The Job Retention Scheme is a really important tactic for businesses looking to retain good employees and save cash. We’ve updated our notes on the scheme, which is copied below for reference.
Updates (including guidance 4/4/2020)
- HMRC will be the body that administers the grant scheme.
- Now confirmed that Charitable and not for profit organisations will be eligible.
- Whilst the scheme is backdated to the 1 March grants will only be available when employers have agreed furlough terms with their employees and they have stopped work, subject to employment law in the usual way.
- Available to all employees on the payroll at 29 February.
- The employer will pay the employee through payroll and as such RTI submissions will still be maintained. This actually makes a lot of sense as it is a system that already works well.
- Relevant employees must be designated as furloughed employees.
- The scheme will not cover dividends where directors/ shareholders of owner managed companies pay small salaries and the balance as dividends.
- The grant will cover all employment costs including; salary, employer pension contributions and employer NIC.
- The grant will be taxed and should be included in the profits computation for the relevant year.
Illustration (taken from the ICAEW article) shows how the grant would be calculated. Note assumes no pension payments. If a pension was paid (i.e. Mr A was opted in) the grant would cover this too being 80% x (£2,000) + Ers NIC + Ers Pension subject to the £2,500 cap. Note that the Ers NIC and Pension will be calculated using the new 80% salary as reference.
What you’ll need to make a claim
To make a claim you will need the following information:-
- your ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (see note – how much can you claim)
- your bank account number and sort code
- your contact name
- your phone number.
HMRC advise that business owners will need to calculate the amount you are claiming. However, HMRC will retain the right to retrospectively audit all aspects of a claim.
HMRC advise that claims can be made using payroll data either “shortly before or during running payroll.”
How much you can claim?
- 80% of your employees’ wages up to a maximum of £2,500.
- Minimum automatic enrolment employer pension contributions on the subsidised wage.
- Grants will be prorated if your employee is only furloughed for part of a pay period.
- Claims should be made from the date the employee finished work and starts on furlough leave, not when the decision is made or they were written to.
- Employers National Insurance contributions.
One of the problems with the scheme is the delay in being able to make claims and receive funds. The grant covers a period of three weeks and could split a payroll period if it falls in between. If an employee was furloughed on 20 March there could be 11 days available for the March claim.
The employer would need to pay the employees net pay on 31 March and 30 April well before potentially being able to make a claim in early May for receipt sometime in mid to late May.
Whilst we can’t be sure this will apply for all businesses, Banks may be willing to extend or arrange overdrafts for a limited time for the amounts expected to be claimed.
For advice on how you can implement this scheme including HR, Payroll, support making claims and working through cash flow please contact our team dedicated to dealing with the Job Retention Scheme; Lucy Pitfield, Simon Hall and Steph Smith on 01522 81 5100.
Original Article (published 21 March)
The Government has announced a new scheme to protect people’s jobs during the crisis. The scheme is open to all UK businesses and will see the Government pay part of the wages of employees that would otherwise have been laid off. The scheme will be open for an initial three months from 1 March however Rishi Sunak said “… and I will extend the scheme for longer if necessary”.
This is a grant from the Government, not a loan, so it will not need to be repaid.
To access the scheme employees, or certain employees, need to be designated as “furloughed workers”. You will need to notify these workers of the change, in writing (email will be fine) making sure you follow a fair selection process.
It’s worth noting that the Government is not changing employment law to allow this to change in status. Therefore, making this change to an employee’s status remains subject to employment law.
You have the option of topping up the remaining 20%, but it is not mandatory.
You must not make the employees redundant and guidance will most likely be issued, in due course, about the time frame the Government expects you to keep them employed after society and business can return to normal. If you have already laid staff off, you can reverse this decision if you wish, as this scheme is backdated to 1st March.
HMRC are developing a system that will allow employers to provide this information through an online portal and once processed they will issue reimbursement. At the time of writing this (21 March 2020) there was no method of reimbursing these costs and the system isn’t expected to be available until April. Therefore, managing cash during this intervening period is still crucial (see our advice about cash flows).
There is a cap on the reimbursement of £2,500 of the employee’s wage costs per month, based on their regular salary. It should also be noted that the employee should be shown on the February pay run and that a claim will be possible for periods from 1 March 2020.
It is not clear yet how much those on zero hours’ contracts or fluctuating wages will be treated, but it is expected that it will be either the amount which was paid through last month’s payroll or an average of the past few months.
Careful planning and consideration of employee’s contracts of employment is required when considering this scheme but it is certainly a significant boost to companies in what are unprecedented times.