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COVID-19: Employment eBulletin: details of Coronavirus Job Retention Scheme

27 March 2020

In light of new detailed guidance issued by the Government on the terms of the Coronavirus Job Retention Scheme, our Employment team look at the key points for employers.

These are as follows:

  1. All employers can claim a payment towards salary costs of their furloughed employees. The only conditions are that the employer must have started a PAYE scheme by 28 February 2020 and must hold a UK bank account.
  2. Employees will qualify for the scheme if they are ‘furloughed’ by their employer; they must be notified that they are furloughed employees and that they are no longer required or permitted to carry out any work for their employer.
  3. Employees are covered whether full time, part time or flexible/zero hours contracts.
  4. Employees who have been made redundant since 28 February 2020 can be rehired and placed on the scheme immediately.
  5. The scheme will pay to the employer a sum equal to 80% of an employee’s regular salary or wage, subject to a cap on payments of £2,500 per month per employee. The employer will receive an additional sum to cover employers national insurance contributions and the statutory minimum auto enrolment pension contribution.
  6. There is no obligation on the employer to top up payments to full salary levels but they can do so if they wish at their own cost.
  7. Payments made by employers to their employees will be subject to tax and National Insurance in the usual way.
  8. The calculation for salaried employees will exclude any fees, commissions and bonuses they would usually earn so covers basic pay only.
  9. For employees with variable pay, the employer can claim the higher of:9.1.1 an amount equal to earnings in the same month last year or;9.1.2 average monthly earnings in the 2019/2020 tax year.
  10. The minimum period for which an employee may be furloughed is three weeks.
  11. The claim will be made via an online portal and claims must be submitted every three weeks.
  12. Employees are permitted to continue with training activities which are a part of their role during a period of furlough as long as they are not generating income or providing a service.
  13. If employers are not topping up payments, then placing employees on the government scheme and paying only what the scheme provides will amount to a variation in their pay terms and employers should consider carefully how best to implement that in order to avoid a risk of future claims. Some contracts may contain contractual variation clauses which allow the variation.
  14. Employees who are absent and in receipt of Statutory Sick Pay should continue in receipt of Statutory Sick Pay until their entitlement is exhausted, but can then be furloughed.
  15. Employees on maternity leave can be furloughed for the purposes of the scheme immediately on their return which can be before the end of the statutory maximum period of leave.
  16. If employers pay enhanced rates of maternity pay to women on maternity leave, they can recover the costs of the enhanced element under this Scheme. The statutory element is covered by existing rules in which most employers can recover 92% of Statutory Maternity Pay (SMP) from HMRC, with small employers recovering a higher percentage.
  17. There remains some uncertainty about holiday entitlement during a period of furlough. It is possible that a week of holiday cannot be part of the furlough claim. Further, there may be an entitlement to full pay for days of holiday which were accrued prior to commencement of the furlough period. It seems likely that holiday will continue to accrue but this too is not certain.
  18. The sums received by the employer will be treated as taxable income of the business, and the sums paid to the employees will then be offset as expenses incurred.
  19. In order to claim these payments, the employer will need to provide details, via an online portal which is yet to be released, of its ePAYE reference number, which is used for payroll filings, the number of employees furloughed for whom the claim is made, the start and end date for each furlough period, bank account details and contact details.
  20. Employers will have to calculate the amount they are claiming and HMRC will have a right to audit retrospectively all aspects of the claim so employers should keep records demonstrating the basis of each claim made.
  21. At the end of the scheme, it will be for the employer to determine whether or not to make redundancies or allow employees to return to work and the scheme will place no restrictions on that. Redundancy dismissals can also be made while employees are furloughed. Usual rules about consultation prior to dismissal will apply so employers should factor these into their plans.
  22. It is expected that payments will be available from late April.
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