Summary of the Coronavirus job retention scheme.
The scheme applies in respect of employees who have been ‘furloughed’, a period of temporary leave in which they are not required to work for the employer, but remain on their payroll. This is does not directly alter the employment relationship between employer and employee.
The scheme allows the employer to recover a proportion of pay from HMRC in respect of employees on that leave. The reimbursement that the employer can get per employee from the HMRC is limited, meaning the employer can claim the lower of 80% of wage costs or £2,500 per calendar month, plus employer national insurance contributions and employer auto-enrolment pension contributions).
The scheme is backdated to 1 March 2020, open for at least three months and will be extended if necessary. HMRC are urgently working to set up the new system of reimbursement, and the Government expects the scheme to be up and running by the end of April 2020. The downside of this is that you will need to fund your payroll costs until the reimbursements are made.
Which employees are covered?
The scheme covers the following, as long as they were on the employer’s payroll on 28 February 2020, regardless of their contract type;
- Full-time employees.
- Part-time employees.
- Employees on agency contracts.
- Employees on flexible or zero-hour contracts
Employees who were made redundant since 28 February 2020 can qualify, as long as they are re-engaged by the employer
Where an employee has more than one job, their employments are treated separately and each reimbursement cap, refers to each employer individually.
Where an employee who is on unpaid leave, they cannot be furloughed, unless that period of unpaid leave started after 28 February 2020.
Which employers are eligible for the scheme?
All employers in the UK that had created and shared a PAYE payroll scheme on 28 February 2020 and have a UK bank account are eligible.
Can an employer rotate furlough leave between its employees?
As an employer, you must put employees on furlough leave for a minimum of 3 weeks, outlined in the latest Government guidelines in keeping with the prevention of the spread of Coronavirus.
You can put employees onto furlough in ‘batches’, as the work minimises for some areas of the business , then as the work stops for the rest of the business, they then can be placed onto furlough leave.
Can an employee request their employer puts them onto furlough leave?
An employee can request it, but an employer does not have to agree. It is the employer’s decision whether to place an employee on furlough leave.
Are employers obliged to top up the remaining 20%?
As an employer you are entitled to pay full pay but under the scheme you are not obliged to pay full pay during furlough leave. If you do ‘top-up’ to 100% you can only claim back the employer national insurance and minimum auto-enrolment payments, up to the cap.
For any employer paying less than 100%, this needs to be agreed and the employee’s consent given in order to do so. Given the alternative is unpaid leave, lay-off or redundancy, it is expected that the majority of employees will agree.
Will workers continue to accrue holiday during furlough leave?
It is not clear as to whether this would continue to accrue during furlough leave, but given the Working Time regulations, it seems likely the 5.6 weeks will continue to accrue.
What can an employer claim back?
How does an employer make a claim to HMRC for reimbursement?
- To claim, the employer will need to submit:
- The employer’s ePAYE reference number.
- The number of employees being furloughed.
- The claim period (start and end date).
- The amount claimed.
- The employer’s bank account number and sort code (UK bank account)
- A contact phone number.
Employers can only submit one claim at least every three weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated to 1 March 2020 if applicable.
Reimbursement will be paid via BACS payment to the nominated bank account.
The claim can only be made at the point at which the employer runs payroll or in advance of an imminent payroll because actual payroll amounts need to be submitted
What does the reimbursement cover?
The reimbursement allows the employer to claim up to the lower of 80% of usual monthly wage costs or £2500 per employee whichever is the lower, plus the associated cover of employer national insurance contributions and minimum auto-enrolment employer pension contributions.
Does the reimbursement limit include auto-enrolment pension contributions and employer’s NICs?
The guidance makes clear that these payments can be claimed back in addition to the cap.
How is the 80% calculated for those with irregular earnings?
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to 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 has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
If the employee started employment in February 2020, their earnings so far should be pro-rated.
This advice is based upon the Governmental and ACAS guidance as at the time of this email.
THE LATEST INFORMATION PROVIDED IN THIS DOCUMENT IS DATED FROM FRIDAY 27 MARCH 2020. IF YOU REQUIRE THE PREVIOUS INFORMATION DATED FROM TUESDAY 17 MARCH TO THURSDAY 26 MARCH, IT CAN BE FOUND ON OUR WEBSITE UNDER NEWS ARTICLES. PLEASE FOLLOW THIS LINK.
If you have any questions on any of the above or any of the Covid-19 guidance and updates we have released in the past few weeks, then please do not hesitate to get in touch with us.
