The Job Retention Scheme was announced by the government to assist employers retain their staff during the Coronavirus crisis. The information below was updated to include the further HMRC announcements on 26th March 2020.
All organisations within the UK who employ staff. This includes businesses, charities, public authorities and recruitment agencies (if paid through PAYE).
The government will provide grants which will cover 80% of the salary of an employee. (Capped at £2,500). This will allow employers to retain staff, which otherwise would have been laid off because of the coronavirus crisis.
The first step is to designate employees as ‘furloughed’. The employee will need to be notified of this change, which would be subject to their employment contract.
The second step is to notify HMRC about the employees who have been furloughed. This will be done through a new online portal.
The definition of ‘furlough’ is to force or allow an employee to take a period of absence. The employee is not made redundant but they are not to carry out any work for the business whilst furloughed.
The employee remains on the employers payroll as an alternative to being laid off.
No. Employers must choose which employees are being furloughed.
No. The job retention scheme only covers employees who are not working.
If an employee continues to work, be it on reduced hours or for reduced pay, they are not furloughed and are not eligible for this scheme.
Yes. An employee can be furloughed for each job. The cap of £2,500 applies to each employer.
The government will provide a grant of up to 80% of the employee’s wage, with a cap of £2,500 per month.
There is no limit that each business can claim.
The cap is £2,500 plus the associated employers National Insurance and minimum employer pension contributions.
As a result the total possible grant per an employee is £2,804. This is calculated as the Gross Salary of £2,500 + £245 Employers NI + £59 Employers Pension.
The actual salary before tax as of 28th February 2020 is what is used to calculate the 80% claim. Other income such as bonuses, commissions, etc should NOT be included.
No. There is no requirement for employers to pay the 20% shortfall, however they could choose to cover the difference if they wished.
The scheme can be backdated to 1st March 2020 and can include any employees who were in employment on 28th February 2020.
It is due to last for a minimum period of 3 months, with a current end date of 1st June 2020.
The government have confirmed that there is currently no readily available system to issue payments to employers.
A new software system is to be developed, which is expected to be ready by the end of April.
Should short term cash flow be an issue, businesses are advised to consider the VAT deferral scheme and the Coronavirus Business Interruption Loan.
Employees which have remained employed for a full year prior to the claim can use the higher figure of either:
1. the same months earnings for the previous year
2. or the average monthly earnings for 2019/20
Employees who have yet to work a full year can claim an average of their monthly earnings since commencing employment.
Yes. The salary paid to a Director can be covered under the job retention scheme.
Many Directors pay themselves the optimum directors salary topped up with dividends. It is only the salary which is eligible.
It is important to restate that to qualify the Director must be furloughed.
HMRC have confirmed that Directors can be furloughed. They have not confirmed if a company with only 1 Director can furlough themselves.
We await the definitive answer to this but our assumption would be yes. This assumes that the Director does not do any work which produces an income for the business. The business is effectively closed on a temporary basis.
Conclusion of the Job Retention Scheme
The government had no choice but to provide a scheme for employers to retain staff. The alternative was unprecedented job losses.
At Patterson Hall Chartered Accountants we aim to provide our clients with the most up to date advice in this ever changing landscape. As soon as any further announcements are made we will be sure to update these blogs and notify our clients.
For further information on the Job Retention Scheme see the HMRC guidance https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
See below for other Coronavirus support available to small businesses:
Coronavirus Support Summary
VAT Deferral Scheme
Income Tax Deferral
Business Support Grant & Rates Relief
Self-employment Income Support Scheme
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