STOP PRESS:

The Coronavirus Job retention scheme portal will go live on Monday 20th April.

It is understood businesses will be able to apply themselves using their own Government Gateway Business account, or if there accountant hold’s full agent status, they will be able to apply on behalf of their client.

An update on the coronavirus job retention scheme was published on the 4th April. Below is an outline of key areas and issues which have been raised since it was introduced.

The scheme is designed to benefit all employers, even when they are owner-managed. It should however be recognised when a claim is made, that individual is furloughing themselves and subsequently should not be undertaking work which generates income for the business. It is acceptable however to undertake activities to meet statutory obligations, for example preparing accounts and returns.

The employers identified as qualifying for the scheme are;

  • Businesses
  • Charities and not-for-profit organisations
  • Individuals who employ domestic staff
  • Public sector organisations.

In order to make a claim, the employer must identify the employees to be recognised as furloughed. During this time, they are recognised as paid individuals who cannot undertake work however all other employment terms and conditions apply.

Whilst employees who are furloughed are not able to undertake fee-earning activity from their original employer, they are entitled to carry out work for themselves in a self-employed capacity, volunteer, undertake training or work for an additional employer.

A business, such as a hospitality company or non-food retail which has been forced to close may furlough its employees, however it may furlough a group of employees whilst key workers continue to work.

The furlough approach may only apply to employees who started on 28th February or earlier. It is also apparent where an individual has resigned from a role since the 28th February and their new role has been withdrawn, their previous employer could re-employ these individuals to enable them to benefit from the income generated from the furlough grant, rather than becoming reliant on universal credit. There are issues for consideration surrounding this, for example are the terms of employment the same? Could the employer be liable for discrimination if this is not offered to all?

How to furlough?

It is a requirement for the employer to mutually agree with the employee they are to be furloughed, with a written agreement preferably. It is recognised a decision to furlough is an employment change and subsequently this must be supplied in writing with a copy retained for five years. Employees should be paid 80% of their pay based on February 2020 or the same amount in the equivalent month of last year. This is determined by the higher value.

It may be the decision of some businesses to pay the full amount, however this is at their discretion as they will only be able to reclaim 80%. An individual can be furloughed for a minimum of 3 weeks and a maximum of 3 months at today’s date, however this could be extended in the future. The employer could continue to furlough after this time, however, would not receive the grant to recompense them for doing so.

 

How much will be paid?

The amount of the grant will be the lower amount of £2500 per month per employee or 80% of gross regular wages plus employer NIC on the grant figure plus 3% employer pension contributions on the grant figure based on the qualifying threshold.

For owner-managed companies, the director may only claim values on their salary and not dividends paid.

How the payroll should be managed.

When deciding how much is to be paid, employers must consider the cap of £2500 which refers to regular wages and not bonuses and commission. It is acceptable for overtime to be included in the calculation. Where an individual is paid a variable amount, their average earnings over 2019-20 will apply.

By the end of April 2020, a portal will be introduced to enable the grants to be claimed. HMRC will reserve the right to cross-reference data to RTI submissions made.