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Coronavirus Job Retention Scheme

What is it?

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers until 31^st October starting from 1 March 2020.

The Scheme is designed to support employers whose operations have been severely affected by coronavirus.

All employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus.

What employers are eligible for the scheme?

Any entity with a UK payroll can apply, including:

-   businesses
-   charities
-   recruitment agencies (agency workers paid through PAYE)
-   public authorities

You must have:

-   created and started a PAYE payroll scheme on or before 19 March 2020
-   enrolled for PAYE online - this can take up to 10 days
-   a UK bank account

Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme.

Considerations

The initial guidance stated that businesses that were “severely affected” were eligible for the scheme.  However, the guidance has been extended to all businesses as they recognise that all employers will face different impacts from CV19. 

There are many reasons why an “essential” business could be severely impacted by COVID-19 including:

-   Reduction in sales
-   Supply chain issues
-   Health and Safety concerns

Whilst the guidance has been extended, any business that claims under this scheme should document how their business has been impacted by COVID-19 so that can fully justify any claims.

What employees can you 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.

The scheme will close to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full 3-week period prior to 30 June.

This means that the final date by which an employer can furlough an employee for the first time will be 10 June, in order for the current 3-week furlough period to be completed by 30 June. Employers will have until 31 July to make any claims in respect of the period to 30 June.

Additional guidance on the flexible furlough scheme will be available from 12 June 2020.

Employees can be any type of contract, including:

-   full-time employees
-   part-time employees
-   employees on agency contracts
-   employees on flexible or zero-hour contracts
-   Foreign nationals are eligible to be furloughed.

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 can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.

Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February

The scheme is not intended for short-term absences from work due to sickness, and there is a 3-week minimum furlough period.  There is no restriction on furloughing staff that are currently on short term sick leave if there are business reasons for doing so (similarly to other employees).

Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed.  Please refer to note below on Minimum Wage.

You can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant.

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 a furloughed employee becomes sick, it is up to employers to decide whether to move them to SSP or keep them on furlough.

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.

As well as employees, the grant can be claimed for any of the following groups, if they are paid via PAYE:  office holders (including company directors) salaried members LLPs, agency workers (including those employed by umbrella companies) and limb (b) workers.

Employers should write to their employee confirming that they have been furloughed and keep a record of this communication for 5 years.

What restrictions are in place for furloughed staff?

A furloughed employee can not undertake work for or on behalf of the organisation until 31^st July 2020.  However, from 1 July 2020, businesses will be given the flexibility to bring furloughed employees back part time and they will be responsible for paying their wages while in work. There is no detail on any cap on payment or % of salary for the difference in working hours and contracted hours.

Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period.

To be eligible for the grant, employers must agree with their employee any new flexible furloughing arrangement and confirm that agreement in writing.

A furloughed employee (who is not undertaking part-time work) can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.

Considerations

The scheme is subject to employment law and therefore equality and discrimination laws will apply in the usual way when deciding who to furlough. We advise businesses to document their selection process carefully.

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.  This is 20 or more employees in the redundancy process.  The COVID-19 outbreak might constitute ‘special circumstances’ meaning those time periods may not apply (and agreement may be reached more quickly), but this is currently unclear and legal advice should be sought on this issue.

Although the guidance states that “Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed”, this area still remains unclear.  The employer and employee must agree to the employee being furloughed and employers should document any decisions in relation to this decision. Other options could be considered such as reduced working hours.

Employers should discuss with their staff and make any changes to the employment contract by agreement. Written agreement is required and documentation must be kept for 5 years.

Can furlough directors carry out duties?

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

How much can you claim?

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

Until 31 July 2020, the associated employers’ national insurance contributions on this amount and the minimum automatic enrolment employer pension contributions on that wage can be included in the employers’ claim.

From 1 August 2020, employers will pay ER NICs and pension contributions on employees’ furlough grant.

From September 2020, the employer contribution will be 10% plus ER NICs and pension contributions.

In October, the employer contribution will be 20% plus ER NICs and pension contributions.

Employers 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.

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

Employers can also choose to top up an employee’s salary beyond this but are not obliged to under this scheme.

Employees regular wage

For salaried staff the employee’s actual salary as in their last pay period prior to 19 March 2020 should be used to calculate the 80%.

For staff with variable pay, if the employee has been employed (or engaged by an employment business) 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 they have been employed for less than a month, work out a pro rata for their earnings so far, and claim for 80%.

What about Employer NIC and pension contributions?

Until 31^st July 2020, employers can include Employer National Insurance contributions and minimum automatic enrolment employer pension contributions in the claim.

From 1 August 2020, employers will pay ER NICs and pension contributions on employees’ furlough grant.

If you choose to provide top-up salary in addition to the grant, Employer NIC and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings.

What about non-monetary benefits and salary sacrifice?

The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary.

Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.

What should I do about Student loans and Apprenticeship Levy?

Both the Apprenticeship Levy and Student Loans should continue to be paid as usual.

Grants from the Job Retention Scheme do not cover these.

What about staff on Minimum or Living Wage?

Furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below National Minimum or Living Wage.

Time spent training is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage, taking into account the increase in minimum wage rates from 1 April 2020.

As such, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. Where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.

What about staff returning from statutory leave?

Claims for full or part time employees furloughed on return from statutory leave should be calculated against their salary, before tax, not the pay they received whilst on statutory leave.

Claims for those on variable pay, returning from statutory leave should be calculated using either the:

-   same month’s earning from the previous year
-   average monthly earnings for the 2019-2020 tax year

How do you claim?

Claims can be made via an online portal:

https://www.access.service.gov.uk/login/signin/creds

You should make your claim using the amounts in your payroll - either shortly before or during running payroll. The furloughed wages should be reduced to 80% of salary before submitting the claim to HMRC.

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.

To claim, you will need:

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

If you use an agent who is authorised to act for you for PAYE purposes, they will be able to make a claim on your behalf. If you use a file only agent (who files your RTI return but doesn’t act for you on any other matters) they won’t be authorised to make a claim for you and you will need to make the claim yourself.

Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.

Once you have claimed, you must keep a copy of all records for 6 years, including:

-   the amount claimed and claim period for each employee
-   the claim reference number for your records
-   your calculations in case HMRC need more information about your claim

What payments should I report using the RTI system?

Further guidance has been issued in relation to the reporting of payments using the RTI system. 

If employers have not paid any of their employees any wage payments in a tax month they must submit an Employer Payment Submission stating they have not paid any employees in that tax month.

https://www.gov.uk/guidance/reporting-payments-in-paye-real-time-information-from-the-coronavirus-job-retention-scheme

What rights do furloughed employees have?

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.

How does this impact income and Corporation Tax?

Payments received by a business under the scheme must be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

Can furloughed staff work for a different employer?

If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough.

For any employer that takes on a new employee, the new employer should ensure they complete the starter checklist form correctly. If the employee is furloughed from another employment, they should complete Statement C.