Coronavirus Update: Job Retention Scheme

Find out about the eligibility and how the salaries are to be calculated. Please note that this only applies to people who were on the payroll at the 28th February 2020 – for anyone whose start date is after that date the scheme does not apply

Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020.

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Who can claim?

  • Any UK organisation with employees can apply, including:

    • businesses

    • charities

    • 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.

  • Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.

 

Which employees can I claim for?

  • Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:

    • full-time employees

    • part-time employees

    • employees on agency contracts

    • employees on flexible or zero-hour contracts

  • The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

  • To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

  • If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.

  • Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

  • To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.

  • Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.

  • You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.

  • If your employee is on unpaid leave, they cannot be furloughed, unless they were placed on unpaid leave after 28 February.

  • Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.

  • Employees who are shielding in line with public health guidance can be placed on furlough.

  • If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.

  • 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 organisation. However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

  • Individuals who are on, or plan to take Maternity Leave – please contact MHR if we act for you or your payroll advisor.

 

Anything else I need to know?

  • 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.

  • We 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.

  • Full time and part time employees

    • For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%.

    • Fees, commission and bonuses should not be included.

  • Employees whose pay varies

    • If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

      • the same month’s earning from the previous year

      • average monthly earnings from the 2019-20 tax year

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

  • If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

  • Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.

  • All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.

  • You can claim a grant from HMRC to cover wages for a furloughed employee, equal to the lower of 80% of an employee’s regular salary or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.

 

What will I need to make a claim?

  • Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

  • To claim, you will need:

    • your PAYE reference number

    • the number of employees being furloughed

    • the claim period (start and end date)

    • amount claimed (per the minimum length of furloughing of 3 weeks)

    • your bank account number and sort code

    • your contact name

    • your phone number

  • You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

  • You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.

  • Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.

  • You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.

  • You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.

 

Will I be taxed?

  • Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

  • Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

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