Please note: this article was correct at the time of writing and publication. However, please bear in mind that advice and guidance may change at short notice due to the nature of this unprecedented situation. We are doing our utmost to provide up to date information, as and when it happens.
For the latest, please visit www.ncass.org.uk/coronavirus
What is Job Retention Scheme?
Is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020.
It is designed to support employers whose businesses have been severely affected by coronavirus (COVID-19).
Employers can use a portal to claim for 80% of the usual wage costs of employees who are ‘furloughed’ employees’ up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
The scheme covers anyone who is employed via PAYE that is not able to go to work that is or was employed on 1st March Someone has to be furloughed for 3 weeks minimum before a payment can be claimed.
What is a furloughed worker?
Furloughed workers are those who are unable to work due to the coronavirus situation.
They are not people who have been made redundant.
During Furlough Leave, an employee cannot undertake work for or on behalf of the organisation.
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.
Which Businesses can Claim under this Scheme?
Any UK organisation with employees can apply provided they have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Which staff are included?
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:
- full-time employees
- part-time employees
- employees on agency contracts
- employees on flexible or zero-hour contracts
The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
Hows it calculated?
Full time and part time employees
For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.
Employees whose pay varies
If the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:
- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Bonuses, commissions and fees are not included as part of your monthly earnings. The staff will still pay Income Tax & NI on these payments.
Are Zero-hour contract employees included?
Yes – but you need to be sure they are on a zero-hour contract and therefore on your payroll – not simply casual workers who may not be eligible.
Do I have to pay the additional 20% of their salary?
No. You can choose to pay the additional 20% if you want to but you don’t have to.
Can a furloughed employee still work?
No. You only furlough a worker if there is no work for them. To furlough a worker and then have them working is fraudulent activity.
My employee has 2 jobs with 2 different companies – can I still furlough them?
Yes – You can be put on furlough by one employer and continue to work for another, if it is permitted within your employment contract.
If you’re put on furlough by more than one employer, you’ll receive separate payments from each employer. The 80% of your normal wage up to a £2,500 monthly cap applies to each job.
Is TRONC included?
It is currently unclear whether TRONC is or isn’t included in the scheme. The Government guidance says that “Fees, commission & bonuses should not be included” which implies that it is not included however TRONC is part of the PAYE scheme. Also by the fact that TRONC is not specifically excluded may imply that it is included.
Can I claim National Insurance contributions and minimum automatic enrolment employer pension contributions as well?
Yes. Businesses can claim Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on top of the actual wage cost.
I only recently just started employing people – can I furlough them?
To be eligible you must have created and started a PAYE payroll scheme for the employee by 28 February 2020
A member of staff is self isolating – can they be furloughed?
Yes however they cannot work and it needs to be for a minimum 3 week period.
What happens if someone is sick when furloughed?
Strictly speaking if staff are sick during the furlough period pay should switch to contractual sick pay or Statutory Sick Pay.
Can I furlough someone and then have them work?
No. A furloughed employee can not undertake work for or on behalf of the organisation – although they can undertake training so now is a great time to get them updating their Food Safety & Health & Safety training courses but they must be paid the minimum wage.
Can a furloughed worker come back to work?
Yes but an employee has to be furloughed for 3 weeks minimum else the grant payment for the employee will not be paid.
I made someone redundant after 1st March – what should I do?
This is your call. You are allowed to bring them back into employment and Furlough them as claims will be backdated to the first day of furlough (as long as this is after 1st March)
Are furloughed still officially employed?
Do employees still earn holiday allowances?
Yes. They are still employees of the business and will still be accruing the normal worker rights.
How do I furlough a worker?
Write a letter to each member of staff including:
• Business name & Address
• Their name & address
• An explanation that they are being furloughed and what this means for them
• That they are will still remain an employee during this period
• Date they will be furloughed from & when you envisage this will last until
• That they cannot work during the period of being furloughed
• How much they will be paid & when
This is a temporary change to your employees’ terms and conditions. You will need to get them to confirm that they accept this change. Otherwise you may be in breach of employment law. This is available in the NCASS Coronavirus Resource area
How do I get the money back?
HMRC are building a portal for claims. They hope it will be in place by the end of April but obviously there may be teething troubles so we can expect a 6 to 8 week lead time before claims from employers begin to be processed.
Why will it take so long to get the money back?
HMRC need to build a system to administer the millions of people that will need to claim and this takes time.
I want to Furlough workers but don’t have the cash to pay staff this money – what should I do?
This is not 100% clear however we would advise that even if you don’t have the cash now you should still furlough them via the Job Retention Scheme, just explain to your staff that you don’t have the cash to cover what they are due tight now but that when you have it from HMRC you will then be able to pay them.
Can I furlough myself?
All employees on the PAYE scheme can be furloughed if there is no work for them however remember that you are not allowed to work whilst you are furloughed.
I pay myself through PAYE and dividend, what am I claim for?
You can claim for the wages that you would pay yourself normally via the PAYE scheme however remember that you cannot work during this period. Dividends are not included. Please note. This information is for guidance only and all members are encouraged to seek independent advice relating to their specific business and circumstances. NCASS cannot be held accountable for the actions taken by any member
For further information
For employers –
HMRC Business Support Helpline – 0800 024 1222
HMRC have opened a dedicated helpline for businesses and the self-employed to answer queries or concerns regarding tax payments and finding solutions including:
• agreeing an instalment arrangement
• suspending debt collection proceeding
• cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately
ACAS – www.acas.org.uk/coronavirus
For Employees –
When is the Job Retention Scheme available?
The Coronavirus Job Retention Scheme is now open for applications as of 20th April 2020. Employers can now claim online for a grant for 80% of their furloughed employees’ salaries, up to a maximum of £2,500 per employee. Click here to visit HMRC and make a claim.
HMRC have also produced step by step guidance on how to make a claim. There is also a calculator to help you work out your claim. The system can process up to 450,000 applications per hour and employers should receive the money within 6 working days of making an application.
To receive payment by 30th April, you will need to complete an application by 22nd April. Please keep a note or print-out of your claim reference number as you won’t receive a confirmation SMS or email.
The Chancellor also announced a one month extension to the scheme last week as a result of an extension of lockdown measures. This means that the scheme will now be open until the end of June. HMRC are holding live webinars providing an overview of the scheme to help employers and employees deal with the economic impacts of Coronavirus. Register for a live webinar here.