Published on: 20 Apr 2020
COVID-19 has brought unprecedented economical and social crisis, globally. Businesses across UK; just like around the world, have been severely impacted. Along with medical crisis, UK faces challenge of rising unemployment as many businesses find it hard to maintain their current workforce. UK government has intervened with its one of kind, Coronavirus Job Retention Scheme. This Scheme essentially lets businesses retain their staff even if they are being temporary shutdown. Our Accountants at Certax Fitzrovia have compiled all the information regarding what is Coronavirus Job Retention Scheme that can be useful to you whether you are an employee or an employer.
What is Job Retention Covering?
Even if the businesses are being shut down temporary, HMRC allows employers to claim a grant that can cover a majority proportion of their payroll expense. Employers will furlough every employee, who otherwise would have been made redundant. For each employee, employers can claim
- 80% of their usual monthly wage
- Or £2,500; whichever is lower of the two
- And associated Employer NI and pension Contributions on the subsidized furlough pay
What does furlough mean?
Essentially, furloughing employees is just like giving them paid leave. Instead of having employers lay off employees in COVID-19 crisis, the earlier can retain the later temporarily on their payroll. It helps in letting the grant reach systematically to those who would otherwise not have any kinds of wages and salaries. During the furlough time, employers cannot ask the furloughed employee to do any kind of work or provide any services that directly or indirectly leads to revenue generation for the business. The employee can, however, voluntarily agree to do any side-line work that does not lead to revenue generation.
The employees will be retained up till 30th June 2020 or to any further date Government announces for the Furlough period. Beyond the said date, if businesses reopen and revive, employees can be taken back on regular payroll paid by employers. In case the business permanently closes, employees can then be made redundant as per their original employment contract terms and conditions.
What is Time Frame for Furloughing?
Employees can be temporarily furloughed from 1st March 2020. As of Friday, 17th April 2020, the UK Treasury has published formal rules on operating the Coronavirus Job Retention Scheme. The Chancellor of Exchequer, Rishi Sunak has confirmed that the scheme will be available up until 30th June; with a possibility of further extension if deemed necessary.
Originally, any employee that has been on payroll on or before 28th February, qualified to be furloughed. The employee can be re-employed and then furloughed if he/she has been made redundant any time after 28th February. Any employee made redundant before 28th February does not qualify.
For further details on which employees qualify to be furloughed, Read our next blog.
Who can claim under Coronavirus Job Retention Scheme?
Before any employer can claim furlough grant for employee wages, they need to ensure:
1)They have an already operational PAYE payroll scheme on or before 19th
2)They have enrolled for online PAYE
3)They have a UK based bank account
All employers, big or small, across UK are eligible as long as they meet the above conditions.
Employers further must ensure that their employee retention calculations include only employees that have been on their payroll on or before 19th March. The date has been revised in recent announcements. The original date announced was 28th February.
Can you backdate the furlough pay?
Yes. Furlough pay can be backdated to as far as 1st March. The online portal for applying for the furlough scheme has just been operational. So, all those employers who have paid their employees themselves can claim the backdated employee pay from HMRC for periods starting 1st March. The Exchequer believes that the payments will reach the employers by end of April. Many may have received the grant already. The UK Government is urging employers to pay employees on time; where they can and not wait for the Grant, with assurance that sooner or later, the Grant will be disbursed to them.
What is UK Government Furlough Guidance about Employee Retention Agreements?
The UK Government has advised all the employers to seek written Furlough Agreements from their employees. They should do so retrospectively if they have not already done it. In case, an employee is not informed that he/she has been furloughed, he/she may claim full wages or salaries as opposed to 80% furlough pay. Such disputes may employee altogether ineligible for the Coronavirus Job Retention Scheme. The Employee Retention Letter with furlough terms and conditions must be signed by the employee and retained by employer for minimum 5 years. This is because employment laws allow employees to back claim unpaid wages and salaries as far as five years old.