Job Retention Scheme
This Scheme is designed to enable Employers to give a temporary leave of absence (furlough) to their Employees if their business has been affected by the coronavirus outbreak. It allows the Employer to continue to employ its Employees, instead of making them redundant, and HM Revenue & Customs (HMRC) will reimburse the cost of the Employees pay whilst on furlough (plus associated Employer costs), subject to certain limits.
Here is a brief summary of some of the details of the Scheme:
* If you have a lack of work, or have had to temporarily close your business, due to COVID-19, you can 'furlough' some, or all of your employees.
* You need to get agreement from your employees to designate them as furloughed workers. You can then reduce their pay to 80% of their 'normal' pay, up to a gross pay 'cap' of £2,500 per month.
* You can reclaim that whole amount from HMRC plus the associated Employer National Insurance Contributions and Minimum Automatic Enrolment Employer Pension Contributions on that amount.
* You can choose to 'top up' a furloughed workers pay, but you will only be able to reclaim 80% of their 'normal' pay (up to a maximum of £2,500 per month) plus the associated Employer costs.
* You can only designate employees as furloughed workers if they were on the payroll at 28th February 2020.
* For salaried Employees, 'normal' pay is based on their salary at 28th February 2020. It does not include discretionary bonuses, commissions, tips etc. However, it can include compulsory commission and fees, past overtime, regular and obligatory payments etc.
* For Employees with variable hours, 'normal' pay is the higher of either; their earnings for the same period in the previous year, or the average of their earnings for the 2019-20 tax year. If the Employee has been employed for less than 12 months, their 'normal' pay will be their average earnings since they started working for their Employer.
* The Scheme applies to all types of employee contract including full time, part time, zero hours and variable hours.
* Once people recover after being on sick leave, or in self-isolation, they can be furloughed.
* Anyone made redundant from 28th February 2020 can agree to be brought back and placed on furlough.
* Furlough must be for a minimum period of three weeks, but employees can be placed on furlough more than once.
* Furloughed workers MUST NOT do ANY work for the business during the period that they are furloughed (even if their pay is being 'topped up').
* Wages and salaries must be paid to Employees first and then reclaimed through an online HMRC portal.
* HMRC's online portal is not yet available, but it is expected that it should be available for claims from the end of April 2020.
Company Directors CAN be designated as furloughed workers.
To furlough a Director, like other workers, they must be temporarily laid off due to a lack of work, or temporary business closure, as a result of the COVID-19 outbreak.
Ordinarily, furloughed workers MUST NOT do ANY work for the business whilst on furlough. However, Company Directors have statutory duties and obligations to their company that they are required to fulfill as set out in the Companies Act 2006 (e.g. Duty to promote the success of the company etc.). In addition to statutory filings, Company Directors have also to ensure that the company's records are maintained, that Employees are paid, that payroll Real Time Information (RTI) reports are submitted to HMRC, that VAT Returns are completed and submitted, that annual Accounts are prepared and filed, that Corporation Tax Returns are completed and
submitted etc., etc., etc.
Furloughed Company Directors MUST NOT do ANY work for their company of a kind that they would carry out in normal circumstances TO GENERATE COMMERCIAL REVENUE, or provide services to, or on behalf of their company. However, Company Directors CAN carry out their statutory duties, provided that they do no more than would reasonably be judged necessary for that purpose.
Claims for furloughed Director's pay should be claimed along with other furloughed workers pay.
If we process your business's payroll, we should be able to make the claims on your behalf, so that, when we process the payroll, we can then make a claim for reimbursement of the furloughed workers pay at that time.
OTHER GUIDANCE FOR EMPLOYERS AND EMPLOYEES
Here are links to other UK Government websites giving guidance for Employers and Employees: