Coronavirus Job Retention Scheme – Key Information

BLOG6th Apr 2020

*Updated 1 June 2020*

Following on from our initial blog detailing the Coronavirus Job Retention Scheme (“the Scheme”), on Tuesday 12th May, further guidance was published by the Government in relation to the Scheme for both employers and employees.

Making a Claim Through the Job Retention Scheme Portal

The portal is now open to applications. Having already completed over 100 claims on behalf of clients, currently totalling over £2.5 million, we have summarised the key points to be aware of when navigating the portal. You can view our guidance here.

Who can claim?

The guidance now clarifies that “any entity” with a UK payroll can apply, including businesses, charities, recruitment and public authorities, whereas previously it said a “UK organisation”, provided you have the following:

  • created and started a PAYE payroll scheme on or before 28 February 2020
  • enrolled for PAYE online
  • a UK bank account

Who can be furloughed?

The updated guidance confirms that apprentices can be furloughed along with individuals (i.e. not entities) being able to furlough anyone they pay through PAYE such as nannies, and they were on their payroll on, or before, 18th February 2020. In addition, employees can be on any type of employment contract, including full-time, part-time, fixed-term, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed.

The guidance now also makes specific mention of eligible individuals who are not employees, but are paid under PAYE and that they can be furloughed. This includes office holders (including company directors), salaried members of Limited Liability Partnerships, agency workers (including umbrella companies) and limb (b) workers. There are specific considerations for each of these, especially around the legal process to follow. For instance, when furloughing a Company Director steps must be taken by the Board of Directors and recorded; once furloughed they can fulfil their statutory obligations but not undertake any work which would generate commercial revenue or provide services to or on behalf of their company. This latter point extends to specifically include a Personal Service Company.

The “Martin Lewis” Effect

The guidance now also clarifies that alongside being able to re-hire employees made redundant after 28th February 2020 to put them on furlough, this extends to any employees that stopped working for you on or after 28 February 2020 in that you can re-employ them, put them on furlough and claim for their wages through the scheme. This point was something that was heavily campaigned for by Martin Lewis, albeit it remains in the prior employers discretion to decide whether to do this.

It remains that any employee who started after 28 February cannot be furloughed and so it would be up to the previous employer to decide if they will rehire them in such a scenario.

What you can claim for

  • 80% of your employees wages up to a maximum of £2,500 (even for employee’s that this would bring them below the National Minimum Wage)
  • Minimum automatic enrolment employer pension contribution on the subsidised wage
  • Employer National Insurance contributions on your furloughed employees pay

Grants will be pro-rated if your employee is furloughed for only part of a pay period, so it would seem to make sense to have specific furlough pay components within payroll. Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to confirming their furloughed status.

What is not covered under the Scheme

  • Apprenticeship levy (this one seems strange given that it is effectively an additional employer tax but the guidance confirms not included, whereas was previously silent)
  • Student loans
  • Additional National Insurance or pension contributions due because you have chose to top up an employee’s salary
  • Any pension contributions that you make above the mandatory employer contribution

What is included in the calculation of employee wages:

  • Salary
  • Pay
  • Past overtime
  • Fees and compulsory commission payments

AAB have a calculator that we can share with clients to work out the furlough pay.

What is excluded from the calculation of employee wages:

  • Discretionary bonuses
  • Tips/gratuities
  • Discretionary commission payments
  • Non-cash payments

Benefits in Kind and Salary Sacrifice Schemes

The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary. Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.

Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.

Working for a different employer

If contractually allowed, employees are permitted to work for another employer whilst you have placed them on furlough, but they must be available to come back to work when furlough completes.

For any employer that takes on a new employee, the new employer should ensure they complete the starter checklist form correctly. If the employee is furloughed from another employment, they should complete Statement C.

Find more information on how to use the Job Retention Scheme Portal, and the latest updates regarding the scheme.

If you would like any further information on the Job Retention Scheme or are unsure about what Government support package is available to your business, we are here to help.