23 Mar Coronavirus Job Retention Scheme
Updated 24.03.20 @ 9am
Under the new Coronavirus Job Retention scheme, government grants will cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis. The scheme, open to any employer in the country, will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It will continue for at least three months, and can include workers who were in employment on 28 February.
To claim under the scheme employers will need to:
1. Designate affected employees as ‘furloughed workers’, and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation so please take HR advice. Link Accounting clients will have access to HR support through Croner Taxwise – please see previous email around this or get in touch with us to confirm our practice code.
2. 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.
3. HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
While HMRC is working urgently to set up a system for reimbursement, we understand existing systems are not set up to facilitate payments to employers. A business that need short-term cash flow support, may benefit from the VAT deferral announced and may also be eligible to apply for a Coronavirus Business Interruption Loan.
Q: What exactly does ‘furloughed’ mean?
A: Wasn’t sure myself so had to look up too. It’s if you allow someone to be absent from work for a period.
Q: Are the Government going to pay my team for me?
A: There seems to be a common misconception that the government will subsidise 80% of your team costs while they work for you. Not so – it’s only for people who you would normally make redundant in any other situation. They are in effect on “garden leave”, and should not be doing any work during the “furloughed” period.
Q: Surely they can do some odd jobs for me whilst off…
A: Absolutely not.
Q: Can they go part time and benefit from this?
A: No. They can’t lift a finger. You’d be best making some of your staff full time, and put others on garden leave.
Q: Who qualifies?
A: We believe at present that it is anyone on payroll at 29th February 2020.
Q: How do you work out what they get 80% of?
A: Not sure yet – I’m thinking it’ll work like other things like SMP, so average of last 12 weeks pay potentially.
Q: Can we alter February’s payroll to bump the figure up?
A: Um, no! This is not something that sits with our values, so don’t bother asking! Add to that it is tantamount to fraud….
Q: Can directors benefit from this?
A: No guidance yet – I suspect shareholders will be excluded (not confirmed), but if you’re a director and seriously consider yourself to be “furloughed”, I think you need to have a chat with yourself as you’ll have no business to come back to.
Q: Can we do a bit of jiggery-pokery to enable me to make a claim under this scheme when we both know I don’t really qualify?
Q: But my mates “accountant” said they would…
A: No problem….we’ll make the transition as easy as possible to your new accountant
Clearly, everything is moving at a fast pace and things are changing day to day. This is what we know at present but we are expecting further clarification to be forthcoming from the government over the next day or two in terms of the mechanics and finer details of this scheme.
Should you wish to chat this through, please just get in touch on 01295 720500. Alternatively, get in touch with your designated account manager.
For ongoing information, see these useful links:
- Support for businesses – https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses