HMRC will reimburse 80% of furloughed workers wage costs up to a cap of £2,500 per month per employee. The scheme will be in place for 3 months and if needed, be extended until the health crisis is over. Employer Q&A: Coronavirus Job Retention Scheme, your questions answered here.
HMRC are currently creating a new online portal so that all UK employers, regardless of size, will be able to seek assistance if they have employee(s) who have been designated as ‘furloughed’ workers, known as the Coronavirus Job Retention Scheme.
if you are an employer, you must determine which of your employees are ‘furloughed workers’ and inform them.
What is a ‘furloughed’ employee?
The word furlough generally means a temporary leave of absence from work.
A furloughed employee is someone who rather than being dismissed for redundancy by their employer, is kept on the payroll during a period where the employer does not have any work for the employee.
There is an employment law aspect to this. Employers will need to consult and agree on which each employee that they are being furloughed.
When date will it apply ? Will I be able to pay my staff their March wages?
The Scheme will be backdated for wages from 1 March 2020 although it will be some weeks before payments under this scheme are made to employers, around the end of April.
How long can I keep my staff in furlough for?
The scheme is in place for 3 months initially and it will be reviewed as and when that becomes necessary.
Does the scheme apply to all employers?
It applies to all UK businesses, regardless of their size. It also applies to charitable and not for profit businesses too.
This is a grant offered by the government and does not need to be paid back.
Can an employee work whilst they are furloughed?
To qualify for the scheme, employees must not undertake work for the employer whilst they are furloughed.
What is included in the 80% cover per employee?
As far as we aware currently from the guidance provided by the UK Government, the 80% reimbursement refers to earnings and wages costs.
Details of how and if bonuses and benefits will be taken into consideration have yet to be released.
There is currently no guidance as to whether it includes employer pension and national insurance contributions.
What if the employee is already off work and receiving Statutory Sick Pay (SSP)?
It is not yet clear to what extent employers will be able to furlough employees who are currently on SSP.
Does it apply to all employees, including directors of a limited company?
It is unclear to what extent this can apply to a director and personal service companies.
The 80% wage guarantee will not cover zero-hour contracts or casual workers unless they work on the PAYE system.
The self-employed are not covered by this scheme.
As an employer, do I have to supplement employees’ salaries over the 80%?
According to guidance, an employer does not need to supplement over the 80% offered, but they can if they wish to.
A widely held opinion is that employers can choose whether to:
- Only make the salary payment (80%, capped at £2,500) reimbursed by the government.
- Pay all of the difference between the grant and the employee’s normal salary.
- Pay part of the difference between the grant and the employee’s normal salary.
Guidance on the full mechanisms of payment are yet to be released.
What can I do in the meantime for cash flow?
If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.
You may consider the possibility of using this money to ease immediate cash-flow issues in order to furlough employees. The aim being to pay it back within 12 months when they are reimbursed under the Job Retention Scheme.
If you have any further queries regarding the above please do not hesitate to get in touch or email us at support@southsideaccountants.co.uk.
Written by Shaima Todd
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