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;
- The scheme is running for a 3 month period from 1 March 2020. It is possible the Government may extend the scheme, if necessary.
- 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.
- 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'.
- 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.
- 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.
Employers can choose to pay employees above the thresholds imposed, but will do so at their own expense.
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.
Once an employee is furloughed they cannot undertake work for, or on behalf, of the business. This includes providing services or generating revenue.
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.
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.
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.
The eligible individuals who can claim that may not be on the payroll are as follows;
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.
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.
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.
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.
The employer must agree in writing to the employee to confirm they are being furloughed. This communication must be kept for 5 years.
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.
- Office holders (including directors)
- Salaried members of LLPs
- Agency workers (including those employed via umbrella companies)
- Limb (b) workers
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.