Job Retention Scheme
The Job Retention Scheme was announced by the government to assist employers retain their staff during the Coronavirus crisis. The information below was updated to include the further HMRC announcements on 26th March 2020.
Who is eligible for the Job Retention Scheme?
All organisations within the UK who employ staff. This includes businesses, charities, public authorities and recruitment agencies (if paid through PAYE).
How does the Job Retention Scheme help my business?
The government will provide grants which will cover 80% of the salary of an employee. (Capped at £2,500). This will allow employers to retain staff, which otherwise would have been laid off because of the coronavirus crisis.
How do employers claim the grant available?
The first step is to designate employees as ‘furloughed’. The employee will need to be notified of this change, which would be subject to their employment contract.
The second step is to notify HMRC about the employees who have been furloughed. This will be done through a new online portal.
What is a furloughed employee?
The definition of ‘furlough’ is to force or allow an employee to take a period of absence. The employee is not made redundant but they are not to carry out any work for the business whilst furloughed.
The employee remains on the employers payroll as an alternative to being laid off.
Do all employees need to be furloughed?
No. Employers must choose which employees are being furloughed.
Can employees on reduced hours be furloughed?
No. The job retention scheme only covers employees who are not working.
If an employee continues to work, be it on reduced hours or for reduced pay, they are not furloughed and are not eligible for this scheme.
Can employees be furloughed if they have more than 1 job?
Yes. An employee can be furloughed for each job. The cap of £2,500 applies to each employer.
How much of an employee’s salary is covered by the job retention scheme?
The government will provide a grant of up to 80% of the employee’s wage, with a cap of £2,500 per month.
There is no limit that each business can claim.
Does the furloughed salary cap of £2,500 include National Insurance and Pension Contributions?
The cap is £2,500 plus the associated employers National Insurance and minimum employer pension contributions.
As a result the total possible grant per an employee is £2,804. This is calculated as the Gross Salary of £2,500 + £245 Employers NI + £59 Employers Pension.
Does the furloughed salary include bonuses?
The actual salary before tax as of 28th February 2020 is what is used to calculate the 80% claim. Other income such as bonuses, commissions, etc should NOT be included.
Do employers need to pay the remaining 20% shortfall to employees?
No. There is no requirement for employers to pay the 20% shortfall, however they could choose to cover the difference if they wished.
From what date does the Job retention scheme commence and how long will it last?
The scheme can be backdated to 1st March 2020 and can include any employees who were in employment on 28th February 2020.
It is due to last for a minimum period of 3 months, with a current end date of 1st June 2020.
When will the Job retention scheme grant be available?
The government have confirmed that there is currently no readily available system to issue payments to employers.
A new software system is to be developed, which is expected to be ready by the end of April.
Should short term cash flow be an issue, businesses are advised to consider the VAT deferral scheme and the Coronavirus Business Interruption Loan
How does the job retention scheme work for employees on zero hour and variable hour contracts?
Employees which have remained employed for a full year prior to the claim can use the higher figure of either:
1. the same months earnings for the previous year
2. or the average monthly earnings for 2019/20
Employees who have yet to work a full year can claim an average of their monthly earnings since commencing employment.
Can a single Director only company furlough themselves?
It has been confirmed that a sole director can be furloughed. If you do this, technically you cannot provide any services to or carry out any income generating work for the company during the period of furlough. You are able to continue to perform your statutory obligations as a director whilst furloughed.
Conclusion of the Job Retention Scheme
The government had no choice but to provide a scheme for employers to retain staff. The alternative was unprecedented job losses.
As soon as any further announcements are made we will be sure to update these blogs and notify our clients.
For further information on the Job Retention Scheme see the HMRC guidance https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice –