COVID-19: How to claim for wage costs through the coronavirus job retention scheme

by | Mar 27, 2020 | Blog

New guidance was released from the Government overnight regarding the Job Retention Scheme and Furlough workers.

The additional details, clarified below, will need to be considered when planning for the months ahead.

  • Employers can claim for 80% of furloughed employees’ usual 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. This gives a maximum cap of £2,500 +£245 (employers’ NIC) + £59 (auto-enrolled pension contribution) = £2,804 of total possible grant that can be applied for per employee per month.
  • Further guidance regarding how employers can calculate claims for Employer NI and Auto-Enrolment employer pension contributions is to be released in due course.
  • For Furloughed workers on a higher wage, they will receive £2,500 per month as a gross payment but will pay employee PAYE and NICs on that sum.
  • Any UK organisation with employees can apply including Businesses, Charities, Recruitment agencies (agency workers paid through PAYE) and Public Authorities.
  • Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including full-time, part-time, agency contracts, flexible or zero-hour contracts.
  • Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
  • Employees on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this.
  • Employees who are shielding in line with public health guidance can be placed on furlough.
  • If your employee has more than one employer, they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
  • Furlough must be taken in blocks of three weeks at a time. There is nothing to prohibit rotating employees on furlough, provided leave is taken in minimum blocks of three weeks.
  • Employees have the same right when furloughed as they did before. This includes Sick Pay, maternity rights, parental rights and other unfair dismissal rights.  This does not explicitly say the right to accrue holiday, but we strongly suspect that it will be the case.
  • If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance. Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower).
  • As not all staff are able to work at this present time, the Government has advised that they can volunteer or do training, BUT, if doing training they must be paid National Minimum Wage (£8.72 after 1st April) for each hour spent training.
  • Employers should discuss furlough with their staff and make any changes to the employment contract by agreement. We suggest confirming the changes in writing. Feel free to adapt this template.
  • To claim furlough, you will need:
    • Your ePAYE reference number
    • The number of employees being furloughed
    • The claim period (start and end date)
    • Amount claimed (per the minimum length of furloughing of 3 weeks)
    • Your bank account number and sort code
    • Your contact name
    • Your phone number
  • Employers are responsible for calculating the amount they are claiming. HMRC will retain the right to retrospectively audit all aspects of the claim. Once HMRC have received the employer’s claim 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.
  • Employers should make their claim in accordance with actual payroll amounts at the point at which they run their payroll or in advance of an imminent payroll.
  • When the government ends the scheme, employers must decide, depending on their circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
  • Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.
  • Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
  • Employers should take care when selecting which employees are placed on furlough. Normal protections against discriminatory and unfair selection will apply, and employers are advised to obtain detailed legal advice.

We understand that the current situation is causing several extraordinary challenges for businesses, but we are here to support you and your business throughout. We will continue to provide updates via email and maintain our website so you can see the summaries of the schemes available and what you need to do to access them.

If you have any questions or need assistance with implementing this scheme within your business, please contact your Client Partner via email or by calling 01454 619900.

For further information, we suggest you visit the Government website

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