Our Quick guide – recommended steps
If you need to furlough a worker:
- Notify them in writing of the cessation of their duties and confirm they are remaining on the payroll
- Continue to pay through payroll at their normal salary or reduce to 80% from the furlough date – if you are not prepared to top up to full pay (we believe this will be allowed but there is some ambiguity)
- Await to find out how you will claim the 80% grant from HMRC ensuring you keep full and detailed records
- Please try not to phone us and read the detail below
If you need funding assistance:
- Suspend your next VAT payment (all payments due from 20 March to 30 June – no application process)
- Arrange time to pay with HMRC allowing you to defer your PAYE payments call 0800 0159 559
- Speak to your bank a manger about getting access to a Business Interruption Loan
Please read the following detail to be properly informed and certainly if you are planning on phoning us – PLEASE READ THIS FIRST! Thank you
Coronavirus Job Retention Scheme – headlines and details that we have so far
What it is and what will it cover?
The Coronavirus Job Retention Scheme will be a government grant – to reimburse employers for 80% of furloughed workers wage costs, to a cap of £2,500 per month.
Further the scheme will be:
- Backdated to March 1st
- Open initially for at least three months but extended ‘for longer if necessary’
Total funding pot available
As per the Chancellor’s speech “I am placing no limit on the amount of funding available for the scheme. We will pay grants to support as many jobs as necessary.”
Who is eligible for the scheme?
All UK businesses are eligible (or in the Chancellor’s words “Any employer in the country – small or large, charitable or non-profit – will be eligible for the scheme.”)
Coronavirus Job Retention Scheme (CRJS) will be administered by HMRC.
Employers will need to:
- Designate affected employees as ‘furloughed workers’ (see further below)
- Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)
As noted above the grant is a reimbursement to the employer therefore the employer will make the wage/ salary payment to the furloughed worker and then be reimbursed by HMRC.
When will the scheme be live?
No set date but the following statements indicate that it will not be immediate:
- “HMRC is working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.”
- “HMRC is working night and day to get the unprecedented Coronavirus Job Retention Scheme up and running and we expect the first grants to be paid within weeks.”
- “If your business needs short term cash flow support, you may be eligible for the Coronavirus Business Interruption Loan Scheme”
What is a furloughed worker?
We understand that furloughed workers are “workforce who remain on payroll but are temporarily not working during the coronavirus outbreak” per GOV.UK
It is noted that employers will need to notify employees of this change in employment status to furloughed, but that changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
When thinking about the answers to some of these questions, it’s helpful to understand the reasons for the introduction of the CJRS; it has been introduced to encourage businesses to follow the latest medical advice for Coronavirus and ensure businesses who rely on physical interactions close their doors to the public.
Where a business can carry on without those physical interactions, for instance by working remotely, it should be business as usual and the policy doesn’t appear to be designed as a catch-all wage subsidy for the UK workforce.
I’m sure many clients will have unanswered questions as to how the CJRS will work for them and we hope to be able to answer these questions for you as we get further guidance in the coming days and weeks.
For me, the key questions we need guidance from the government on are:
- How will the scheme work for those employees with irregular earnings, or on zero-hour contracts? Will there be some form of averaging earnings calculation to, akin to the calculation for statutory maternity pay qualifying earnings or statutory redundancy pay?
- How do employers know if they can furlough an employee? Are there employment law and rights implications? The guidance from Citizen’s Advice would suggest there are limitations on when this can be done so will additional measures be put in place to allow for this to happen?
- Once furloughed, can an employee return to work, then subsequently be furloughed again and still be entitled to CJRS? If so, with what regularity can you furlough an employee?
- Is CJRS available where the employee has not been completely furloughed, but is only partially active or has a reduced workload?
- Does the employer have to cover the additional 20% of pay, or the amount in excess of £2,500 for higher-earning employees as a requirement of obtaining the CJRS? The comments from the Chancellor in the press briefing suggested that employers could top-up pay, but no clarity was given on where this would be a formal requirement or something they can choose to do voluntarily and on how much they would need to pay.
- How long will employers have to wait to receive payment from CJRS? The initial guidance suggests the scheme will be paying out by the end of April at the latest, but there is no further guidance on whether particular businesses or sectors will be prioritised.
- Can an employer delay making payment to employees until they receive funding from the CJRS? It would appear from the initial guidance that employers will have to make the payment initially, and are then reimbursed by the CJRS. However, there is no guidance on whether it will be possible to delay payment of wages becoming due this month until April, when the scheme should be up and running. The guidance does point to the ability to use the business disruption loan suggesting this can be used to bridge the cash flow until the employer is reimbursed by CJRS.
- What happens if an employer has already had to terminate employees before the CJRS was announced? The initial guidance does suggest that the CJRS will look to support employer’s employees who were employed at 1 March, so some clarity is needed on whether terminated employees can be re-hired and qualify for CJRS.
- Will the amounts paid under the CJRS be liable to PAYE and national insurance? It would appear as though the CJRS would be a simple subsidy of income, which would mean the payment would be earnings in the employee’s hands and therefore should be liable to PAYE and national insurance, but confirmation of this is needed. If the CJRS payment is liable to PAYE and national insurance, employers will need to foot the bill for the employer’s national insurance cost due on the payments. Employers may be able to manage the employer’s national insurance liability by applying for either a time to pay (TTP) arrangement or through the use of the business disruption loan.