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Furlough and Job Retention Scheme - Updated

How does furlough work and who is eligible? 

Furlough is backdated to 1st March and is available for employees on the payroll at 28th February 2020. All UK businesses are eligible. Any employee who was made redundant after that date but who was employed at 28th February 2020, can be re-employed and furloughed. The scheme pays a grant not a loan to the employer which will be paid to the employer through a new online system which is currently being set up for this purpose. We do not have any details about the application process at the moment. There is uncertainty as to whether you can claim now and then pay the staff once you receive funding as there is currently no clear guidance on this. If this is the case, a separate paragraph will need to be included in the letter to your employees explaining this.

Submission of Claim 

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

What to do after you’ve claimed

Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.

You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.

You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.

Can employees move in and out of furlough?

We have had many clients asking if workers can be moved in and out of being furloughed if work becomes available to an employer and then ceases again. The scheme is being designed to allow for flexibility so that furloughed staff can be brought back to work e.g. to replace those still working who later become sick. An employee must remain on furlough for a minimum period of three weeks, although a further period may immediately follow the previous furlough if agreed.

Accessing help through Business Interruption Loan Scheme

As the furlough system will take time to build, businesses should in the meantime, look to the Coronavirus Business Interruption Loan Scheme to support cash flow. The guidance issued so far says: ‘if your employer cannot cover staff costs due to COVID-19 they may be able to access support’. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined.

How much is the Grant?

The maximum grant will be calculated per employee and is the lower of 80% of an employee’s regular wage and £2,500 per month PLUS the associated employers’ NI contributions (NIC) on this amount and the minimum auto enrolment employer pension contributions on that wage. Fees, commission and bonuses should not be included.

This provides a maximum cap of £2,500 plus £245 (employers’ NIC) plus £59 (auto-enrolment pension contribution) so a total possible grant of £2,804

Should I continue to pay 100% of salary even though the Government are only subsidising 80%?

You need to consider the circumstances as well as the ability of the business to continue to pay the salary. Your employees who are continuing to work may be disgruntled if they are working and receiving the same pay as an employee who is at home taking things easy.

Can directors be furloughed?

In theory directors can be furloughed in the same way as other employees. However, a condition of furloughing is that the individual must not undertake work of any kind for the company during this time. This is harder for a director to justify, particularly if they are the sole director. It may be necessary for the director to notify all suppliers, customers and other business contacts that the business has been suspended pending the end of the Coronavirus crisis. In many cases this is impractical and undesirable because the director may wish to use this time working on improving the business so that when trading recommences the business performs well quickly. In these circumstances, furloughing is not permitted. Remember also that this only relates to PAYE income, not dividends.

How is payment assessed for Zero hours contracts?

Their average pay is expected to be based on earnings over a period. The period of averaging has not yet been announced but a 12-week period seems likely.

As previously mentioned, guidance is changing quickly and we shall continue to update you as matters become clearer. However, please remember that we are here to help you and will do all we can to support both you and your business through the weeks and months ahead. Please do get in touch if you have specific queries.