At a glance - Coronavirus Job Retention Scheme: a cash grant that is designed to allow employers to retain staff who would otherwise be laid off.
What does the government mean by furloughing?
Who can be furloughed?
How does it work and how much can be claimed?
HMRC will reimburse:
What are wages?
Wages are your monthly earnings:
If wages are of a fixed annual amount this is the amount paid in the month to 29 February.
If the your employee's salary varies:
The grant paid to your employer will be calculated based on your regular, contractual pay, such as wages, compulsory commission and past overtime.
The calculation will not include discretionary commission (including tips) payments or bonuses, non-cash payments or benefits in kind.
What about overtime?
It is paid. We queried this on 3 March 2020 and HMRC have been quick to update their guidance.
Practically speaking, this means that the amount paid is based on your contractural earnings as paid in February 2020, or if the calculation is based on variable pay, the mechanism will be the average of contractual earnings for 2019/20 paid up to 28 February 2020. It will not include discretionary amounts paid.
How to make a claim from HMRC
What to pay?
As an employer you may need to renegotiate the employee's contract: the need to do this may well reflect your financial circumstances.
You must pay the employee all the grant received for their gross pay, no fees can be deducted from the grant money.
The employees you furlough must not work for you during the furlough period.
Do not forget about employment law. This is for your protection as an employer (against claims by employees once this is all over) as well as the protection of your employees.
*We are unable to give employment law advice but have included some suggestions below which should help manage your risk here. If in doubt you must seek independent legal advice.
How to make a claim
The online portal for making claims is expected to be available by the end of April. Claims can only be made every 3 weeks but can be backdated to 1 March 2020.
To make a claim you will need the following information:
You must calculate the amount to claim, HMRC will not do it for you. HMRC have said that they will retain the right to retrospectively audit all aspects of your claims.
Tax Treatment of the Job Retention Grant
Steps to take when furloughing workers
Coronavirus Job Retention Scheme - update 4 April 2020
61 Friar Gate Derby DE1 1DJ
Registered to carry out audit work Association of Chartered Certified Accountants.
www.auditregister.org.uk under number 8011438
Directors of Small Companies
Company Directors & Shareholders: many small companies are run by just one or two directors and have no other employees.
What government financial support is available to director/shareholders during the Coronavirus crisis?
We have added our thoughts on this - this is not part of an official announcement
Furlough vs. Redundancy
What is the best course of action for an employer in dealing with staffing during the COVID-19 emergency?
If you want to retain your staff but cannot afford to pay them you can:
Furloughing as an option
Do you wish to retain your employee?
Is your business, due to the effects of COVID-19:
In other words, is it impossible for the employee to work for you at present or there is no other paid work currently available for them to do?
Are they employed by you under an employment contract i.e. a written or verbal contract?
Are they paid a regular wage in return for working regular hours?
You can furlough them, by keeping them on the payroll.
Is your worker casual or subject to a zero-hours contract?
Does your business have any ongoing obligation to offer them work?
Does the worker only work when they want to?
Yes, or generally they accept work when its offered.
You do not need to furlough them as you already have no obligation to provide work. You may want to use the furloughing process as a way of ensuring their future their loyalty. *
*More information is awaited from the government as it is unclear what rights casual workers have in this instance.
Short-term and temporary lay-offs
You can claim statutory redundancy pay if you’re eligible and you’ve been temporarily laid off (without pay or less than half a week’s pay) for either:
Write to your employer telling them you intend to claim statutory redundancy pay. This must be done within four weeks of your last non-working day in the four or six week period.
See HMRC Redundancy Pay Your Rights
Workers are not normally entitled to:
Letter to employee
Instructions: you can use this as a template, cut and paste the text on to your own letterhead. There are Notes for completion below.
[Employer name if not on headed paper]
Dear [Employee name]
Due to the ongoing COVID-19 (Coronavirus) pandemic, we have identified you as a suitable employee [to be furloughed / agreed with you that you will be furloughed]* under the Government Job Retention scheme.
What this means is that you will not be required to work until further notice but will continue to be paid [as normal / and will receive 80% of your normal pay / you will receive pay of £2,500** per month.]*
Income tax and national insurance will be deducted from your pay as normal.
You will continue to be our employee during the furloughed period, however, you must not undertake any work for us during this period.
Your furlough period starts on [insert start date – this cannot be before 1 March 2020]. It will end on the earlier of:
We expect the period not to exceed three months. This may be extended if government restrictions mean that it is not possible for you to return to work. The government has set the minimum furlough period at 3 weeks.
[As already discussed we agree that you may other undertake paid temporary work/and unpaid voluntary work during your furloughed period]*
We will contact you when you are required to return to work.
[Please sign the attached form to confirm your agreement to being a furloughed employee and return to [name of appropriate person/address or email address] by [date]***.
Notes for completion - DELETE BEFORE SENDING
*Delete as appropriate.
**Only use the £2,500 per month option where employee earnings are such that 80% of their normal gross pay is more than £2,500 per month. For example, someone earning £3,000 per month (?£3,500 per month) would be due £2,800 at 80% but this is reduced by the cap to £2,500.
You will not need your employee’s agreement to the furlough if:
***It is recommended that you set a deadline for responses.
Employee response form
A form for a furloughed employee to return to the employer
I [Employee name and works / employee number (if they have one)] consent to being a furloughed employee until such time as I am asked to return to work.
I understand that I remain an employee of [insert name of employer] and must continue to adhere to the terms of my employment other than by prior agreement with my employer.