Job Retention Scheme 80% pay for employees
Employees
All small employers will be able to access financial support from the government in the form of the Job retention scheme, to continue paying part of their employees’ salary. This could be either because the work that person does is not viable any more, for the time of the crisis, or because the business cannot operate any more.
The scheme is not yet live, as legislation will need to be amended, but when it is it will work as follows:
- The employer will need to designate affected employees as ‘furloughed workers,’ and tell them of this change. The worker will then not be able to undertake any work.
- HMRC will require details through an online portal.
- HMRC will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 per month.
We understand this scheme will become operable in April, with payments backdated to March 1 if needed.
Rules as outlined in official statements released at 23 March 2020
- Furloughed members of staff must not work for the employer during the period of furlough.
- Furlough is from 1 March 2020, so is to be backdated. It will last for at least 3 months and will be extended if necessary. Note that while the scheme is backdated to the beginning of March as it is intended to support all those employed then, a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. This will of course be subject to employment law in the usual way.
- It is available to employees on the payroll at 28 February 2020.
- All UK businesses are eligible, ‘any employer on the country, small or large, charitable or non-profit’ to use the Chancellor’s words.
- The scheme pays a grant (not a loan) to the employer.
- The grant will be paid to the employer through a new online system which is being built for this purpose.
- The employer will pay the employee through payroll, using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll will continue as normal.
- Scheme will be administered by HMRC:
• Relevant employees must be designated as furloughed employees.
• Employers will submit information to HMRC through a new online portal.
• As this will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. The narrative used in the information released so far says ‘if your employer cannot cover staff costs due to COVID-19 they may be able to access support…’. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined, nor whether there is a bar of some description. - Maximum grant will be calculated per employee and is the lower of:
• 80% of ‘wages’. The notes published so far, use the phrase ‘wage for all employment costs up to a cap of £2,500 per month’. It is our understanding that this includes employers’ NIC and pension contributions. Wages will be determined by reference to a defined period (yet to be announced).
• £2,500 per month.
If you think that your business will need to take advantage of the Job Retention Scheme please contact us to discuss further and also to get a template of the letter that you will need to send out to the employees you wish to furlough.