The scheme is available for all UK employers for at least three months starting from 1 March 2020.
They expect the scheme to be up and running by the end of April and it is designed to support employers whose operations have been severely affected by Coronavirus (COVID-19).
Employers can use a HMRC portal to claim for 80% of furloughed employees’ (employees on a leave of absence) to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
You 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.
As a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not a requirement of the scheme.
The scheme will be open to all UK employers that had created and started a PAYE payroll scheme on or before 28 February 2020. The furloughed employees must also have been on your PAYE payroll by 28 February and can be on any type of contract. This also covers those employees who were made redundant after 28 February if they are rehired by their employer and placed on furlough as a result of the scheme.
To be eligible for the subsidy, when on furlough, an employee can not undertake work (with the exception of volunteer work or training) for, or on behalf, of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
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.
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.
You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.
When the government ends the scheme, you 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).
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.
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.
The grants in which the business receives will be treated as other revenue and businesses can deduct the employment costs as normal. The grant should therefore not create a taxable profit and therefore won’t be subject to Corporation Tax.
The Government have stated in their guidance for the SEISS in point 1 above that a director of their own company “may” be able to get support using the Job Retention Scheme.
At the time of writing, we do not know if further guidance will be provided for Owner-Managed Businesses. Directors’ who pay themselves via salary and dividends, may therefore be entitled to the 80% subsidy on their salary only, but there is no subsidy for dividends.
For assistance in creating Furlough contracts for your employees, we can provide this service for a small fee.
We can also manage the HMRC Furloughed Employee Portal, including grant claims and advising thereon, for a small fee per 3-weekly claim.