Coronavirus Job Retention Scheme
Under the Coronavirus Job Retention Scheme all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month per employee. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
It has recently been announced that the Coronavirus Job Retention Scheme (JRS) will be extended until the end of October. The scheme will run for a further four months and Employees will continue to receive 80% of their monthly wages up to £2,500. However, companies will need to start sharing the cost of the scheme from August, with a statement released stating that employers would need to ‘share with the government the cost of paying salaries’. The scheme will continue from August to October but with greater flexibility to support the transition back to work. Employers currently using the scheme will be able to bring furloughed employees back part-time during this period. More information can be found on HMRC’s website.
HMRC has stated that any entity with the following can be eligible for the claim:
- A UK bank account
- Was on a UK payroll before March 19, 2020
- On any type of employment contract (as well as being fixed term)
Therefore, those that are:
- Apprentices – if paid at least Apprenticeship minimal wage, National Living Wage or National Minimum Wage
- Shielding employees – if shielding in line with public health guidance, if unable to work from home or would be made redundant
- Employees with caring responsibilities – if unable to work due to caring responsibilities caused by coronavirus will have access to this scheme
For those who are not considered employees; are they eligible?
The revised guidance from HMRC particularly addresses detailed clarification on furloughed workers who are not considered employees but can be eligible for the scheme, such as:
- Office holders – to be agreed between office holder and party who operates PAYE on income
- Salaried members of Limited Liability Partnerships (LLPs)
- Agency workers
- Limb workers
- Company directors
- Foreign nationals are also eligible claimants.
Accessing the scheme
In order to access the scheme you will need to:
- designate affected employees as ‘furloughed workers,’ and notify your employees of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation,
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).
In order to make a claim you will need to provide the following information:
- ePAYE reference number
- The number of employees being furloughed
- The claim period (start and end date)
- Amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- The relevant bank account number and sort code
- Claimant’s contact name
- Employee’s contact phone number
The Coronavirus Job Retention Scheme (CJRS) is live and HMRC have been making payments since 20 April 2020. HMRC's aim is for employers to be paid the first furlough payments four to six working days after submission of their claim. Employers will be able to claim 14 days before they are due to pay their employees.
The new online system has been stress-tested to deal with up to 450,000 claims an hour and HMRC are confident that it can deal with a large volume of claims. There are currently no plans to extend the scheme to those employees who have had their working hours reduced because of the pandemic, or to assist those who started a new job after 19 March 2020 if their previous employer does not agree to re-engage and furlough them.
New operational guidance will be published shortly, to assist employers in getting their claims ready to upload when the online portal opens.
If an employee’s pay varies and he/she has been employed for 12 months or more, the employer can claim the highest of the same month’s earning from the 2019-2020 tax year, or the average of the monthly earnings from that year. If employed for less than that period, employers need to claim 80% of the employee’s monthly earnings since their start date.
To find out if you’re eligible and how much you can claim to cover wages for employees on temporary leave (“furlough”) due to coronavirus (COVID-19) go to this link.
What does it mean to be a ‘furloughed’ worker under this scheme?
- HMRC states that furloughed employees can pursue voluntary work under the condition that it does not, in any case, generate revenue on behalf of the organisation. An employee’s training can also be continued under the same rule.
- Employees having more than one job are also eligible to be furloughed for both or one whilst continuing the other.
- To proceed the claim, HMRC stresses that employers must confirm to their employee that they have been furloughed, in writing. Any employee is required to be furloughed for a minimum of three consecutive weeks.
Furloughing staff and proving profits have been affected by COVID-19
If you are making a claim to the Government’s CJRS, we would note that HMRC are likely to audit claims either now or at a later date and so please ensure that you keep accurate records of furloughed employees, including the agreements to vary the terms of contracts etc.
Please be aware in particular that if HMRC find that your profits were not affected by Coronavirus there is a possibility that they will claw back any monies overclaimed, bearing in mind it was set up to support companies whose operations have been severely affected by Covid-19.
NUNN HAYWARD’S PLANNING ADVICE:
- This scheme does not mean that the Government is offering to pay 80% of all your employees’ wages if they are working. It is intended to help employers pay staff while they are laid off as opposed to making redundancies. The hope is this will save a spike in unemployment and keep the business fabric together until things return to normal
- We suggest that if you need to consider laying-off staff due to business interruption during the coronavirus outbreak, review your options in the light of this new support package. There now seems to be a real opportunity to retain staff who can resume their normal duties as soon as the current restrictions are lifted.
- It is likely that when the small print on this Job Retention Scheme is published it will include a raft of anti-avoidance provisions so proper advice is essential.
Should you have questions or specific queries relating to the Coronavirus Job Retention Scheme or furloughing staff, please contact us on 01753 888211 or email firstname.lastname@example.org
The information that we have provided is for general purposes only and therefore does not constitute professional advice. Appropriate professional advice should be sought for individual circumstances before any further action is taken.