus Job Retention Scheme goes live as it is extended to end of June Pensions regulator issues auto-enrolment guidance for pandemic Government widens eligibility for job retention scheme HMRC releases guidance on coronavirus Self-employment Income Support Scheme Coronavirus Job Retention Scheme set to launch on 20 April Chancellor announces financial aid package for charities Firms struggling to access emergency coronavirus loans UK economic output reduces to 31% as result of coronavirus lockdown Chancellor announces changes to Business Interruption Loan Scheme Majority of UK firms have less than three months' cash reserves Government publishes details on coronavirus grant schemes for small businesses Directors on PAYE can furlough under job retention scheme Government relaxes insolvency rules during coronavirus pandemic HMRC publishes guidance on recognising genuine government contact HMRC urges businesses using VAT deferral to cancel direct debits Chancellor unveils help for self-employed workers Government and financial regulators tell banks to keep lending UK facing 'worst recession in modern history' COVID-19 Business Measures - job retention and tax deferrals Coronavirus Business Interruption Loan Scheme goes live Information for businesses and employers

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