All the detail you need on the Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme is a great opportunity for British businesses to protect staff numbers, but how and when can employers actually use it?

Announced by Chancellor Rishi Sunak on 20 March 2020, the Coronavirus Job Retention Scheme represents an unprecedented business support package designed to prevent the extensive redundancy measures many firms were facing.

Sample furlough letter for staff

If you’re considering furloughing staff through the Coronavirus Job Retention Scheme then have a look at our template letter.

Download template letter

What is it?

All UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.

On 26 March, further detail was announced. The updated scheme differs from what was originally announced, in that there is no longer an express requirement that in order to qualify the employee would otherwise have been made redundant. However, the eligibility criteria may change with little or no notice

 Who is eligible?

UK employees paid by a UK employer who were on the payroll on 28 February 2020 and who have been asked to stop working but who remain in employment. This includes part-time staff, apprentices, and employees with zero hour or flexible contracts. Employees on agency contracts can only be included if they are not working.

How much support is on offer?

HMRC will reimburse 80 per cent of wages up to £2,500 per month, plus associated employers’ national insurance and minimum automatic enrolment employer pension contributions. This means that the grant maxes out for employees who earn more than £37,500 base salary per annum.

How long will the scheme run for?

The scheme will run from three months from 1 March to 31 May 2020, after which it will be reviewed and possibly extended.

What do I need to do as an employer to use the scheme?

You will need to officially notify employees in writing that they have been furloughed. After that, businesses must pay employees as per the usual payroll practices and then submit information to HMRC through a new portal that is not yet live.

Consent to furlough is not strictly required, provided the employer tops-up the employee’s normal earnings so they are not out of pocket overall. However, if furlough involves any reduction in pay, then consent is required (unless the employee’s contract of employment contains a specific right to lay off the employee without pay, or reduce hours and therefore pay).

Note that employers cannot claim for employees who continue to work on reduced hours or for reduced pay.

When will I receive my payment grant from the government?

According to government guidance, payments are expected be made “before the end of April”. Employers will need to fund salary costs in the meantime.

Can an employee work during furlough?

The latest government guidance is that a furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your business.

The guidance also says that if workers are required to complete online training courses whilst they are furloughed, then they must be paid at least the minimum wage for the time spent training, even if this is more than the 80 per cent of their wage that will be subsidised.

What payments to employees does the scheme cover?

For full time and part time salaried employees, the scheme covers their basic annual salary as at 28 February 2020, excluding bonus, commission or other variable pay.

What about pension, holiday and other benefits?

Employers have a statutory obligation to automatically enrol employees in a workplace pension and there are no powers in place to vary that obligation. However, the government has announced it will cover employers’ pensions contributions for furloughed workers. Employers will continue to have to make these payments, but they will be calculated by reference to the salary paid whilst furloughed and a grant can be obtained for this sum.

The government has also announced that regulations will be amended to allow annual leave to be carried over into the next two years, where it is not reasonably practicable for a worker to take some, or all, of the holiday to which they are entitled due to the coronavirus.

Employees continue to be entitled to all their rights under their employment contracts unless they are varied – so employees will be entitled to bonus, commission, healthcare etc. Varying these rights may or may not require consent depending on the terms of the employment contract. Employees who are furloughed may agree to forgo these benefits.

What about holiday pay?

Employees will continue to accrue holiday whilst on furlough. The usual notice requirements under the Working Time Regulations 1998 will continue to apply. In the absence of any agreement to the contrary, an employer may require an employee to take holiday (by giving advance notice which is twice as long as the period of holiday that the employee is required to take) and/or to cancel holiday that has been booked for late in the year (by giving advance notice to the employee of the same number of days as the period of holiday).

What about tax and national insurance?

Payments made by the employer will be subject to the usual deductions for income tax and national insurance. However, the Coronavirus Job Retention Scheme also covers employer National Insurance contributions. The government is due to issue more guidance on how employers should calculate their claims for employer National Insurance Contributions before the scheme becomes live.

For income tax self-assessment, payments due on 31 July 2020 will be deferred until 31 January 2021.

Do I have to pay employees who are not able to work at the moment?

Yes, employees have the right to be paid provided that they are ready, willing and able to work. Employees who cannot work because they are self-isolating, or looking after a family member who is isolating, are eligible for sick pay. The only exception would be if the employment contract expressly permitted lay off without pay, or they agree to any pay reduction as part of a furlough arrangement.

What is the position of employees who have already been made redundant?

Employees made redundant since 28 February 2020 are eligible if they are re-employed and placed on furlough instead.

What is the position of employees with whom we have already agreed reduced hours or reduced salaries?

The current guidance issued on 26 March 2020, states that these employees will not be eligible for the Coronavirus Job Retention Scheme.

What is the position of employees who are serving notice of termination?

There is no requirement for an employer to rescind notices of termination.

What is the position of employees who are contracted to join us but have not done so?

The scheme only covers employees who were on the payroll on 28 February 2020. Guidance indicates that this means a payroll record has been set up and submitted under HMRC’s real time information system.

Can an employee who is furloughed return to work?

Yes, although there is a minimum furlough period of three weeks. There are no limitations on re-joining the scheme if an employee returns to work and is then required to be furloughed again.

Are directors eligible?

Executive directors (i.e. those with an employment contract) will be eligible. Non-executive directors are also covered (they are also subject to taxation as if they were employees under tax law).

Are zero hours employees eligible?

Yes. For employees whose pay varies each month and who have been employed for a full 12 months prior to the date of the claim, their wages should be considered as either average monthly earnings from the 2019-20 tax year or the same month’s earnings from the previous year, whichever is higher.

If the employee has been employed for less than 12 months, you can claim for an average of their monthly earnings since they started work.

Can employees who are currently absent on sick leave (including those self-isolating in accordance with Government advice) instead be furloughed?

Employees who are on sick leave or self-isolating cannot be furloughed and should get statutory sick pay (£94.25 per week) or any higher contractual sick pay entitlement. However, once they are able to return to work, they are eligible for furlough. Vulnerable individuals who are being shielded at home can be placed on furlough.

Can employees who are at home looking after children be furloughed?

Yes

Do we have to follow redundancy process or any other process before designating employees as furloughed workers?

There is no mandatory process for deciding which employees will be furloughed. Employers will wish to ensure there is nevertheless a clear business rationale for decisions about who to furlough in order to avoid allegations of discrimination and further arguments around the unfairness of any subsequent redundancies. This is especially important where there are a number of employees carrying out a similar role and only some of those employees are to be furloughed.

You will need to officially notify employees in writing that they have been furloughed. After that, businesses must pay employees as per the usual payroll practices and then submit information to HMRC through a new portal that is not yet live.

Consent to furlough is not strictly required, provided the employer tops-up the employee’s normal earnings so they are not out of pocket overall. However, if furlough involves any reduction in pay, then consent is required (unless the employee’s contract of employment contains a specific right to lay off the employee without pay, or reduce hours and therefore pay).

How will the Coronavirus Job Retention Scheme be policed?

It is likely the grant will be applied for with a simple check box declaration. It is expected that HMRC will have extensive enforcement powers to audit applications after the event in order to prevent fraud and abuse.

Kingsgate are here to support candidates, businesses and services

We will endeavour to continue to deliver our services to the highest standards and have adapted our way of working so we can support you during this difficult time.  As we supply frontline staff, it’s business as usual so please get in touch with your staffing needs.

Contact details:

Tel: 02085497212

Email: jobs@kingsgaterecruitment.co.uk

Web: www.kingsgaterecruitment.co.uk

Source: bethebusiness