Job Retention Scheme & 80% Wages Grant - COVID-19
Understandably we have had a lot of queries regarding how this is going to work.
I've summarised a lot of the answers to the main questions below, a lot of which are I am afraid along the lines of "we will have to wait and see" as HMRC's system for doing this isn't up and running.
Our technical updates on this are coming direct from HMRC, our institute AAT, aswell as ACCA and Croner TW, so we have all the bases covered - as soon as we get more detail we'll be in touch.
Coronavirus Job Retention Scheme
HMRC will set up a new online portal so that ALL UK employers, regardless of size, will be eligible for assistance where an employee has been designated as a ‘furloughed worker.’ HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. The current plan is that this will be in place for 3 months, at which point it will be reviewed. Employers must set out which of their employees are ‘furloughed workers’ and inform the particular employees.
The current guidance states ‘You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to’
Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
When will it apply?
This will be backdated for wages from 1 March 2020 although it will be some weeks before payments under this scheme are made to employers.
When will it end?
The scheme is in place for 3 months at present and it will be reviewed as and when that becomes necessary.
How will an employer apply for the reimbursement?
The details are yet to be released.
If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.
It is worth noting that employers may wish to consider this new loan facility which provides loans of up to £5m being accompanied with no interest charges for the first 12 months. Employers may consider the possibility of using this money to ease immediate cash-flow issues in order to furlough employees. The aim being to pay it back within 12 months when they are reimbursed under the Job Retention Scheme. However the interruption loans are repayable and may not be suitable for everyone.
Does it apply to all employers?
It applies to all UK businesses, regardless of their size. This applies to charitable and not for profit businesses too.
This is a grant which employers do not have to pay back.
What is a ‘furloughed’ employee?
The word furlough generally means a temporary leave of absence from work.
A furloughed employee is someone who rather than being dismissed for redundancy by their employer, is kept on the payroll during a period where the employer does not have any work for the employee.
There is an employment law aspect to this. Employers will need to consult and agree on which each employee that they are being furloughed. While we are always happy to assist with payroll queries, we would recommend our subscription based HR line for employment law queries. Let me know if you require more details of how this works.
Can an employee work for an employer whilst they are furloughed?
To qualify for the scheme, employees must not undertake work for the employer while furloughed.
What will be covered?
The guidance refers to earnings and wages costs. It is not clear what is meant by ‘wages.’ Details of how and if bonuses and benefits will be taken into consideration have yet to be released.
There is currently no guidance as to whether it includes employer pension and national insurance contributions.
What if the employee is on SSP already?
It is not clear to what extent employers will be able to furlough employees who are currently on SSP.
Does it apply to all employees?
**It is unclear to what extent this can apply to a director and personal service companies.**
The 80% wage guarantee will not cover Zero-hour contracts or casual workers unless they work on the PAYE system
The self-employed are not covered by this scheme.
Must an employer supplement employees’ salaries over the 80%?
No. Employers can if they wish to or if there is an employment contract in place which requires this.
For employees who have been furloughed employers can choose whether to:
Only make the salary payment (80%, capped at £2,500) reimbursed by the government.
Pay all of the difference between the grant and the employee’s normal salary.
Pay part of the difference between the grant and the employee’s normal salary.
*Sourced from Croner TW 25/03/20
We will be in touch directly with clients as soon as we get further Guidance