COVID-19: Job Retention Scheme - Updated: 27 May 2020
Coronavirus Job Retention Scheme: a cash grant that is designed to allow employers to retain staff who would otherwise be laid off.
At a glance
How to claim
Update 29 May 2020
The scheme now extends until the end of October 2020 and under taper provisions, furloughed employees will be able to work part-time and employers will begin to contribute to Employers National Insurance (ERs NICs).
March to August
November - Scheme closed
Scheme closure to new entrants
UPDATE 27 May 2020: Record Keeping and TUPE, see headings below.
UPDATE 12 May 2020: Extension of scheme and proposed relaxation of rules
UPDATE 5 May 2020: Incorrect refusal of Job Retention Scheme financial support
COVID-19: Company Directors & Shareholders: many small companies are run by just one or two directors and have no other employees.
What government financial support is available to director/shareholders during the Coronavirus crisis?
The government has confirmed our views on this:
What is the best course of action for an employer in dealing with staffing during the COVID-19 emergency?
If you want to retain your staff but cannot afford to pay them you can:
Furloughing as an option
Do you wish to retain your employee?
Is your business, due to the effects of COVID-19:
In other words, is it impossible for the employee to work for you at present or there is no other paid work currently available for them to do?
Are they employed by you under an employment contract i.e. a written or verbal contract?
Are they paid a regular wage in return for working regular hours?
You can furlough them, by keeping them on the payroll.
Is your worker casual or subject to a zero-hours contract?
Does your business have any ongoing obligation to offer them work?
Does the worker only work when they want to?
Yes, or generally they accept work when its offered.
You do not need to furlough them as you already have no obligation to provide work. You may want to use the furloughing process as a way of ensuring their future their loyalty. *
*More information is awaited from the government as it is unclear what rights casual workers have in this instance.
Short-term and temporary lay-offs
You can claim statutory redundancy pay if you’re eligible and you’ve been temporarily laid off (without pay or less than half a week’s pay) for either:
Write to your employer telling them you intend to claim statutory redundancy pay. This must be done within four weeks of your last non-working day in the four or six week period.
See HMRC Redundancy Pay Your Rights
Workers are not normally entitled to:
Instructions: you can use this as a template, cut and paste the text on to your own letterhead. There are Notes for completion below.
[Employer name if not on headed paper]
Dear [Employee name]
Due to the ongoing COVID-19 (Coronavirus) pandemic, we have identified you as a suitable employee [to be furloughed / agreed with you that you will be furloughed]* under the Government Job Retention scheme.
What this means is that you will not be required to work until further notice but will continue to be paid [as normal / and will receive 80% of your normal pay / you will receive pay of £2,500** per month.]*
Income tax and national insurance will be deducted from your pay as normal.
You will continue to be our employee during the furloughed period, however, you must not undertake any work for us during this period.
Your furlough period starts on [insert start date – this cannot be before 1 March 2020]. It will end on the earlier of:
We expect the period not to exceed four months. This may be extended if government restrictions mean that it is not possible for you to return to work. The government has set the minimum furlough period at 3 weeks.
[As already discussed we agree that you may other undertake paid temporary work/and unpaid voluntary work during your furloughed period]*
We will contact you when you are required to return to work.
[Please sign the attached form to confirm your agreement to being a furloughed employee and return to [name of appropriate person/address or email address] by [date]***.
Notes for completion - DELETE BEFORE SENDING
*Delete as appropriate.
**Only use the £2,500 per month option where employee earnings are such that 80% of their normal gross pay is more than £2,500 per month. For example, someone earning £3,500 per month would be due £2,800 at 80% but this is reduced by the cap to £2,500.
You will not need your employee’s agreement to the furlough if:
***It is recommended that you set a deadline for responses.
A form for a furloughed employee to return to the employer
I [Employee name and works / employee number (if they have one)] consent to being a furloughed employee until such time as I am asked to return to work.
I understand that I remain an employee of [insert name of employer] and must continue to adhere to the terms of my employment other than by prior agreement with my employer.
What does the government mean by furloughing
Who can be furloughed?
Can your employee work for you when furloughed?
HMRC's guidance is slightly muddled in terms of what kind of entity can be linked or associated.
We assume that the latter applies, as not all employers are companies and so it is odd to limit the rule to just companies. We have requested clarification from HMRC.
How does it work and how much can be claimed?
There is a minimum furlough period of three consecutive weeks. Employees can be taken in and out of furlough, when this happens the three week minimum period applies to each separate instance of furloughing.
HMRC will reimburse:
March 2020 £80.65 per day
April 2020 £83.34 per day
May 2020 £80.65 per day
June 2020 £83.34 per day
What are wages?
Wages are your monthly earnings:
If your employee's salary varies:
What about overtime?
It is paid. We queried this on 3 April 2020 and HMRC have been quick to update their guidance.
Practically speaking, this means that the amount paid is based on your contractual earnings as paid in February 2020, or if the calculation is based on variable pay, the mechanism will be the average of contractual earnings for 2019/20 paid up to 28 February 2020. It will not include discretionary amounts paid.
What about the National Minimum Wage (NMW)?
The NMW increased on 6 April 2020.
Apprentices must be paid at least the Apprenticeship Minimum Wage/National Living Wage (NLW)/NMW. The employer must top-up any shortfall between the amount it can claim for an apprentice's wages through the furlough scheme and their appropriate minimum wage.
Other employees are subject to different rules: no one is working during the time that they are furloughed. If they are paid 80% of their usual pay, this may well take them below the NLW/NMW and that is accepted. If they are undertaking training in that period, they must be paid the NLW/NMW for the training period and the employer must top-up any shortfall.
What about holiday pay and bank holidays?
Your employees can still take a holiday while they are furloughed. Under the Working Time Regulations (WTR), holiday pay must be paid at the employee’s normal rate of pay or, if this varies, it must be based on the average pay the employee has received in the previous 52 working weeks. This means that if a furloughed employee takes holiday, the employer will have to pay additional amounts over the grant in order to meet the requirements of the WTR.
Where an employee usually works bank holidays the employer can agree this is included in the grant payment. If the employee usually takes the bank holiday as leave, the employer will either have to top up their holiday pay or give them a day of holiday in lieu. Since April and May include four bank holidays employers will need to consider how they are going to deal with this.
What about directors and annual salaries?
HMRC have now included this in their guidance. Directors and any other employees paid annually are eligible to claim, provided they meet the qualifying conditions, which include:
Directors who are paid annually just in March/start of April will not be eligible:
Conversely, a director who was paid an annual salary in say February 2020, would be eligible for the grant as they would have been notified to HMRC on an RTI submission on or before 19 March 2020 for a payment of earnings in the 2019/20 tax year.
The HMRC online claims calculator should not be used for directors and those who are paid annually. Manual calculations must be performed instead.
Transfer of Undertakings (Protection of Employment) Regulations (TUPE)
How to claim
What to pay?
As an employer you may need to renegotiate the employee's contract. The need to do this may well reflect your financial circumstances.
You must pay the employee all the grant received for their gross pay, no fees can be deducted from the grant money.
The employees you furlough must not work for you during the furlough period.
Do not forget about employment law. This is for your protection as an employer (against claims by employees once this is all over) as well as the protection of your employees.
*We are unable to give employment law advice but have included some suggestions below which should help manage your risk here. If in doubt you must seek independent legal advice.
What period is covered by the job retention grant claim?
These examples illustrate how we think the grant will work for many businesses:
Example 1: Corona Travel Ltd is a specialist tour operator sending UK tourists to remote parts of China. When Wuhan Province announces a lockdown in February 2020, the company decides to cancels all its spring and early summer tours. All staff are laid off at the end of February except the director. When the UK announces its employee job retention scheme in late March 2020, the company contacts staff and advises them that they will be re-employed and furloughed. As the staff were all laid off before 1 March the company's furloughing claim in respect of the furloughed staff can be backdated to 1 March as none of these employees worked in March.
Example 2: Corona Gelatos Ltd employs 15 employees, 12 who work in sales and the production line and delivery. The UK went into COVID-19 lockdown on 23 March and all the company's retail customers shut down their gelato parlours. The company decides to cease all production and lay off and furlough all sales, production and delivery staff from 24 March. Staff are paid their normal salary up to 23 March and the furloughed staff are paid their salary as negotiated with the company for the period they are furloughed from 24 March onward.
What is required to make a claim
The online portal for making claims became available on 20 April.
Claims can be made every three weeks. Payment will be made within six working days. HMRC say you should only contact them about your claim if you have not received payment within 10 working days.
To make a claim you will need the following information:
Currently, no claims can be made using the online portal for any furloughed employees without NI numbers. Where an employer has furloughed employees without NI numbers:
Where the employer does not have a UTR or CRN they should answer ‘No’ to the questions:
They will then be asked ‘What is the name of the employer?’ and the claim can proceed.
Prior to 7 May the claim had to be made in one session, you could not save it and go back to it. From 7 May claims can be saved so you can go back and finish them later. You should print or print to pdf once you have finished completing the claim so that you have a copy for your records. Once you have submitted the claim you will get a confirmation screen with a reference number. No email confirmation will be provided so you should print or note down the reference number.
You must calculate the amount to claim, HMRC will not do it for you. HMRC have provided an online calculator but this cannot be used in some circumstances including for directors and those who are paid annually. You should keep a full record of your calculations. Care should be taken with calculations as claims cannot be amended once made.
HMRC have said that they will retain the right to retrospectively audit all aspects of your claims and payments may be withheld or have to be fully repaid if HMRC find that they are based on dishonest or inaccurate information or if they are fraudulent.
A Treasury Direction issued on 22 May 2020 makes it clear that the written agreement for the employee to cease all work has to be retained by the employer until at least 30 June 2025 and must:
Tax Treatment of the Job Retention Grant
VAT implications Added 19/5
HMRC have not provided any guidance as to whether the grants under the CJRS will be subject to VAT or count towards turnover for VAT registration limits. Normal principles are expected to apply meaning:
Steps to take when furloughing workers
We assume that once information has been submitted you will receive your grant from HMRC. HMRC have said that payment should be made within 6 working days.
At a glance
Directors of small companies
Furlough v Redundancy?
Letter to employee
Employee response form
Overview and examples
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