Following our article last week on what you need to know about the Coronavirus Job Retention Scheme, the government has now published its’ latest guidance, so here’s more of the key information and detail to help businesses and employees with those unanswered questions.
Who can claim?
Any UK organisation with employees can apply and claim, including:
- Recruitment agencies (agency workers paid through PAYE)
- Public authorities
You must have created and started a PAYE payroll scheme on or before 28 February 2020, and have an UK bank account.
Which staff can we claim for?
Furloughed staff must have been on your PAYE payroll on 28 February 2020, so any employees / workers placed on the payroll since this scheme has been announced are unlikely to be eligible to claim for.
The employees / workers can be on any type of contract, including:
- Full and part time
- Agency contracts
- Flexible or zero hours contracts
The scheme also covers employees who were made redundant since 28 February 2020, if they are re-employed by their employer.
And who can’t we claim for?
You can’t furlough anyone who is:
- currently sick or self-isolating in accordance with government advice and being paid statutory sick pay. Although, they can be furloughed after this period.
- taking unpaid leave, unless they were placed on unpaid leave after 28 February 2020.
- still working for you - even if they are only doing a few hours here and there if they are "providing services or generating income". However, staff can for example, complete online training courses when furloughed. If they do this you have to pay them for their time separately, at least national minimum / living wage.
What can you claim
Employers need to make a claim for wage costs through this scheme.
You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.
Fees, commission and bonuses should not be included.
At a minimum, employers must pay their employee the lower of 80% of their regular wage, or £2,500 per month. You can also choose to top up an employee’s salary beyond this (up to an extra 20%) but are not obliged to. This is based on their gross earnings.
The government has said it will issue more guidance on how employers should calculate their claims for Employer National Insurance contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.
How do you calculate their pay?
For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February 2020 should be used to calculate the 80%.
For those employees whose pay varies – if they have been employed (or engaged by an employment business) for a full 12 months prior to the claim, you can claim for the higher of either:
- the same month’s earning from the previous year; or
- 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 the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
What about the National Living Wage/National Minimum Wage?
Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.
Therefore, 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 NLW/NMW.
However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
What steps must we take to place employees on furlough leave?
You will need to:
- Decide which employees to designate as furloughed.
- Notify those employees of the intended change.
- This change cannot be imposed on these employees. Their agreement to be furloughed and the change in pay arrangements needs to be agreed with the employee – we recommend some consultation and agreement, with the change confirmed in writing.
- Ideally, your business should advise how long it expects furlough leave to continue, however, this may be difficult in the current climate. Employers may wish to put employees on furlough leave for an initial period, subject to review. Three weeks is the minimum period an employee can be furloughed for. They can then come off furlough. This means that employers cannot rotate staff weekly between furlough and non-furlough.
If you intend to furlough 20 or more employees then the collective consultation obligations are likely to be triggered, to agree to the changes and should be followed.
It’s expected that the majority of employees should consent to being furloughed, because it’s a better alternative than unpaid leave, lay off, or redundancy.
What information do we need to make a claim?
To claim, you will need to provide to HMRC:
- Your ePAYE reference number
- The number of employees to be furloughed
- The claim period (start and end date)
- Amount claimed
- Your bank account details
- Your contact name and phone number.
Once the scheme is up and running you can only make a claim once every three weeks for each furloughed employee (which is the minimum length an employee can be furloughed for).
You'll have to work out how much to claim. Do you best to get this right as HMRC retain the right to audit you and recover any overpayments.
When will we be able to claim online?
The current timescale HMRC are aiming to have the online portal up and running by, is the now the end of April 2020 (pushed back from start of April). The claims can be backdated to 1 March 2020.
Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to your nominated UK bank account.
You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted.
Need more information?
We know there are still questions that remain unanswered and we’ll be working hard to keep you up to date with the latest developments, as and when they are announced.
Please note that the above information is guidance on what we know at this stage, and does not constitute legal advice.
If you need advice about this scheme, or help on furloughing staff (including the process to follow and how to agree the changes), or any other employment related matter connected to the current coronavirus situation, then contact us directly.
In the meantime, look after yourself and each other - stay safe and healthy!
Mike Patterson is Head of Employment at Berwins Solicitors and has a wealth of experience in supporting businesses and individuals on HR and Employment matters.