The detail on the Government’s Job Retention Scheme has now finally been released. Please see below for a summary of the scheme:
Who is eligible for the scheme?
- All UK employers with a PAYE scheme setup will be able to access support to continue paying part of their employees salary for those who would otherwise have been laid off during the crisis
Which employees can be claimed for?
- This applies to employees who have been asked to stop working but who are being kept on the payroll, these are described as “furloughed workers”
- There is no requirement to furlough all employees although all normal equality and discrimination laws apply
- They must have been on the payroll as at 28 February 2020
- The scheme covers any employees who had initially been made redundant since 28 February 2020 but have now been rehired by their employer.
- Directors are able to claim for the salary element of their remuneration which is processed through a PAYE scheme
What grant can an employer claim for its employees?
- HMRC will reimburse 80% of an employees wages, up to £2,500 per month plus the associated Employers National Insurance and minimum automatic enrolment employer pension contribution
- Fees, commission and bonuses should not be included
- The scheme will cover wages backdated to 1st March 2020 – providing the employee was laid off at that date
- The scheme is initially open for 3 months but will be extended if deemed necessary
- Employers can choose to pay their employees their full wage but they are not obliged to under this scheme subject to the terms of the employees contract of employment which may need to be amended
- If an employees pay varies the grant will pay the higher of:
- The same months earning from the previous year
- Average monthly earnings from the 2019-20 tax year
- Average monthly earnings – If the employee has been employed for less than a year
What are the tax and national insurance implications of the scheme?
- Wages of furloughed employees will be subject to Income Tax and National Insurance as usual
- Employers can make a further claim for the associated Employer National Insurance and minimum automatic enrolled employer pension contributions for the element of wages covered by the scheme
- If an employer chooses to pay an employee their full pay the associated Employers National Insurance and pension contribution would not be covered for the top up amount
What does the term “furloughed” actually mean?
- A furloughed employee is one who has been asked to stop working but remains on the payroll
- If an employee has more than one job they can be furloughed by each employment and the £2,500 limit applies to each individual employer
- The minimum wage does not apply to furloughed workers as they are not working any hours
- A furloughed employee cannot carry out any work for their employer, although they can carry out volunteer work or training that isn’t a service to or revenue generating for their employer.
- An employee must be furloughed for a minimum of 3 weeks to qualify for the scheme
- The maximum period an employee can currently be furloughed for is 3 months
How do I make an employee furlough?
- Employers are required to discuss the furlough with their employees
- Any changes required to employment contracts must be agreed with employees
- The employer must write to employees confirming that they have been furloughed
- Employees hired after 28 February 2020 cannot be placed on furlough
- If an employee is working, even on reduced hours, they are not eligible for this scheme
What if an employee is on another form of leave?
- Employees on sick leave should get Statutory Sick Pay and should only be furloughed when that ends
- Employees who are self isolating should get Statutory Sick Pay and should only be furloughed when that ends
- Employees who are shielding in line with the government guidance can be placed on furlough
- Employees who are on maternity/paternity leave should continue to be paid the statutory amount however if you pay enhanced contractual pay it is covered by the scheme
How is a claim made?
- The employer will be required to submit information about furloughed employees and their earnings to HMRC through a new online portal
- The portal does not currently exist but HMRC are working urgently on it and believe it should be working by the end of April
- HMRC will require the following information to support a claim:
- Your ePAYE reference number
- The number of employees being furloughed
- The claim period
- The amount claimed
- Your bank details
- Your contact details
- HMRC will review the claims to ensure that the employer is eligible for the grant and arrange payment
Should you require further clarification on the above, or any other matter, please contact your Fairhurst partner.