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The Coronavirus Job Retention Scheme opened this week. Employers can now claim for a grant through HRMC that will cover 80% of an employee’s wages, National Insurance and pension contributions, up to £2,500 per month. Monies will be backdated from 1st March 2020 and the scheme will run for at least three months but it will be extended if deemed necessary.
Any UK organisation with employees can apply for the scheme including businesses, charities, public authorities and/or recruitment agencies - providing the employer created and started a PAYE payroll scheme on or before 28th February 2020. The employer must also hold a UK bank account.
Employers will receive a grant of up to 80% of wage costs for each furloughed worker, capped at £2,500 per month, plus minimum automatic pension contributions and employer National Insurance contributions. Commissions and bonuses are not included. Employers must pay the entire grant received directly to the employee, but they can opt to ‘top-up’ the wage to 100% if they wish. The grant will not have to be paid back.
In order to be eligible for the Job Retention Scheme, employees must have been on the payroll and an RTI submission notifying payment should have been made on or before this date.
The worker must first be put on ‘furlough’, which means they “can’t undertake work for, or on behalf of the organisation or any linked or associated organisation. This includes providing services or generating revenue.”
The furlough period must be for a minimum of three weeks and during this time, the wage is still subject to income tax and other deductions.
‘Employees’ includes full-time and part-time employees, those on flexible or zero-hour contracts and those on agency contracts, as long as they are not working. It also covers umbrella and limited company employees, providing they were on the payroll for said company on or before 19th March 2020.
Directors may go on furlough, but they must not be seen to engage in any activities that contribute to generating revenue. This includes social media posts. Training activities that are ‘directly relevant’ to employment are permitted as is anything that ‘stems from Acts of Parliament’ for example, duties relating to the filing of company accounts. More information about this can be found in the scheme’s Government guidance under ‘Company Directors’.
Owners of small businesses who pay themselves through PAYE, and salaried partners who are paid through PAYE are both eligible for the Job Retention Scheme, but it does not include dividend payments.
Self-employed partners and shareholders should instead apply for the Self-Employment Income Support Scheme, which is a similar grant of up to 80% of a self-employed person’s average monthly earnings.
Where employees have two or more employers, they can be furloughed for each job individually but the £2,500 per month cap still applies. Employees can be furloughed from one job and continue to work for and be paid by another employer - however this could breach their employment contract. It is therefore down to the employee to negotiate this extra work with their employer to see whether it is permitted.
Workers will not however be eligible for the Scheme if they were placed on unpaid leave, reduced hours or reduced pay. Where redundancies were made, these employees can still be re-employed and put on furlough – providing they were on the PAYE payroll as of 28th February and an RTI was submitted. There are special considerations for those on Statutory Sick Pay and Maternity (or similar) Leave – more information about these cases can be found in this set of guidance.
You will probably need to claim once every three weeks (as this is the minimum amount of time an employee can be on furlough) and you should claim for all furloughed employees collectively each time. Once HMRC have approved the claim, the amount should be paid into the employer’s bank account within six days. They have advised that you do not contact them until ten days have passed with no payment.
If you’d like help processing your claim for the Coronavirus Job Retention Scheme or the Self-Employment Income Support Scheme, contact us today. Our team of specialist accountants are also on-hand if you’d like to discuss your financial options or you’d like further clarification on your eligibility for other forms of financial support.