JOB RETENTION SCHEME

FAQ's

Employers can apply for grants of 80% of furloughed employees' (employees on a leave of absence) monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage, provided they keep the worker employed.

The scheme will cover the cost of wages backdated to 1 March 2020, if applicable. This funding will be open to all employers with a PAYE payroll scheme that was created and started on or before 28 February 2020, including charities.

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

Q1: What does ‘furloughed’ mean?

It means putting employees on temporary leave of absence where they do not work but are retained on payroll and resume their duties when they are needed again.

Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

Q2: Is any work allowed when on furlough?

Employees that are being furloughed are not to undertake ANY work during that time.

Q3: What is the minimum furlough period?

The minimum period of furlough is 3 consecutive weeks. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.

Q4: Can directors be furloughed?

Directors and owner-managers can be furloughed as long as they are on PAYE payroll. They will still be allowed to undertake statutory duties and obligations such as filling their accounts whilst they are being furloughed so that would not count as doing work.

Q5: What about salaried Members of Limited Liability Partnerships (LLPs)?

Members of LLPs who are designated as employees for tax purposes (‘salaried members’) under the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 are eligible to be furloughed and receive support through this scheme.

Q6: Does the scheme apply to all employers?

Yes, all employers can access the scheme provided they have a PAYE scheme in operation; there is no restriction on size or type. It also applies to not for profit organisations.

Q7: What do employers need to do?

You will need to designate which of your workforce will be furloughed employees and then submit that information to HMRC, along with each employee’s earnings.

Employers should write to their employee confirming that they have been furloughed and keep a record of this communication.

Q8: What about companies in Administration?

Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme. However, HMRC would expect an administrator would only access the scheme if there is a reasonable likelihood of rehiring the workers. For instance, this could be as a result of an administration and pursuit of a sale of the business.

Q9: What if only some of your employees are furloughed?

If you are not placing everyone on furlough, you should consider carefully which employees it applies to and think about those workers whose skills will continue to be in demand. It may be worth getting advice from employment law/ HR specialists as the decision may result in discrimination claims from those who allege they were made to do it because of their age, disability or pregnancy.

Q10: How much can employers claim?

When employers have designated which employees are being furloughed and notified HMRC of their earnings the employer will then receive a grant to cover the 80% their wages. The grant will be liable for income tax and employee national insurance contributions (NICs).

The way you work out your employees’ wages is different depending on what type of contract they’re on, and when they started work. 

For salaried employees (full time or part-time) Claim for the 80% of the employee’s salary, as of 28 February 2020, before tax.

Q11: What information will you need to make a claim?

- 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

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when you wrote to the employee confirming their furloughed status.

You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for.

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.

Q12: When can you start claiming?

The online service you will use to claim isn’t available yet.

HMRC are hoping to have the scheme up and running by the end of April 2020.

Q13: Is the Coronavirus Job Retention Grant Taxable?

Yes, payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

Q14: How will the grant be paid?

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 must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted.

Q15: Do employers still need to pay the full salary to the employee?
 
No, there is no requirement to do this. Employers can do so if they wish but they would need to make up the other 20%. Many employers will chose to reduce the employee’s pay to the amount funded by the government.

Q16: What about Employer National Insurance and Pension Contributions?
 
Employers will still need to pay employer National Insurance and pension contributions on behalf of furloughed employees. Those costs can be included in the claim.

Employers can’t claim for:

- additional National Insurance or pension contributions they make because you chose to top up your employee’s salary
- any pension contributions they make that are above the mandatory employer contribution

Q17: What about bonuses, commission, fees and overtime?
 
Employers can claim for any regular payments they are obliged to pay employees. This includes wages, past overtime, fees and compulsory commission payments
 
Fees, commission and bonuses should not be included in the calculation of the employees regular wage.

Q18: What about workers on zero hour’s contracts or irregular hours?
 
The Chancellor said the intention was to try to cover as broad a group of people as possible. It has been suggested (as yet unconfirmed) that the 80% test would apply to such workers’ February 2020 pay.

Q19: What about employees on short-time working?
 
Furlough requires the employee to not carry out any work, so short-time working could not continue during furlough.
 
Employers should consider re-organising work patterns to allow for some of those on short-time working to go back to full hours and the others to be furloughed. 

Q20: What about employees on fixed term contracts?
 
Employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended during the furlough period without breaking the terms of the scheme. Where a fixed term employee’s contract ends because it is not extended or renewed employers will no longer be able claim grant for them.

Q21: What about employees whose pay varies?

If an employee has been employed for a full 12 months prior to the claim then you claim for the higher of either:

- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 tax year

If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

Q22: What about apprentices?
 
Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed.
 
However, employers must pay their Apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training.

Q23: What about Apprenticeship Levy and Student Loans?
 
Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the Job Retention Scheme do not cover these.

Q24: What about Agency Workers (including those employed by umbrella companies)?
 
Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies.
 
Furlough should be agreed between the agency, as the deemed employer, and the worker, though it would be advised to discuss the need to furlough with any end clients involved.
 
Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.

Q25: What about Limb (b) Workers?
 
Where Limb (b) Workers are paid through PAYE, they can be furloughed and receive support through this scheme.

Q26: What if employees are on unpaid leave?
 
Employees on unpaid leave can’t be furloughed unless they were placed on unpaid leave after 28 February.

Q27: What if employees are on Statutory Sick Pay?
 
Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.
 
Employees who are shielding in line with public health guidance can be placed on furlough.

Q28: What about employees with caring responsibilities?
 
Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. E.g. employees that need to look after children.

Q29: What if an employee has more than one job?
 
Employees with more than one employer can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.

Q30: Which employees are not eligible?
 
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
 
If an employee is working but on reduced hours or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll subject to the terms of the employment contract you agreed.

Q31: What if an employee does volunteer work or training?
 
A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.
 
If workers are required to complete online training courses, for example, whilst they are furloughed then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

Q32: What if an employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay?
 
If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.
 
If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.
 
The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.

Q33: What about employees on National Minimum Wage?
 
Individuals are only entitled to the National Living Wage (NLW) / National Minimum Wage (NMW) for the hours they are working.
 
Therefore, furloughed workers who are not working must be paid the lower of 80% of their salary (or £2,500) even if, based on their usual working hours, this would be below NLW/NMW.

Q34: What happens when the government ends the scheme?
 
Employers must make a decision, depending on their circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
 
Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.