Coronavirus: HMRC Job Retention Scheme- what we know so far
On Saturday the Government made some pretty impressive announcements relating to supporting businesses who have seen a downturn in work due to Coronavirus. In particular, we are being asked for information on how the job retention scheme will work and what is on offer.
As with our other recent factsheets, we don’t have all the answers and we are working in uncertain times, but we have done our best to give you our interpretation of the announcement. This will be updated as and when we know more.
All information is subject to legislation that is yet to be finalised. We are expecting to see legislation at some point in the upcoming week.
All businesses need to keep a watchful eye on the Gov.Uk website where much of the information is contained. https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses
The aim is to reimburse employers up to 80% of salary payments paid to employees if they are not able to work due to there be being no work available. There is a cap of £2500 per employee and we don’t at this point know whether the £2500 will be net of tax or gross, or whether it will include all costs associated with employment i.e. pension contributions.
HMRC has not yet set up the portal and mechanism for reimbursement so the business must make the payment and seek reimbursement when it’s up and running.
The concern for many is whether the business has enough cashflow to allow for salary payments to be made. You can make use of the grants and loans, VAT and business rate holidays to provide immediate relief on cashflow.
Steps to take
- Identify who in your workforce will be “furloughed”. This is the term used by the Chancellor, but it has no defined meaning in terms of UK employment law, so let’s not get hung up on the word! Essentially, you need to agree with those employees who do not have work to do, and who you wish to keep on your payroll, that they will for a period of time not be expected to work and will receive up to 80% of their salary with a cap of £2500 per month. You do not need to apply selection criteria to select designate employees as furloughed and we would advise asking for volunteers in the first instance.
- Be aware that if you are not topping up the 20% (there is no obligation on the employer to do so) this is technically a deduction of wages. To protect the business, its best to get written consent from the employee.
- There are unlikely to be many employees who do not agree. The alternatives are less attractive (see below).
- Submit information about these employees to HMRC when their system becomes live. We assume that there will then be payment to the employer but we don’t know how this will work. We do know that the checks HMRC will carry out to protect against abuse and fraudulent claims will be stringent and HMRC will seek to claw back incorrectly issued funds.
- We do not know what the tax implications are yet.
- You should consider re-hiring employees who you have recently made redundant, so long as they were on your PAYE on 28 February, they will be eligible.
- Furlough should not be rotated around different employees.
- HMRC will claw back any fraudulent or incorrect payments made.
- For those with irregular earnings please follow this link to Gov.uk which details how their payment will be calculated. https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme#employees-you-can-claim-for
- Employers who are on long-term sick or currently off sick do not have to be furloughed and cannot ‘return’ to work to benefit from the scheme, unless they are able to actually carry out duties.
- Employees are not permitted to take on additional employment whilst on furlough leave.
- Disciplinary procedures and other internal procedures can be continuous with employees who are on furlough leave.
- You may still undertake a redundancy process with employees who are on furlough leave.
Just to clarify- there are alternative measures which might be more appropriate in your circumstances so don’t dismiss these in favour of the furlough. See our previous FAQS https://bhayanilaw.co.uk/coronavirus-latest-update-for-employers/
- If your employee is unwell, they will be entitled SSP or company sick pay as per your contract of employment or sickness absence policy
- If your employee is self-isolating because someone else in their household has symptoms and provide you with a self-isolation note (https://111.nhs.uk/isolation-note/), they will be entitled to SSP.
- If you are likely to have no need for the employees going forward due to significant decline in your business, or a permanent closure, you may need to consider redundancy of some or all staff and you can contact us for advice.
- If your employee is staying at home for childcare reasons they are entitled to unpaid leave.
- If your employee is undertaking a job which is still needed but they are working from home, you need to continue to pay their salary as normal. The Coronavirus Job Retention Scheme will not apply while employees are completing their duties, even in reduced capacity.
- Zero hours workers are eligible for the Coronavirus Job Retention Scheme if they are on your PAYE payroll and were on the 28 February 2020. Please follow this link to Gov.uk which details how their payment will be calculated. https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme#employees-you-can-claim-for
- Holidays will accrue during the furlough period at the employee’s full-time rate.
- The employees will be entitled to any benefits they are due under the contract of employment during time spent as a designated furloughed worker unless you specify otherwise.
- The Coronavirus Job Retention Scheme will not lead to a breach of the National Minimum Wage or National Living Wage as a furloughed worker is not to complete any duties during any period spent as designated furloughed worker.
- During a period of lay-off, employees become entitled to a redundancy payment after 4 weeks of continuous lay-off, we do not believe that this will apply to designated furloughed workers.
The importance of procedures and employment law
The Government website makes it clear that everything you do is still subject to normal employment law considerations so you MUST follow processes if you want to protect the business against employment tribunal claims. Sadly, we have already seen employees raising grievances where their employer has not followed the right procedure in making them redundant, as well as unlawful deduction from wages claims.
How can we help?
If you are an existing Watertight client most of our advice and letters will be included in your package cost, so please check with us before you take action.
For ad hoc help we can give you some free advice through our regularly updates factsheets, or we can give you a cost for letters and advice.
Most of our advisors are working from home currently and its business as usual for the time being.
Call us on 0114 3032300/02033292080 or email [email protected]