Covid-19 Job Retention Scheme (Furloughed Employees)
HMRC have updated the Job Retention Scheme details and we would like to simplify these rules to help you understand how the Government are going to help you.
What you need to know – The Employer
- You can only use this scheme if you are an employer and have had an employers’ PAYE scheme on 28th February 2020;
- Only the employer can apply for benefit from this scheme;
- This scheme will only be able to pay employees that were paid in February 2020;
- You cannot get employees to work part time and then furlough the other part; and
- The scheme is available to any business in the UK with a UK payroll.
What you need to know – The Employee
If you were a director / employee / apprentice at a qualifying employer, then you may receive benefit from the Job Retention Scheme if:
- You were on the employers’ payroll on 28th February 2020;
- You have been furloughed for a minimum of three weeks;
- Whilst furloughed, the employee cannot undertake any work for the employer but can undertake unpaid volunteer / charitable work. The employee can also work for another employer;
- An employee can continue their training / learning, as long as they are not working ie generating revenue for the employer;
- There are a class of individuals who are not employees, but if they had been paid via PAYE, they will be eligible. Such individuals are:
- Office holders (i.e. company directors)
- Salaried members of a Limited Liability Partnership (LLP);
- Agency workers and those working via Umbrella companies.
How to Furlough Directors’, Office Holders & Employees
- Directors and Office Holders – The company or LLP should adopt Furloughing the director/office holder by way of a formal board minute. Both the employer and the employee should agree to the decision to furlough. The director / office holder can continue to satisfy their obligations under Companies Act and do work that is not generating commercial revenue.
- Employees – The employer must inform the employee of their decision to furlough the employee and the employee must agree to being furloughed. The employees’ employment rights would remain unaffected. The communication to furlough the employee is a change in the employees’ contract. This communication must be kept for 5 years.
How is the Grant Paid?
The grant is paid to a qualifying employer who has furloughed employees within the rules issued by the HMRC.
- The grant payable is 80% of the furloughed employees wage and will be based on their February 2020 payslip if they are on a fixed salary.
- The grant payable for employees whose pay varies will be the highest of either; 80% of the same month’s earnings from the previous year or 80% of their average monthly earnings for the 2019-2020 tax year, if they have been employed less than 12 months.
- Employers’ can also claim for the minimum national insurance and pension contributions on behalf of furloughed employees.
- There is a maximum of £2,500 per month limit of the grant per employee.
- The employer is entitled to top up the grant with the remaining 20%, if they chose to do so.
- The claim will start from the date the employee has been furloughed and If that was part way through the month, then it will be pro-rata. Note that the minimum period of qualifying furlough is three continuous weeks.
How Can Jays Accountants Help?
If we operate your payroll scheme, we will be asking you during the payroll runs to confirm which employees have been furloughed. The furlough period can be backdated to 1st March 2020. You must follow the above rules when furloughing employees. HMRC may carry out an audit at a later date, should they deem it necessary.
The above guidance is only a summary of the rules and if you wish to know more, you can access the full rules here.