The Coronavirus Job Retention Scheme was introduced in March 2020 with the intention of helping employers affected by the Coronavirus (COVID-19) pandemic to keep employees on their books rather than having to lay them off.
In essence you can ‘furlough’ employees, giving them a special leave of absence. You will continue to pay them either their full wage (at your discretion) or the amount covered by the Job Retention Scheme. This is equal to 80% of their wages plus the associated Employer National Insurance contributions and pension contributions, capped at £2,500 per month.
It is a temporary scheme initially running for four months, although it can be extended if necessary. Payments can be backdated to the start of March.
Am I eligible as an employer?
In order to qualify you must have been operating a PAYE payroll scheme on or before 19 March 2020. You also need to be enrolled for PAYE online and have a UK bank account.
Any employer can apply for the scheme, including businesses, charities, recruitment agencies and public bodies.
The scheme is intended for employers who cannot otherwise maintain their workforce due to coronavirus but there is no requirement to prove that this is the case as the current situation is assumed to have affected every employer.
Who can be furloughed?
You can claim for employees on employees on all types of contract, including full-time, part-time, zero-hour and flexible contracts. This also includes foreign nationals and people on all categories of visa.
The employees must have been employed and on your PAYE payroll on or before 19 March 2020. This means you must have made a Real Time Information (RTI) submission to HMRC by this point. This is a change to earlier guidance, which set the original cut-off date at the end of February.
For employees who were made redundant or stopped working for you after 28 February 2020, you can re-employ them and then put them on furlough. You can only claim for the 80% of their wages from the date at which you re-employ them. They must have been on your payroll on or before 28 February 2020, with the appropriate RTI submission made to HMRC.
Employees who were made redundant after 19 March 2020 can also be re-employed and their wages claimed for from the date of re-employment. Again, they must have been on payroll on 19 March 2020 with an RTI submission made.
The Government has issued full guidance on eligibility for the scheme, which can be viewed here.
How do I furlough an employee?
Employees affected by the scheme must be informed by writing and they must consent to being furloughed. You should discuss your intentions with staff and make any changes to the employment contract by agreement. This means the change in status may be subject to negotiation. If sufficient numbers are involved, collective consultation or a collective agreement between the employer and a trade union may be undertaken.
It’s worth noting that existing employment laws still apply, including equality and discrimination laws when deciding who to offer furlough to.
Not every employee needs to be put on furlough as it may be the case that you can continue to operate to a limited degree with a reduced workforce. Any employee who is put on furlough is not allowed to undertake any work for you and must be furloughed for a minimum of three weeks. It has been made known that HMRC will take abuses of the scheme, such as asking a furloughed employee to work, very seriously. Employees can continue to train, as long as this does not make money or provide services for the employer or any entity linked to the employer.
Employees can return to work after an initial furlough period and can potentially be furloughed again, for another minimum period of three consecutive weeks.
What do I pay furloughed employees?
You can pay the furloughed employee, on a monthly basis, either 80% of their regular wage or £2,500, whichever is lower.
You can also choose to pay their full wage or top up the payments but this is at your discretion. You will still only be able to claim back a maximum of 80% of their regular wage, capped at £2,500.
You will still need to pay employer National Insurance and pension contributions on behalf of your furloughed employees, but you can also claim for these under the Job Retention Scheme.
How do I claim back the wages?
You can claim back a maximum of 80% of your furloughed employees wages, up to a maximum of £2,500 per month, plus associated National Insurance and pension contributions, via the Government’s Job Retention Scheme online service.
You will need a number of details, including your employer PAYE scheme reference number and each employee’s National Insurance number. You will also need to work out the full amount you’re claiming for including employer National Insurance contributions and employer minimum pension contributions.
If you are claiming for 100 or more employees you will need to upload a file with their details and related information.
Alternatively, you can use an agent who is authorised to do PAYE online for you to make the claim on your behalf. They will be able to work out the amounts being claimed for and undertake the claims process.
After claiming you will receive a claim reference number. HMRC will check the claim and pay the amount into your bank account via BACS within 6 working days. Due to the high demand at this time, employers are asked not to contact HMRC unless they have made a claim that has not been paid after 10 working days.
You are required to keep all relevant records, inform your employees that you have made the claim and pay them the appropriate amount if you have not already done so.