Last night, the government published guidance on the Job Retention Scheme, announced last week by the Chancellor.
Here's the detail.
Who can claim?
Any UK organisation with employees can apply, including:
- recruitment agencies (agency workers paid through PAYE)
- public authorities (although there are some exceptions)
You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme.
Employees you can claim for
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-hour contracts
The scheme also covers employees who were made redundant since 28 February 2020, if you rehire them and put them on furlough.
You can also furlough anyone who has been asked to shield themselves on medical advice.
And those you can't
As we previously advised, you can't furlough anyone:
- who is sick or self isolating in accordance with government advice and being paid SSP
- who is still working for you - even if they are only doing a few hours here and there if they are "providing services or generating income". But, staff can complete online training courses when furloughed. If they do this you have to pay them for their time separately
- taking unpaid leave which started before 1 March 2020
- you engage as a self employed contractor won't be eligible - but they may be able to receive payments under the self employed package announced yesterday.
The £2,500 cap
You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer NI contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. You can top this up, but you aren't obliged to do so. This is based on their gross earnings.
The government has said that it will issue more guidance on how to calculate Employer NI and minimum automatic enrolment employer pension contributions, before the scheme becomes live.
Working out average pay
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim and their pay varies, you can claim for the higher of either:
- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Salaried employees should have their furloughed pay based on their salary as at 28 February 2020.
NMW doesn't apply
Furloughed staff aren't working, therefore you don't need to worry if their hourly pay once furloughed falls below NMW rates. However, if staff do undertake any permitted training - you must make sure they are properly paid for this. You can't offset from the 80% wage.
You can only furlough staff who agree to the arrangement. Plus, you'll need to confirm this in writing.
You can only furlough staff for a minimum period of three weeks.
Making a claim
Once the scheme is up and running you can only make a claim once every three weeks for each furloughed employee. The guidance explains what information you'll need. You'll have to work out how much to claim. Do you best to get this right as HMRC retain the right to audit you and recover any overpayments.
You must pay the employee all the grant you receive for their gross pay and can't deduct fees from the money that is granted. [It's not entirely clear what 'fees' mean in this context.]
When will the money be available?
We still don't know the answer to the most pressing question for many employers. Last week the Chancellor said that the portal being built to support the scheme should be open before the end of April. Even though the money will be backdated to 1 March 2020, that's a very long time to wait if you've no money coming in.
Need more information?
There's still questions that remain unanswered. If you need help furloughing staff, please contact any of our employment partners for advice. We've created a suite of letters to help you which are available free of charge to our IMhrplus clients.
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