If you cannot maintain your current workforce because your operations have been severely affected by coronavirus (COVID-19), you can furlough employees and apply for a grant that covers 80% of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay.
This is a temporary scheme in place for 4 months starting from 1 March 2020, but it may be extended if necessary and employers can use this scheme anytime during this period. It is designed to help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy. However, all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus.
Employers can use this scheme anytime during this period.
Up to date guidance for employers and businesses on coronavirus (COVID-19) can be found here
The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020 to allow them to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
This includes businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities.
HMRC is working urgently to set up a system for reimbursement of salaries for workers under the Coronavirus Job Retention Scheme as existing systems are not set up to facilitate payments to employers.
However, payments will be backdated to March 1st 2020 and the scheme will be open initially for at least three months but extended for longer if necessary.
Business owners will have to designate affected employees as ‘furloughed workers,’ and notify all their employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
We understand that furloughed workers are “workforce who remain on payroll but are temporarily not working during the coronavirus outbreak”.
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 hours contracts.
Note:
- You will need to calculate the amount you are claiming
- HMRC will retain the right to retrospectively audit all aspects of your claim
- The employer must have a UK bank account – HMRC will make the payments via BACS
- If you’re a director of your own company and paid through PAYE you may be able to get support using this Job Retention Scheme, please see below
Once the new online HMRC portal is active, you will have to submit information to HMRC about the employees that have been furloughed and their earnings.
WHAT YOU’LL 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 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.
You should make your claim using the amounts in your payroll – either shortly before or during running payroll. Claims can be backdated until the 1 March where employees have already been furloughed.
If appropriate, worker’s wages should be reduced to 80% of their salary within your payroll before they are paid. This adjustment will not be made by HMRC.
MINIMUM FURLOUGH PERIODS
Any employees you place on furlough must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.
AFTER YOU’VE CLAIMED
HMRC will check your claim, and if you’re eligible, pay it to you by BACS to a UK bank account.
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.
WHEN THE GOVERNMENT ENDS THE SCHEME
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
HMRC will process all claims made before the scheme ends.
WHEN YOUR EMPLOYEES ARE ON FURLOUGH
You cannot ask your employee to do any work that:
- makes money for your organisation
- provides services for your organisation
They can take part in volunteer work or training.
EMPLOYEE TAXES
Your employees will still pay the taxes they normally pay out of their wages.
This includes pension contributions (both employer contributions and automatic contributions from the employee), unless the employee has opted out or stopped saving into their pension.
EMPLOYEE RIGHTS
Employees still have the same rights at work, including:
- Statutory Sick Pay
- maternity and other parental rights
- rights against unfair dismissal
- redundancy payments
Grants cannot be used to substitute redundancy payments. HMRC will continue to monitor businesses after the scheme has closed.
WORKING FOR A DIFFERENT EMPLOYER
If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough.
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.
We will notify all Falkirk Delivers businesses via e-newsletter once the HMRC online portal is accepting applications for the Coronavirus Job Retention Scheme
ELIGIBLE INDIVIDUALS WHO ARE NOT EMPLOYEES
As well as employees, the grant can be claimed for any of the following groups, if they are paid via PAYE:
- office holders (including company directors)
- salaried members of Limited Liability Partnerships (LLPs)
- agency workers (including those employed by umbrella companies)
- limb (b) workers
The guidance below sets out specific considerations for those individuals who are paid via PAYE, but who are not necessarily employees in employment law. Unless explicitly set out below, all other guidance is applicable to these cases, and should be followed.
Office Holders
Office holders can be furloughed and receive support through this scheme. The furlough, and any ongoing payment during furlough, will need to be agreed between the office holder and the party who operates PAYE on the income they receive for holding their office. Where the office holder is a company director or member of a Limited Liability Partnership (LLP), the furlough arrangements should be adopted formally as a decision of the company or LLP.
Company Directors
As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
This also applies to salaried individuals who are directors of their own personal service company (PSC).
Salaried Members of Limited Liability Partnerships (LLPs)
Members of LLPs who are designated as employees for tax purposes (‘salaried members’) under the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 are eligible to be furloughed and receive support through this scheme.
The rights and duties of a member of an LLP are set out in an LLP agreement and in the absence of an agreement, default provisions in the LLP Act 2000, based upon company and partnership law. Such an agreement may include separate agreement between the LLP and an individual member setting out the terms applicable to that member’s relationship with the LLP.
To furlough a member, the terms of the LLP agreement (or any such agreement between the LLP and the member) may need to be varied by a formal decision of the LLP, for example to reflect the fact that the member will perform no work in the LLP for the period of furlough, and the effect of this on their remuneration from the LLP. For an LLP member who is treated as being employed by the LLP (in accordance with s863A of ITTOIA 2005), the reference salary for this scheme is the LLP member’s profit allocation, excluding any amounts which are determined by the LLP member’s performance, or the overall performance of the LLP.
Agency Workers (including those employed by umbrella companies)
Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies.
Furlough should be agreed between the agency, as the deemed employer, and the worker, though it would be advised to discuss the need to furlough with any end clients involved. As with employees, agency workers should perform no work for, through or on behalf of the agency that has furloughed them while they are furloughed, including for the agency’s clients.
Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.
Limb (b) Workers
Where Limb (b) Workers are paid through PAYE, they can be furloughed and receive support through this scheme.
Those who pay tax on their trading profits through Income Tax Self-Assessment, may instead be eligible for the Self-Employed Income Support Scheme (SEISS), announced by the Chancellor on 26 March 2020.
TAX TREATMENT OF THE CORONAVIRUS JOB RETENTION GRANT
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.