The Coronavirus Job Retention Scheme (Furlough)
Coronavirus Job Retention Scheme extended to 30 June 2020
SYLO Associates can support and provide advice and guidance on the Coronavirus Job Retention Scheme and can help you to navigate through the process and provide the necessary templates for your use.
Full guidance was issued on Thursday 26th March 2020, and this is our summary. We are, of course, continuing to decipher the detail of the guidance and we will issue updates and additional documents regularly.
Latest update – 21st April 2020
The SYLO team continues to keep up to date with the detail of the Government’s Coronavirus Job Retention (Furlough) Scheme and they are regularly making changes and addressing key questions. The latest update was issued last Friday 17th April 2020. In summary the changes are:
The guidance confirms that annual leave may be taken during furlough leave, but it must be paid at 100% of normal pay;
- The update says that furlough should be agreed, but not necessarily in writing. As this contradicts previous guidance, our advice still remains that you should get confirmation of agreement between you and your employee;
- Furlough pay is included in the reference period when calculating statutory pay (maternity, paternity, adoption, shared parental etc);
- Those employers eligible to claim under the scheme has been updated to be any business with a UK payroll;
- Confirmation that an employee on unpaid leave may be moved to furlough leave;
- Clarification that fixed term contracts may be extended whilst the employee is on furlough leave;
- The portal to submit your claim under the scheme opened on 20th April. Any organisation with more than 100 employees will be able to use a file upload. Those with less than 100 will need to input each one manually.
- HMRC are unable to answer any queries, so you may have to address employee queries, which we are happy to support you with.
Please do email us at SYLO Associates if you have any questions.
Coronavirus Job Retention Scheme (Furlough)
The Chancellor announced a new package of financial measures on Friday 20 March 2020 and detailed guidance was issued on 26 March 2020. These measures represent an unprecedented level of financial support to business and employees at this difficult time; albeit subject to an initial period of three-months.
This is a scheme that will allow all UK employers to access financial support to continue paying part of their employees salary (up to 80%) for those who would otherwise have been laid off/made redundant as a consequence of the Coronavirus pandemic.
The Government has now published detailed guidance on how the scheme will work and this note summarises the main points. The full guidance is available here.
The Coronavirus Job Retention Scheme (CJRS) is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. The Government expect the scheme to be up and running by the end of April. It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19).
Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.
The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020.
Who can claim?
Any UK organisation with employees can apply. The organisation must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Employees you can claim for
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:
- full-time employees
- part-time employees
- employees on agency contracts
- employees on flexible or zero-hour contracts
The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
To be eligible for the subsidy, when on furlough, an employee cannot undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
If your employee is on sick leave or self-isolating they should get Statutory Sick Pay (SSP) from day one, but can be furloughed after this.
Employees who are shielding in line with public health guidance can be placed on furlough.
If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay
If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.
Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.
If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.
The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.
You will need to identify the employees you wish to change to ‘furloughed’ status. If all work has ceased, this will be straightforward, but where some work is still required, you will need to follow a selection process to ensure fairness.
You will need to seek agreement from your employees to change their employment status to ‘furloughed’. If agreed, you will need to write to your employee confirming the change of status. Furloughed employees cannot carry out any work for you.
You will need to do this in order to be eligible for the subsidy and a copy of the communication may be requested by HMRC.
When you are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
Work out what you can claim
You will need to make a claim for wage costs through this scheme.
You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses are not included.
At a minimum, you must pay furloughed employees the lower of 80% of their regular wage or £2,500 per month. You can also choose to top up an employee’s salary beyond this but you are not obliged to under this scheme.
HMRC will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live in April 2020.
When the government ends the scheme
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
Employees that have been furloughed
Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
Income tax and Employee National Insurance
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.
Tax Treatment of the Coronavirus Job Retention Grant
Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.
Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
This information is correct as at 27 March 2020
- Please note – this guidance is not intended to be taken as legal advice – for individual situations you will need to take specific legal advice.
- The information in this guide is correct as of 30th March 2020.
- All advice given should be read alongside the Government Guidance
For further guidance about how to furlough your employees or any other information please email us