Job Retention Scheme: Advice to Employers – Part One
The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1st March 2020. The scheme is expected to be up and running by the end of April. It is designed to support employers whose operations have been severely affected by coronavirus.
We have put together a summary of its key points to assist business owners and employers.
It is important to note that if you are going to furlough employees it means that they will not be able to do any work for you. The definition that is being used is ‘to provide service or generate income’, so employees could still attend training courses whilst furloughed, or provide volunteer services for other organisations such as the NHS.
It will only apply to employees who were on the PAYE payroll scheme on 28th February 2020 and who have a UK bank account.
Those employed after this date will not be eligible to be furloughed. It will also cover employees who were made redundant after 28th February 2020 if you rehire them.
Employees who are working but on reduced hours will not be eligible for the scheme. This could cause potential problems and we are happy to advise further on this.
The guidance is quick to remind employers that equality and discrimination laws will apply in the usual way and this should be borne in mind when deciding who to furlough.
You will pay the employee 80% of their salary (up to a maximum of £2500 per month) and you will be able to reclaim this payment from HMRC together with the employer’s NIC payments and the minimum statutory pension payment, which is 3% of salary – obviously only if you pay this. If the employee’s pay varies then you can claim for the higher of either:
- The same month’s earnings from the previous year; or
- Average month’s earnings from the 2019-20 tax year
Employees on sick leave will be entitled to sick pay but can be furloughed once the sick leave has ended. Those employees who are ‘shielding’ can be furloughed.
It looks as though you should follow a redundancy-type procedure if you are going to furlough some, but not all, of your employees. This seems like an overburdensome requirement bearing in mind the current circumstances. However, if you are going to furlough more than 19 employees, you will have to follow statutory consultation procedures. Again, we are able to advise on this element with you if required. The general feedback we are receiving is that most employees are accepting this status.
The minimum amount of time that an employee can be furloughed for is three weeks and you can submit a claim to HMRC at least every three weeks. HMRC will pay the grant by way of BACs into a UK bank account.
The furloughed payments will still be subject to PAYE and NI deductions.
When the scheme ends (currently it is set to run until the end of May, but may be extended) you will need to make a decision as to whether the employee returns to duties or is made redundant, in which case they would be entitled to notice pay and a redundancy payment.
Further details on the Government advice can be found here.
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The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.