COVID-19 Coronavirus Job Retention Scheme Update

This funding will be open to all employers with a PAYE payroll scheme that was created and started on or before 28 February 2020, including charities.

Employers can apply for grants of 80% of furloughed employees’ (employees on a leave of absence) 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, provided they keep the worker employed. The scheme will cover the cost of wages backdated to 1 March 2020, if applicable.

The government has published further guidance in relation to the Coronavirus Job Retention Scheme

Some of the key points are set out below:

Employer eligibility:

  • All UK employers that had created and started a PAYE payroll scheme on 28th February 2020 are eligible. Any UK organisation with employees can apply, including businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities.
  • If employers receive public funding for staff costs, and that funding is continuing, employers are expected to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.

Employee eligibility:

  • Furloughed employees must have been on the PAYE payroll on 28th February 2020, and can be on any type of contract, including full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts
  • Other conditions include:
    • No work: when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.
    • Volunteer work/training: a furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.
    • Reduced hours: employees working on reduced hours, or for reduced pay, will not be eligible for this scheme.
    • Not all employees: businesses do not need to place all your employees on furlough.
    • More than one job: if an employee has multiple employers then can be furloughed for each job separately, and the cap applies to each employer individual.
    • Sick Pay: employees on sick leave or self-isolating should get SSP, but can be furloughed after this. Employees who are shielding in line with public health guidance can be placed on furlough.
    • Unpaid leave: employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
    • Maternity leave, contractual adoption pay, paternity leave or shared parental pay: for SMP the normal rules apply, and employees they are entitled to claim up to 39 weeks of statutory pay or allowance. The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.

How will the wage cost be calculated?

  • Full and part time salaried employees: employee’s actual salary before tax, as of 28th February should be used to calculate the 80%. Fees, commission and bonuses should not be included.
  • Employees whose pay varies: If the employee has been:
    • employed (or engaged by an employment business) for a full twelve months prior to the claim: can claim for the higher of either:
      • the same month’s earning from the previous year
      • average monthly earnings from the 2019-20 tax year
    • employed for less than a year: claim for an average of their monthly earnings since they started work.
    • only started in February 2020: use a pro-rata for their earnings so far to claim.
  • NLW/NMW: the furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW. If workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

Designating employees as “furloughed workers”

  • To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.
  • Employers should discuss with their staff and make any changes to the employment contract by agreement.
  • When employers 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.

Furloughed employees rights:

  • 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.
  • When the government ends the scheme, employers 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).

How to claim:

  • Employers will designate affected employees as ‘furloughed workers,’ and notify their employees of this change;
  • employers will submit information to HMRC about the number of employees that have been furloughed, the amount claimed, the claim period etc. through a new online portal;
  • claims should be made claim in accordance with actual payroll amounts at the point at which payroll is run or in advance of an imminent payroll; and
  • once HMRC have received the claim and the business is eligible for the grant, they will pay it via BACS payment to a UK bank account.

Employers can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.

Directors paid through salary and dividends

Furthermore, the Chancellor noted yesterday that those who pay themselves a salary and dividends through their own company are not covered by the “Self-Employed Income Support Scheme” but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes. In this scenario, the typical level of wages processed through PAYE is minimal and therefore many individuals on a “dividend salary” model will receive minimal contribution from the Government in respect of their earnings.