COVID-19: Guidance for employers on the Coronavirus Job Retention Scheme

Below are some FAQs employers may ask about furloughing employees, in light of the government’s new guidance in response to the COVID-19 outbreak.

1. Who can I claim?

2. What can you claim?

3. Will the payment be subject to normal income tax?

4. How to claim for furlough?

5. What happens after the government ends the furlough scheme?

______________________________________________________________________

Who can I claim?

Any UK employer who has employees can apply for the grant. However, employers must have created and started a PAYE payroll scheme before 28 February 2020 and hold a UK bank account.

In terms of eligible employees, a furloughed employee must have been on the payroll since 28 February 2020 in order for the employer to be able to claim under the Job Retention Scheme. The scheme also covers employees who have been made redundant since 28 February 2020 if they are rehired by the employer.

If an employee is sick or undergoing self-imposed self-isolation, they should be paid SSP. If an employee is self-isolating under government guidance, they can be placed on furlough.

The scheme can also be used where an employer offers enhanced maternity pay to its employees. This is deemed as wage costs and therefore the grant can cover this.

Employees who have more than one job, they can be furloughed by either one or both employers, and the cap on the grant applies to each employer separately.

What can you claim?

Employers will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month. The grant will also cover the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. An employer can choose to top up an employee’s salary above the 80% but they are under no obligation to do so.

For the purpose of calculating the 80%, an employer should take the employee’s salary as at 28 February 2020. Fees, commission and bonus should not be included in this.

You can claim for any regular payments you are obliged to pay employees, including: wages, past overtime, fees and compulsory commission payments. Discretionary bonuses (including tips) and any other commission payments should be excluded from the calculation submitted to HMRC.

If an employee’s pay is variable, and they have been in the company for over one year, you can calculate 80% using the higher of either the same monthly earnings from the previous year or the employee’s average monthly earnings for the year 2019/20 tax year. If the employee has been in work for less than one year, the employer should calculate the 80% based on the employee’s average monthly earnings since they started work.

Employers will still remain liable for employer national insurance contributions and automatic enrolment pension contributions. Employers can claim a grant to cover 80% of the employee’s wages plus employer’s national insurance contributions and automatic enrolment pension contributions.

Will the payment be subject to normal income tax?

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.

How to claim for furlough?

Employers should discuss and negotiate with employees putting them on furlough. It is advisable that employers take legal advice on the process of putting employees on furlough, this is because a collective consultation may need to take place depending on the number of employees the employer is intending to place on furlough.

To claim, employers will need:

• • your employer PAYE reference number
  • the number of employees being furloughed
  • National Insurance Numbers for the employees you want to furlough
  • Names of the employees you want to furlough
  • Payroll/works number for the employees you want to furlough
  • your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
  • 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

Employers will need to calculate the amount you are claiming to input on the online portal, which is predicted to be available on 20 April 2020.

Employers can only submit one claim every 3 weeks, which is the minimum amount of time an employee can be on furlough for.

What happens after the government ends the furlough scheme?

When the government ends the scheme, employers will need to make a decision, depending on the financial and long-term circumstances of their company, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).

Employees who have been furloughed have the same rights as they did prior to previously, including rights to statutory sick pay, maternity pay and rights against unfair dismissal and rights to a redundancy payments. Employees will continue to accrue employment rights whilst on furlough leave thus employers should be mindful of employees they put on furlough shortly before their 2-year employment anniversary.

Last updated: 20/04/2020