Coronavirus Job Retention Scheme and Furloughed workers

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If an employer cannot cover staff costs due to COVID-19, they may be able to avoid redundancies by accessing the Coronavirus Job Retention Scheme as announced on Friday 20 March. The scheme enables the employer to claim a grant of up to 80% of an employee’s usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.

The employer could choose to fund the 20% difference between this payment and the salary, but does not have to.

To qualify for this scheme, the employee should not undertake work while they are furloughed but they can undertake work for another employer, carry out voluntary work or training.

While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

Employers must discuss becoming classified as a furloughed worker with their employees. If an employee’s salary is reduced as a result of these changes, they may be eligible for support through the welfare system, including Universal Credit.

Employees you can claim for

Furloughed employees must have been on your PAYE payroll on 28 or before February 2020, and can be on any type of contract, including:

  • full-time employees
  • part-time employees
  • employees on agency contracts

Coronavirus Job Retention Scheme and Furloughed workers

If an employer cannot cover staff costs due to COVID-19, they may be able to avoid redundancies by accessing the Coronavirus Job Retention Scheme as announced on Friday 20 March. The scheme enables the employer to claim a grant of up to 80% of an employee’s usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.

The employer could choose to fund the 20% difference between this payment and the salary, but does not have to.

To qualify for this scheme, the employee should not undertake work while they are furloughed but they can undertake work for another employer, carry out voluntary work or training.

While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

Employers must discuss becoming classified as a furloughed worker with their employees. If an employee’s salary is reduced as a result of these changes, they may be eligible for support through the welfare system, including Universal Credit.

Employees you can claim for

Furloughed employees must have been on your PAYE payroll on 28 or before February 2020, and can be on any type of contract, including:

  • full-time employees
  • part-time employees
  • employees on agency contracts

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.

Owner-Managed Companies

Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme. Such companies must have been paying a salary through a payroll to be eligible for a grant.

National Minimum Wage

Furloughed workers 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 the National Living Wage/National Minumum Wage. The only exception is if they are required to carry out training for their job whilst on furlough at which point they must be paid at least the NLW/NMW and even if this is more than the 80% of their wage that will be subsidised.

Making a claim: The online system for claiming should be operational on 20 April

You’ll need to claim for:

  • 80% of your employees’ wages (even for employee’s on National Minimum Wage) – up to a maximum of £2,500. Do not claim for the worker’s previous salary.
  • minimum automatic enrolment employer pension contributions on the subsidised wage

Grants will be prorated if your employee is only furloughed for part of a pay period.

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.

 

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.

Owner-Managed Companies

Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme. Such companies must have been paying a salary through a payroll to be eligible for a grant.

National Minimum Wage

Furloughed workers 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 the National Living Wage/National Minumum Wage. The only exception is if they are required to carry out training for their job whilst on furlough at which point they must be paid at least the NLW/NMW and even if this is more than the 80% of their wage that will be subsidised.

Making a claim: The online system for claiming should be operational on 20 April

You’ll need to claim for:

  • 80% of your employees’ wages (even for employee’s on National Minimum Wage) – up to a maximum of £2,500. Do not claim for the worker’s previous salary.
  • minimum automatic enrolment employer pension contributions on the subsidised wage

Grants will be prorated if your employee is only furloughed for part of a pay period.

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.

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