Job Retention Scheme – Furloughed workers update
Under the Coronavirus Job Retention Scheme, all employers in the UK will be able to access support to continue paying part of employees’ salaries who would otherwise have been laid off during the ongoing crisis.
Furloughed workers are employees whose employers cannot cover staff costs due to coronavirus, and as such they have been asked to stop working but have not been made redundant.
Such employers are now able to access support to continue paying part of their staff’s wages, to avoid redundancies and so they can retain their teams.
To avoid fraud, there are expected to be cross-checks between the applications for grants against PAYE records for each employer.
Employers will be required to make one claim for the entire workforce, record how many workers are covered and will need to keep records.
How the scheme works
• The employer should discuss with affected employees and notify them (preferably in writing) that they have become ‘furloughed workers’. ACAS have a suggested information that should be included that we have adapted and is at the bottom of this article with suggested letters.
• The employer can claim a grant of 80% of workers’ wages up to £2,500 a month once they have been furloughed.
• The employees remain on the payroll deducting tax and national insurance under the pay as you earn (PAYE) system.
• If employers want to top up pay levels, they can, but will not be able to claim for more than 80 per cent of £3,125.
• The employer could choose to fund the differences between this payment and employee’s salary, but does not have to.
• The furloughed workers should not undertake work for their employer while they are furloughed. • The scheme is available to all employees.
• The employer needs to get agreement from the worker to do this, unless it’s covered by a ‘lay off’ clause in the employment contract.
• The employer needs to submit information to HMRC about the employees that have been furloughed and their earnings. The submission will be through a new online portal which is expected before them end April (HMRC will set out further details on the information required).
• If an employee’s salary is reduced as a result of these changes, the employee may be eligible for support through the welfare system, including Universal Credit.
• For employees on zero-hour contracts, the employer can use the monthly pay in February 2020 as a benchmark for each person’s pay when furloughed. If any employee did not work in that month, they should claim Universal Credit.
• If employees have to stay at home to look after young children, the employer is likely to be allowed to claim compensation if they furlough these workers.
The Coronavirus Job Retention Scheme will run for at least 3 months from 1 March 2020 but will be extended if necessary.
HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
It is expected that employers borrow or self-fund in the short term to provide the wage package.
If a business needs short term cash flow support, it may be eligible for a Coronavirus Business Interruption Loan.
HMRC guidance on: