The Coronavirus Job Retention Scheme (Furloughed Workers)
Chancellor Rishi Sunak has announced the Coronavirus Job Retention Scheme, designed to enable employers to keep their staff on the payroll. This applies to all UK employers.
To take advantage of the scheme, employers must “furlough” employees , which means to grant them a temporary period of absence as instead of having to lay them off or make them redundant during this crisis.
Her Majesty’s Revenue and Customers (HMRC) will reimburse 80% of furloughed workers’ wages costs up to a cap of £2,500 per month. The scheme can cover the cost of wages for workers who were in employment on 28th February and can be backdated to 1st March 2020. This will continue for at least three months.
To access the scheme, employers must designate affected employees as “furloughed” workers and notify the employee/employees of the change.
Note – Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. HR advice should be sought.
To qualify for the scheme, employees must not undertake work for the employer while they are furloughed.
The employer will then need to submit information to HMRC regarding the “furloughed” worker via a new online portal to enable HMRC to issue the reimbursement.
The employer can choose whether they pay the employee 80% of their wages which will be reimbursed by HMRC or the full 100% by agreeing to top up the additional 20%.
Some things to consider:
- The online portal is new and HMRC are urgently trying to set this up. As a result, there is no current information on what they will require or when it can first be accessed. However, it is understood that reimbursements won’t be made until the end of April.
- In the meantime, employers must pay the “furloughed” employees their wages and run the payroll correctly.
- There is no detail at the moment to allow us to understand what the £2,500 wages costs cap will cover, for example, associated employers’ costs such as national insurance and pension costs or staff bonuses.
- Likewise, we are unsure how part-time employees will be dealt with.
- There is no guidance about what the basis for calculating the wages will be. As an example, an employee that does not receive a straightforward salary because their hours change week to week.
- The scheme is designed to help employers that cannot cover wages costs due to the Coronavirus and as yet, we don’t know what this actually means. For example, if the business has a healthy balance sheet with access to funds in the bank accumulated from before COVID-19.
- It is unclear to what extent this can apply to a director and personal service companies.
Claire Judd of Harvey, Telford & Bates is keeping an eye out for any further detail that is due to be released and please feel free to contact her if you have any questions regarding the above.
Once the portal is up and running, Claire will be able to assist you or make the applications to HMRC on your behalf.
For more information, please speak to one of our members of the team by calling us at 01743 462604 or email us at [email protected]