Covid-10 Job Retention Scheme - update

Posted on 20th April 2020

The HMRC Coronavirus Job Retention Scheme portal is now open and reported to have received 67,000 claims in 30 minutes!

On Friday 17th April 2020 the UK government announced further information relating to the scheme. The main update being that the scheme has been extended until 30th June 2020 to help employers avoid making permanent redundancies while the Covid-19 measures are still in place. Below we have updated our guidance to reflect the new information.

About the Scheme (updated 17/04/20)

The government has announced that to avoid job losses and/or redundancies, they will fund 80% of staff salaries who would otherwise have lost their employment. The scheme will run from 1st March until 30th June 2020, but this is under continuous review and may be extended further.

What about National Living Wage/National Minimum Wage increases? (updated 15/04/20)

It is our understanding that any employee who is on furlough at the time of the NLW/NMW increase in April will not benefit from these increases.

The amount of funding should be calculated on the salary as at 19th March 2020. If the employer has already made their calculations based on previous guidelines of 28th February 2020, they can still use this date.

The salary will only be increased once the employee returns to work or if employees undertake any training while on furlough.

When will the HMRC portal be open? (updated 20/04/20)

The portal is now open!  There will be a 4 to 6 day processing period while background checks are being carried out. This is to prevent any fraudulent claims.  Payment will be made by BACS transfer to a UK bank once eligibility has been confirmed.

Who is eligible? (updated 15/04/20)

Any employee who has been employed on or before 19th March 2020, who were notified to HMRC on an RTI submission on or before 19 March 2020 and has been placed on furlough leave. All businesses in the UK irrespective or size or sector will have access to the scheme. The employees must have been registered on the company’s PAYE system on or before this date.

Employees who are on unpaid leave cannot be furloughed unless the leave was taken after 28th February 2020.

Furlough leave is for a minimum of 3 weeks so employers will not be able to claim any funding for a shorter period.

How will I prove that I have furloughed employees? (updated 20/04/20)

All employees who have been furloughed should have signed a furlough agreement which the company must keep on record for 5 years.

You must also keep a copy of your claim reference number and a copy of your calculations.

HMRC reserve the right to audit businesses who have claimed for the funding.

Will I have to pay it back and how long will it last? (updated 17/04/20)

The government have advised that the scheme will initially run for 4 months, starting from 1st March 2020. Employers will not have to pay the funds back. This is a grant, not a loan.

The funding begins on the day the employee stopped working. Please be aware that the scheme runs during March, April May and now June and not for 4 months from the employee being furloughed. This may be extended should there be a requirement.

How much are my employees entitled to?

Employees will be entitled to at least either 80% of their normal earnings or £2500 per month. Whichever is lower. It is worth noting that the £2500 cap also includes employer NIC and pension contributions.

How does the scheme work? (updated 20/04/20)

Once furlough status has been agreed, it will remain the responsibility of the employer to pay their staffs wages at a rate of at least 80% of their normal earnings and claim this back from HMRC. Employers will be able to submit their claim through a new HMRC portal. To claim the funding, the employer must be registered for online PAYE, this can take up to 10 days. Employers should look at a Coronavirus Business Interruption Loan if appropriate to cover salaries in the meantime.

To claim, employers will need:

  • To be registered for PAYE online
  • your employer PAYE reference number
  • the number of employees being furloughed
  • National Insurance Numbers for the furloughed employees
  • Names of the furloughed employees
  • Payroll/employee number for the furloughed employees
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
  • your bank account number and sort code
  • your contact name
  • your phone number

You will also need to provide either:

  • your corporation Tax unique taxpayer reference
  • your Self Assessment unique taxpayer reference
  • your company registration number

If you have under 100 employees, you will be asked to enter the details of each individual employee onto the system. This will include their name, national insurance number, claim period, claim amount and payroll/employee number (optional).

If you have more than 100 employees, you will be asked to upload a file containing all of the above information. The file formats that will be accepted are: xls, xlsx, csv and ods.

Please be aware that should employers chose not to pay salaries, this is a breach of the employment contract and an unlawful deduction of earnings, which could result in a tribunal claim.

Employers are able to pay the additional 20% of salary if they so wish but are under no obligation by the government to do so and this cannot be claimed back.

It is important to remember that while an employee is on furlough leave they must not undertake ANY work for the business. This means any activity that provides a service or generates revenue.

Can directors be furloughed?

The new government guidelines suggests that company directors and salaried members of Limited Liability Partnerships (LLPs) are eligible to receive the Job Retention Scheme funding.

Directors have certain obligations to the business, so long as they do ‘no more than would be judged as reasonable’ and are not generating any revenue or providing services on behalf of the company, the funding is available.

Can agency workers be furloughed?

Yes, as long as they are paid through PAYE agency workers are eligible.

The agency and the employee should discuss and agree the change to furlough status, but this should also be discussed with any clients, as work may still be available.

Can my employee do volunteer work while they are furloughed?

Employees are free to carry out volunteer work while they are furloughed, so long as the work does not generate a revenue for the company and is in line with public health guidance.

What is the difference between compulsory commission and discretionary commission?

The government have stated that compulsory commission should be used to calculate any employees normal pay. This is when there is a contractual obligation for the employer to make these payments.

If there is no contractual obligation or the commission structure is ‘discretionary’ the commission should not be used when calculating normal pay.

What if my employee has regular overtime payments, bonuses or shift allowances?

HMRC have advised that employees who receive varied salaries will have their pay calculated on either the salary of the same month the previous year or the average salary calculated over the tax year 2019-2020 – whichever is higher.

How do I calculate earnings for an employee who is employed under a zero hours contract?

Employees who are employed under a zero hours contract should have their salaries calculated by using the preceding 52 weeks’ as reference period.

It should be noted that should you be making regular salaried payments to an employee who is employed under this sort of contract, it may be worth reviewing the terms of their employment. These employees remain part of the workforce and make a valid contribution.

What about pension contributions?

If the employee has not opted out of auto enrolment or other pension schemes, the employer would still be required to make the minimum auto enrolment contributions on their behalf.

If this is the case, the funding would be calculated on an employee’s gross salary plus employers NIC plus pension contributions.

Can you give me an example of how this will be calculated?

Should an employee earn £24,000 a year, this is calculated as a gross pay of £2,000 per month. Their net pay would be £1,665 after deductions of PAYE £191 and employees NIC of £144.

The employer pays £174 NIC contributions.

The employer should receive the funding as calculated:

£2,000 plus £174 NIC = £2,174 minus 20% gives a total of £1,739 funding available.

It will remain the responsibility of the employer to pay NIC and income tax contributions on behalf of the employee as well as employers NIC contributions.

What about employees who are currently shielding or on sick leave?

If an employee is on sick leave/isolating and receiving SSP they will only become eligible for the Job retention Scheme funding once that period of absence is over and they are available for work but have no work to return to.

If an employee is shielding in line with public health guidance, they are eligible to receive furloughed status. However, the selection process for furloughing employees should be fair and consistent and not only include those who are shielding.

Employers will be subject to usual auditing processing by HMRC so they must ensure they have a valid business reason for placing any employee on furlough leave.

What about employees with caring responsibilities?

It is our understanding that any employee who is unable to undertake work for the company due to having caring responsibilities, such as caring for their children, is eligible to be furloughed.

This is due to the fact that the business is unable to provide any work for these employees.

What about Apprentices?

Apprentices can be furloughed but they must have their salaries topped up to either Apprentice Minimum Wage, National Minimum Wage or National Living Wage for any time they spend training.

Can my employees still undertake training while on furlough leave?

Great news!

Employees can take part in volunteer work or training (online) as long as it is not creating revenue for the business or providing services.

Employees must be paid at least National Living Wage or National Minimum Wage for time spent training. This means that if 80% of their salaries does not amount to the NLW/NMW, employers must ensure any time training is subsidised.

Holidays and furlough (updated 17/04/20)

Although employers are now able to allow employees to carry over up to 4 weeks’ holiday for up to 2 years, it would now seem that employees are able to take holiday while they are furloughed.

Employees continue to accrue holiday while they are furloughed, the employee and employer can agree to carry the holiday entitlement as part of the furlough agreement as long as the entitlement does not fall under the statutory 5.6 weeks.

Pay and Holidays

If an employee takes annual leave during the furlough period, they must have their salary topped up to 100% for the duration of the holiday.

Bank Holidays

For employees who have a contractual right to take bank holidays, employers top up their employees’ salaries to 100% for any bank holidays that fall within the furlough period.

For employees who do not have a contractual right to bank holidays, the employer is under no obligation to enhance pay for any bank holidays that fall within the furloughed period.

Can I enforce holiday for my employees?

Employers who wish to enforce holiday for their employees who are on furlough leave must give at least 2 days’ notice for every day they require their employee to take as annual leave.

For example, they must give 2 weeks for every week they require the employee to take.

What if I need my employees to come back to work?

Employers will not be able to call employees back to work until the annual leave period is over so must consider this when authorising or enforcing holiday.

Employees with caring responsibilities may wish to request holiday during furlough to protect them from having to return to work at short notice.

Can I refuse a holiday request from a furloughed worker?

Employees must request holiday in the usual way while they are furloughed, and the employer must decide whether they are able authorise the holiday.

Employers are under no obligation to accept holiday requests from furloughed workers.

Can holiday be cancelled during the furlough period?

It is down to the employer to agree to any requests to cancel holiday during the furlough period once this holiday has been authorised.

The employer can refuse to cancel any pre-booked holiday or ask the employer to use alternative dates, as long as appropriate notice is given.

An employer can cancel pre-booked holiday. The notice period for cancelling pre-booked holiday is at least the same number of days as the holiday duration e.g. 5 days’ notice to cancel 5 days holiday. Should employers need to do this they should clearly explain to their employees the reason for doing so.

How will this affect my company?

Employers who are financially secure and have furloughed employees due to not having any work will be able to reduce the number of holiday days that will be carried over once everyone returns to work as usual.

For those companies who are relying on the job retention scheme to save their business and

who do not have the resources available to them to top up salaries to 100% and allow employees to take holiday whilst they are furloughed, this new information will be of little benefit and therefore the relaxation on carry over can be utilised instead.

As always, if you need our help with this or any other HR advice then do call us on 01536 215240.

Carla Cifaldi Character
Written by:
Carla Cifaldi
HR Consultant