Coronavirus Job Retention Scheme – Guidance UpdateClient Support
The guidance is finally out, and I am sure a lot of you are as relieved as I am that we can now assist with all your questions. It has been pretty manic with all the queries that previously have been difficult to answer.
The good news is that the scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020. This includes businesses, charities, recruitment agencies and public authorities. It is also good news that the types of contract include:
- Full time employees
- Part time employees
- Employees on agency contracts
- Employee on flexible or zero-hour contracts
The scheme even covers employees who were made redundant since 28 February 2020, if they are rehired by their employer, so the government are allowing you to rehire these employees and put them as a furloughed employee. BUT any employees that you have hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
There are some main points that you need to ensure you are doing to be eligible for the grant:
1. An employee can not undertake work for or on behalf of the organisation, this includes providing services or generating revenue – it is important that the staff that you make furloughed are NOT doing any work at all, from home or at the office, otherwise you will not be eligible for the grant
2. If an employee is working, but on reduced hours or for reduced pay, again you will NOT be eligible for the scheme as they are still working even though it is at reduced hours – please therefore ensure these employees that are furloughed are NOT working at all
3. You HAVE to write to the employees confirming that they have been furloughed and keep a record of this communication – so if you haven’t already done so, please write to the relevant staff advising them that they have been furloughed and the date in which this is effective from. If you need help with the furlough process or sample letters, please speak to your HR providers or employment lawyers.
As long as you have followed the above 3 points, congratulations you are eligible.
What can you claim?
You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, PLUS the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.
NOTE: Fees, commission and bonuses should not be included. HMRC has not yet confirmed if this includes tips.
The online portal will be available by the end of April, hopefully in time for making the April wage payments to staff.
How is it calculated?
Full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%.
ABC Limited employs Mr X at a salary of £36,000 per year, which is £3,000 per month. The claim is based on the LOWER of:
1. 80% of £3,000 = £2,400
2. Or £2,500
ABC Limited will receive the grant of £2,400 which is lower of 80% or £2,500, plus £231 NIC on £2,400.
ABC Limited employs Mr X a salary of £48,000 per year, which is £4,000 per month. The claim is based on the LOWER of:
1. 80% of £4,000 = £3,200
2. Or £2,500
ABC Limited will receive the grant of £2,500 which is lower of 80% or £2,500, plus £245 NIC on £2,500.
Variable paid employees
If the employee has been employed for a full 12 months prior to the claim, you can claim the higher of either:
- The same months earnings from the previous year
- Average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started.
What do you need to make the claim?
To claim, you will need:
- your PAYE 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)
- your bank account number and sort code
- your contact name
- your phone number
It is worth mentioning that you are also required to have a UK bank account; therefore, this may be an issue for international companies which have a UK PAYE scheme.
If Rickard Luckin are your payroll provider, we will begin to collect all the data required in preparation for the launch of the online portal to ensure our clients get the grant as early as possible.
If you require any support or are concerned regarding your payroll, please do not hesitate to contact our Head of Payroll, Hannah Dumenil on [email protected]
to ask her any questions you may have.