What is it?
All UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis for at least three months, starting from 1 March 2020.
Who is it for?
All UK Businesses that had or started a PAYE payroll scheme on 28 February 2020 are eligible. This includes:
- Recruitment agencies (agency workers paid through PAYE)
- Public authorities
How does it work?
Instead of making staff redundant, they can be given a "furlough" designation. You will then submit information to HMRC on your furloughed workers through a new online portal. HMRC will then reimburse 80% of "furloughed" workers' wage costs, up to a cap of £2,500 per month.
To be eligible for this grant, employers should write to their employee confirming that they have been furloughed and keep a record of this communication.
What employees can I claim for?
Furloughed employees must have been on your PAYE payroll on 28 February 2020. They can be on any type of contract. 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. This includes providing services, generating revenue, working reduced hours or on reduced pay. If an employee is working the employer will need to pay the employee through their payroll, subject to the terms of the employment contract you agreed.
While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
Employee on unpaid leave
Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February 2020.
Employee on Statutory Sick Pay
Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.
Employees who are shielding can be placed on furlough.
Employee that has more than one job
Your employee can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
Employee that does volunteer work
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.
Employee that does training
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.
Employee on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay
Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement.
If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.
If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.
The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.
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.
Claim for 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 2020 should be used to calculate the 80%. Fees, commission and bonuses should not be included.
Claim for employees whose pay varies
If the employee has been employed for a full 12 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.
Claim for employer National Insurance and Pension Contributions
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 choose to provide top-up salary in addition to the grant. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).
Claim for National Living Wage/National Minimum Wage
Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.
Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.
What don't we know yet?
When the online application portal will be open. This expected to happen by the end of April 2020.
How employers calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions. Details will be issued by the government before the scheme goes live.
What should I do next?
Employers need to discuss with their staff and make any changes to the employment contract by agreement. You may require legal advice on this process.
You cannot claim for this scheme yet, but the Government expect the scheme to be up and running by the end of April. In the meantime, you can gather all of the relevant information needed to make a claim.
To claim, you will need:
- Your ePAYE 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.
We will update this briefing as soon as more information becomes available.
Critchleys Clients: If you have specific questions or concerns, please contact your Critchleys Accountant directly.
Published 24 March 2020
Last Updated 27 March 2020
27 March 2020
What employee I can claim for
Work out what you can claim
What I should do next
24 March 2020
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