Covid-19 Claims for Employees Wages through the Job Retention Scheme

During these confusing times there is a lot of information for an employer or employee to take on board, we have taken some key points from HMRC’s notice on the Job Retention Scheme published on the 26 March 2020 to give an outline of the key areas to consider. As you can appreciate there will be changes and updates to these scheme’s but we will endeavour to notify you of these changes.

Overview

  • HMRC have offered support to UK Employers with a PAYE scheme to enable them to continue paying their employee salaries where they would otherwise have been laid off during the coronavirus crisis.
  • Employees will be asked to stop working, otherwise known as furloughed workers.
  • HMRC will then reimburse 80% of their wages, up to £2500 per month. This is to safeguard employees from being made redundant.
  • The minimum period that an employee can be furloughed is 3 weeks.
  • The cost of wages will be backdated to 1 March 2020 and is initially open for 3 months, but will be extend if necessary.

Key points to consider:-

  • You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
  • If the company is currently in administration the administrator will be able to access the Job Retention Scheme.
  • Furloughed employees must have been on the PAYE payroll on 28 February 2020.
  • Employees can be full-time, part-time, on agency contracts, on flexible or even zero- hour contracts.
  • If an employee has been made redundant since 28 February 2020, they can be rehired and will be covered by the Job Retention Scheme.
  • Whilst furloughed an employee cannot undertake work for or on behalf of the organisation.
  • Whilst on furlough the employee’s wages will be subject to the usual income tax and other deductions.
  • An employee who continues to work, but for a reduced rate or hours will not be eligible for the scheme.
  • Employers should write to their employees confirming that they have been furloughed and keep a record of this communication.
  • A business can choose not to put all their staff on furlough, however those staff that have been furloughed will not be able to work.
  • Employees currently on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this.
  • Employees on unpaid leave cannot be furloughed, unless they were place on unpaid leave after 28 February 2020.
  • If an employee is eligible to Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply,

 

How to claim

The online services you’ll use to claim is not available yet but HMRC expect it to be available by the end of April 2020.

You can only submit one claim at least every 3 weeks, which is the minimum length and employee can be furloughed for. Claims can be backdated to the 1 March if applicable.

What can you claim

  • Employers must make a claim for wage costs through this scheme.
  • A grant will be provided by HMRC to cover the lower of 80% of the regular wages or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.
  • Fees, commission and bonuses should not be included.
  • At a minimum, employers must pay their employees the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to do so.
  • HMRC are still to provide guidance on how employers should calculate their claims for Employers National Insurance Contributions and minimum automatic enrolment employers pension contributions. This is expected before the scheme becomes live.

Information required to make a claim

  • Both the Employer and Employee must agree to the furlough, once agreed the employer must write to the employee confirming they have been furloughed in order to be eligible to claim. A clear record of this must be kept.
  • The grant will start on the day the employee was put on furlough.

The employer will need

  • Your ePAYE reference number
  • The number of employees being furloughed
  • The claim period start and end date
  • Amount claimed (per the minimum length of furloughing of 3 weeks)
  • Bank account number and sort code
  • Contact name
  • Phone number

Finally

  • This scheme is not due to become live until the end of April 2020 but will be backdated to the 1 March 2020.
  • Payroll software companies are currently waiting for an official response from HMRC with regards to changes to be made to payroll software to accommodate the above changes. You will need to speak to your payroll software providers to see what workaround solutions they have implemented to deal with both the SSP and Furlough changes.
  • Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes.
  • Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax Purposes.
  • All information can be found at https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme