Coronavirus Job Retention Scheme – March 2020
Update: 26th March 2020 – Details have been confirmed for the Coronavirus Job Retention Scheme
Who can claim
Any UK organisation with employees can apply, including:
- recruitment agencies (agency workers paid through PAYE)
- public authorities
You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Work out what you can claim
Employers need to make a claim for wage costs through this scheme.
You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
The government will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live
On 20 March 2020 the Government announced a scheme to provide all businesses with wages for employees who are ‘furloughed’.
HM Revenue and Customs (HMRC) will reimburse 80% of employees’ wage for all employment costs, up to a cap of £2,500 per month, as a result of the COVID-19 outbreak. The employer can choose to pay the additional 20% but there is no obligation to do so.
This applies to staff who are unable to perform their work as the country is put on lock down due to COVID-19. It is believed that this financial help will also apply to those companies who had already laid-off workers, as long as they are reinstated into their workforce and given a leave of absence instead.
All UK businesses are eligible to access the scheme and to do so they would need to:
- Check your employment contracts
- Designate affected employees as ‘furloughed’ workers and notify employees of this change.
- Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. Further details to follow from the HMRC as to how this will work.
- The employer does not have to furlough the whole workforce, they can furlough part of it.
Employers must follow normal employment law requirements in designating employees as furloughed. This is likely to apply as follows:
- If there is a lay off clause in the contract of employment this should be exercised and no consultation or notice period is required;
- Where there is no contractual right to lay off or amend pay this will be a change in terms and condition and the only viable option is to agree a variation of contract.
- It is likely employees will agree when faced with the choice of being paid 80% pay or statutory redundancy. This is particularly the case if the employer may become insolvent and they will get no pay now and a statutory redundancy pay in many months’ time.
- Employers can only furlough employees if they have no work at all for that employee. It is also the choice of an employer so, if the employee requests to be furloughed the employer can refuse to agree.
- It is stated that employers must pay 80% of wages to a furloughed employee which they can then claim back from HMRC. Technically if there is no express lay off clause, the employer still remains liable for the remaining 20% unless there is agreement from the employee to the contrary. Consequently any letters sent to employees should seek that agreement.
- The new scheme is not intended to cover employees who are sick, however, employers will need to consider the implications on their policies for workers who are sick and self-isolating due to the coronavirus guidance.
It is believed this will be backdated to 1 March 2020 and will initially run for three months however, it could be extended if it is necessary. The financial support is stated to be a “grant” and therefore we understand that businesses will not be required to pay it back.
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