Why has the government introduced this scheme?
The Government has brought in this scheme to pay employee’s salaries so that they are kept on the payroll where businesses would otherwise have made them redundant due to a downturn in business caused by the COVID-19 pandemic.
What is this scheme?
The Coronavirus Job Retention Scheme is a government grant which will reimburse employers for 80% of furloughed workers employment costs, to a cap of £2,500 per employee per month.
The scheme will remain open initially for three months but may be extended.
This is a grant, not a loan, so does not need to be paid back.
What businesses are eligible for the scheme?
All UK businesses are eligible for this scheme including any employer in the country – small or large, charitable and non-profit companies.
Frequently asked questions
What employees are eligible for the scheme?
This scheme applies to employees who are paid through your PAYE scheme.
An employee can be made a furloughed worker if:
- They were on the payroll on 29th February 2020
- They do not do any work for the employer whilst furloughed
- They are still designated as an employee, and they are subject to their employment contract.
You should check employee contracts of employment to see if there is a contractual right to lay employees off if there is a downturn in work. If not, this will mean a change to the employee’s status or terms and conditions which must comply with Employment Law. This means that you will need to obtain agreement from the employee. If you would like an example of this wording please contact us.
Note - if you have more than 20 employees whose contracts need to be changed, a more formal consultation process will need to be done and we recommend legal advice at this point.
The scheme will run from April 2020 (date to be confirmed) but will be backdated to 1 March 2020 (such that anyone who has been laid off since 1 March and has not left the business under redundancy can be caught by the scheme) and is expected to run for at least 3 months (although the government may decide to extend it as things progress).
What if I have a new starter?
Unfortunately, unless the rules above are met they will not be eligible for this scheme.
Can zero-hour contract workers and casual workers be furloughed?
This scheme will only cover workers on zero-hour contracts or casual workers if they work through the PAYE system.
We are still awaiting advice on how the 80% figure will be calculated for these types of workers.
It is solely the employer’s choice who to furlough and not the employee’s. If the employee requests to be furloughed, the employer can refuse to agree e.g. if there is still work for them to do.
My business remains open and we are rotating our staff, can we furlough them for the days they are not required?
Unfortunately this scheme does not seem to apply to those on short-time working (e.g. shorter days) or those working certain days of a working week, although this is not yet clear. We will update you when we have further information.
Can directors be furloughed?
Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme.
The other conditions for employee eligibility for the scheme are as above including not undertaking any work for the company.
Do employees still accrue holiday?
Further guidance is awaited on employees on holiday and maternity pay but the employee still retains the right to accrue holiday whilst on furlough. You may choose to pay your employee the remaining 20% if they have booked holiday whilst on furlough and the employer will receive a reimbursement for the 80% up to £2,500. It is important that you check the details as per your staff contracts and obtain written agreements for any variations to this.
How much do I need to pay my furloughed workers?
The employer may could choose to pay 80% of wages, or keep the employee on full pay. If you choose full pay, the company has to fund the 20% difference.
Does the 80% include overtime and commission?
Further information on this point is awaited so it can be confirmed whether employers can only use the CJRS grant in respect of an employee’s basic pay or their average take-home pay.
My employees are paid weekly and their pay varies depending on the hours, how is the 80% calculated?
Similarly to the above further information on this point is to be confirmed but it our understanding that an average of the previous 12 weeks pay will be used.
Are all wage costs included?
In the government’s guidance to employees on this subject, it mentions that employers can claim a grant of up to 80% of a ‘furloughed employee’s’ wages ‘for all employment costs, up to a cap of £2,500 per month’. This suggests that this covers thing such as pension contributions, employer’s NICs etc but has yet to be confirmed.
Can the employee undertake other work whilst on furlough?
Guidance is needed on whether employees can work “elsewhere” and is unclear at the moment.
How do I apply for the scheme?
Employers need to submit information to HMRC about those employees who have been designated as ‘furloughed’ and their earnings via a new online portal which is being set up. If you are doing this for the March payroll you should keep a list of Furloughed employees and salary details.
If we provide you with payroll services, we can register your company for the scheme when HMRC makes the new system available, you will need to notify us of you furloughed workers and the date this began.
If you carry out your own payroll, but need assistance with registering for the scheme, please get in touch as we can again set this up on your behalf.
When do I get reimbursed?
HMRC expect the first grants to be paid within weeks, and they are aiming to be up and running before the end of April. If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.
This information is based on our current understanding of the scheme as at 26th March 2020, and this guidance is still incomplete and could change.