COVID-19: Job Retention Scheme - furlough guidance

The government is providing financial support for employers affected by coronavirus disruption.

Government financial support

Furloughed workers

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees' salary for those employees that would have otherwise been laid off during this crisis. These staff are called 'furloughed' workers.

All UK businesses are eligible to apply

To access the scheme, employers will need to designate relevant staff as furloughed workers. The employer needs to get agreement from the worker to do this.

The employer can decide whom to designate as a furloughed worker. If an employee disagrees with their employer's decision, they'll need to talk to their employer and come to an agreement that works for both sides.

HMRC will reimburse 80% of furloughed workers' wage costs to employers, up to a maximum of £2,500 per month. Employers can choose whether they pay the remaining 20% of wages - they don't have to pay it.

If employers made employees redundant, or they stopped working for the employer on or after 28 February 2020, employers can now re-employ them, put them on furlough and claim for their wages through the scheme. This date was then pushed back to 19 March 2020.

When you make a claim you will receive the funds within six working days after you apply, provided your claim matches records that HMRC hold for your PAYE scheme. Making sure that you submit your claim correctly will reduce the chance of any delayed or wrong payments.

From 1 July, businesses will be allowed to bring furloughed employees back part-time, a month earlier than previously announced. It will be down to individual firms to decide what part-time means. They will be able to set the hours and shift patterns staff will work when they return, but companies will have to pay wages while they're in work. Only employees who have been furloughed for a minimum of three weeks on or before 30 June 2020 will be eligible for the scheme after that point.

Any employees not yet furloughed, must be furloughed no later than Wednesday (10 June 2020) if they are to be eligible for support during the final four months of the scheme.

• The Chancellor announced businesses must pay towards furlough scheme from August
• Businesses will pay 10% of wages for furloughed staff by September and 20% by October
• Chancellor says the scheme won't be extended after October.
• The scheme will close to new entrants on 30 June and will not be extended any further.
• The self employed grant will be extended for a further three months, with the available grant being reduced by 10% to 70% of profits.

The coming months: How employers' contributions will increase for furloughed staff.

August

The government will pay 80% of wages up to a cap of £2,500. Employers will have to pay NI and pension contributions. For the average claim, that's 5% of the gross employment costs the employer would have incurred had the employee had not been furloughed.

September

The government will cut its grants to 70% of wages up to a cap of £2,190. Employers will pay NI and pension contributions and 10% of wages to make up the 80% total up to a cap of £2,500. That works out at 14% of the average gross employment costs the employer would have incurred.

October

The grant will be reduced to 60% of wages up to a cap of £1,875. Employers will pay NI and pension contributions and 20% of wages to make up the 80% total up to a cap of £2,500. That's 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.

If an 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. Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.

There may have been some uncertainty whether the maximum £2,500 grant available from HMRC needed to allow for the cost of employers NIC contributions and employers pension contributions to be within this ceiling payment, however, there is agreement that the maximum wage can be £2,500 with the NIC and pension costs (minimum entitlement) is being reimbursed by HMRC in addition to the £2500.

66% of businesses who are continuing to trade, or who have put their business on hold, have applied for the Job Retention Scheme, and 24% of SME's have seen their turnover drop by more than 50% (ONS Survey - April 2020)

When you make a claim you will receive the funds within six working days after you apply, provided your claim matches records that HMRC hold for your PAYE scheme. Making sure that you submit your claim correctly will reduce the chance of any delayed or wrong payments.

Remembering these steps should help keep the process as simple as possible:

• Read the guidance before you apply (see 'Government website' link below for more help)
• Check your employees are eligible
• Check your calculations each time you submit a claim, in case any details have changed
• Only submit one claim per pay period – you can't submit another claim for overlapping periods; this means that in each claim you should include all furloughed employees paid during that period
• If you are missing NI numbers for employees, do try and find them so it doesn't delay your claim; if an employee doesn't have a National Insurance number yet, you should contact HMRC in order to complete your claim
• Double check all of the information in the claim before you submit it, including your bank details.

Important: You will need to calculate the amount you are claiming as HMRC may retrospectively audit all aspects of your claim.

Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.

To find out much more information, please visit the Government's website. The online service to claim your employee wages is now live. Use this link to access the portal. Remember to have your Government Gateway user ID and password handy to help speed up the process. 

Laying off staff or short-time working

In some situations, an employer might need to close their business for a short time, or ask staff to reduce their contracted hours.

• It's important to talk with staff as early as possible and throughout the closure.
• Employees need to be paid for this time unless agreed otherwise.
• Employees who are laid off and are not entitled to their usual pay might be entitled to a 'statutory guarantee payment' of up to £29 a day from their employer.
• Guaranteed payment is limited to a maximum of 5 days in any period of 3 months.
• When a guarantee payment is not payable, employees might be able to claim Jobseeker's Allowance.

How long can employees be furloughed?

The minimum length of time an employee can be furloughed for is three weeks, and for at least three months (until end of May 2020), however, this may now be extended.

• There is nothing in the Guidance to suggest that employers cannot swap employees in and out of furlough (subject to the minimum three-week furlough period).
• Employees can be made redundant at the end of the scheme. When the Government ends the Scheme, employers will have to decide whether furloughed employees can return to their duties or will have to be made redundant. Employees can also be made redundant while on furlough.
• The scheme will be back dated to 1^st March with a view to covering those who have already been made redundant due to the coronavirus outbreak.

Using holiday

Employers have the right to tell employees and workers when to take holiday if they need to. For example, you can decide to shut for a week and everyone has to use his or her holiday entitlement.

If an employer decides to do this, they must tell staff at least twice as many days before as the amount of days they need people to take i.e.: give 10 days' notice if you want staff to take 5 days leave.

Are staff holidays affected?

If staff have already booked or planned holiday, employers should:

• Explain clearly why they need to close
• Listen and resolve any worries about how it will affect their holiday entitlement or plans

Important: Payments received by businesses under the Scheme must be included as income in the business's calculation of its taxable profits for Income Tax and Corporation Tax purposes.

COVID -19 Business Interruption Loans

If your business needs short-term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.

You can also talk to our 'sister company' LG Financial which, because of our existing good relationship with you, will help to speed up any application process. Call Jessica Silva on 020 7841 2919 or email her on jessica@lgfinancial.co.uk

We are monitoring the Chancellor's updates very closely and will advise you in due course, on what your next steps could be. In the meantime, we would recommend take some time to review your employee contracts.

HR Support

If you have any HR questions regarding the above, we would recommend you seek legal advice.

Contact details:

Barry Dass: +44 (0) 20 8861 7556

Email: contact@davenporthr.com

Website: www.davenporthr.com/covid-19-hub.php

COVID-19 Business Interruption Loans

If your business needs short-term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.

You can also discuss your financial requirements with LG Financial enabling you to access much needed funding so that your business can overcome the current crisis.

Contact details:

Jessica Silva: +44 (0) 20 7841 2919

Email: jessica@lgfinancial.co.uk

Website: www.lgfinancial.co.uk

We are monitoring the Chancellor's updates very closely and will advise you in due course, on what your next steps could be. In the meantime, we would recommend take some time to review your employee contracts.