Update regarding Job Retention Scheme

The following is our understanding of this policy and how this will work based on the information published up to and including Midday on 15 April. It should not be relied on for final advice at this stage but is intended to give an indication of how the scheme will work.

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Eligibility and qualification

• The scheme applies to all businesses, no matter what size, and allows employers to class certain employees as furloughed employees’ (employees on a leave of absence). They can then claim a grant against some their usual monthly wage costs which is further detailed below

• You can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020.

This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020. Employees that were employed as of 28 February 2020 and on payroll (i.e. notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for the employer after that and prior to 19 March 2020, can also qualify for the scheme if the employer re-employs them and puts them on furlough.

Employees that are full time, part time, and on flexible / zero hours contracts qualify

• Employees hired after 19 March 2020 cannot be furloughed, or claimed for, in accordance with this scheme.

• The minimum length of time for being furloughed and qualifying for the grant is 3 weeks. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.

• You do not have to place all your employees on furlough. It is aimed at those employees where, due to current circumstances there would otherwise be no role for them and the business would be looking at potentially making them redundant

• Employees who are on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February due to Covid-19. If an employee went on unpaid leave on or before 28 February, you cannot furlough them until the date on which it was agreed they would return from unpaid leave.

• If you have already made someone redundant due to Covid-19 since 28 February, you can decide to bring them back as a furloughed employee and the redundancy / termination can in effect be reversed. This applies to employees that were made redundant or stopped working for you after 28 February, even if you do not re-employ them until after 19 March. This is at the employer’s discretion, and not an employee decision

• If on furlough, the employees will remain on the payroll and continue to be employed by the business but will just be categorized as furloughed

• The decision is solely with the employer i.e. an employee cannot decide or request to be furloughed

• An employee on furlough is effectively a mandatory suspension from work, and furloughed employees are banned from doing any work on behalf of their employer i.e. cannot even work partial hours

• A furloughed employee can carry out training, as long as it does not provide services to, or generate revenue for, or on behalf of your organisation. However, if workers are required to, for example, complete online training courses whilst they are furloughed, then they must be paid at least the National Living Wage / National Minimum Wage for the time spent training, even if this is more than the 80% of their wage that will be subsidised

• For now, the scheme will run from April 2020, but can be backdated to 1 March, and currently will run for 3 months (although this may be extended)

• Employees on sick leave or self-isolating should get SSP.

• Short term illness/ self-isolation should not be a consideration in deciding whether to furlough an employee. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee.

• Employees who are shielding in line with public health guidance can be placed on furlough.

• An employee on furlough can undertake volunteer work, providing this does not provide services to the business or generate revenue.

• Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children can be furloughed

• If your employee already has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually

 
Company Directors

• As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme.

Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
 
Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their business, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of any kind that they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their business.
 
Calculation of the grant
The maximum grant will be calculated per employee and is the lower of:  

• 80% of ‘an employee's regular wage’ and.
• £2,500 per month.

 
Plus, the associated employers’ national insurance contributions (NIC) on this amount and the minimum automatic enrolment employer pension contributions on that wage.
You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.
 
This gives a maximum cap of £2,500 + £245 (employers’ NIC) + £59 (auto- enrolled pension contribution) = £2,804 of total possible grant that can be applied for, per employee, per month.
 
Pay to the employee will be subject to PAYE and national insurance in the normal way.
 
The ICAEW, who are working with the government on these scheme, have provided some numerical examples - https://www.icaew.com/insights/viewpoints-on-the-news/2020/mar-2020/coronavirus-job-retention-scheme-furlough-guidance

• Grants will be prorated if your employee is only furloughed for part of a pay period.

• For full time and part time employees, the claim for the 80% of the employee’s salary, as in their last pay period prior to 19 March 2020.

If, based on previous guidance, you have calculated your claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) you can choose to still use this calculation for your first claim.

For variable / zero hours contracts, if the employee has been employed (or engaged in an employment business) for a full twelve months prior to the claim, you calculate normal pay as the higher of either:  

• The same month’s earnings from the previous year, or
• The average earnings from the 2019/2020 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 until the date they are furloughed.

If they have been employed for less than a month, work out a pro rata for their earnings so far, and claim for 80%.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum auto-enrolment employer pension contributions you are entitled to claim.

• The remaining 20% or anything over and above the capped amount does not have to be paid by the employer.  You may choose to pay this but this will not be funded under the scheme. This is also subject to existing employment law and contracts of employment rules and so will require some HR advice to ensure the correct approach is taken.

 
Employment contract points

• Placing someone on Furlough is a change in their employment status and this change will be subject to existing employment law. Therefore, contracts will need to be reviewed to ensure the correct approach is taken.  In all cases it should be confirmed in writing and you should keep notes to explain why the decision was made to furlough certain employees because equality and discrimination laws will apply in the usual way.

• Some employment contracts may contain a contractual right to lay people off if there is a downturn in work, if yours have this then they can just be classed of furloughed by you as the right exists in the contract

• Where the above does not exist, you need employees to agree to being furloughed as this is a change in their employment terms. Where they do agree, you should get this in writing.  It is possible that employees may not agree to this, although it is difficult to see why they would when the alternatives are exploring using up holidays, taking unpaid leave or being made redundant. However, if this situation arises you will need to take HR advice.

 
Minimum wage points

• Individuals are only entitled to the National Living Wage / National Minimum Wage for the hours they are working. Therefore, as furloughed workers are not working, it is not a problem if the amount paid to them while on furlough falls below the normal rates.

• If workers are required to complete online training courses whilst they are furloughed, then they must be paid at least the National Living Wage / National Minimum Wage for the time spent training

 
How to claim / HMRC administration

• HMRC have developed a separate portal to deal with the grant claims and this is going live on the 20 April 2020

 

• Employers need to make a claim for wage costs through this scheme.  Employers will be required to provide certain information to HMRC as follows:

                o    your employer PAYE reference number
                o    the number of employees being furloughed
                o    National Insurance Numbers for the furloughed employees
                o    Names of the furloughed employees
                o    Payroll/employee number for the furloughed employees (optional)
                o    your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company                                   Registration Number
                o    the claim period (start and end date)
                o    amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
                o    your bank account number and sort code
                o    your contact name
                o    your phone number

• You will be required to calculate the amount you wish to claim

• If you have fewer than 100 furloughed staff you will be asked to enter details of each employee you are claiming for directly into the system - this will include their name, National Insurance number, claim period and claim amount, and payroll/employee number (optional)

• If you have 100 or more furloughed staff you will be asked to upload a file with the information rather than input it directly into the system. HMRC will accept the following file types: .xls .xlsx .csv .ods

​The file should include the following information for each furloughed employee: name, National Insurance number, claim period and claim amount, payroll/employee number (optional).

• 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, for the reasons noted above

• Once HMRC have received your claim and have confirmed you are eligible for the grant, they will make the payment directly to the employer via BACS to a UK bank account. This is expected to take 6 working days

• HMRC will retain the right to retrospectively audit all aspects of your claim.

 
Further Information

• Further information from the Government regarding this scheme can be found at - https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme