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How to ‘furlough’ employees and company directors

How to furlough staff and company directors

We are guiding many clients through the process of ‘furloughing‘ employees. In addition, as we have previously indicated, company directors are also eligible to be furloughed – and we are guiding our clients through this process too.

An update has been made by the Government to the Job Retention Scheme (or ‘80% scheme’) which you can see here and officially confirms:

  • company directors are eligible to be furloughed.
  • the minimum period for each employee to be furloughed is 3 continuous weeks (the word continuous is part of the updated legislation).
  • employees can be furloughed multiple times, but each claim is for a minimum of 3 continuous weeks.

The information required by an employer in making a claim on the HMRC portal is:

  • your ePAYE 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 consecutive weeks)
  • your company bank account number and sort code
  • your contact name
  • your phone number

There are still some questions that the update doesn’t answer. Specifically, these are:

  • when the online portal for making a claim will be ‘live’  – HMRC guidance still refers to ‘the end of April’, but is not specific.
  • whether the 3 continuous weeks (requirement) can span a month, so that employees can return to work for short periods of time, but employers can continue to claim furlough.
  • how quickly payments for furlough will be made.

Do you need more help in furloughing staff?

We are looking at launching a new specific service to help clients make their furlough claims in the correct way. If this is of interest please email Murray Patt now so that we can assess the level of demand – and then provide the necessary resource in-house to support you.

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More clarity about how the ‘80%’ scheme works

We’ve been closely monitoring the support being made available by the Government. In particular, we’ve been keen to get more details about the Job Retention Scheme (often referred to as the ‘80%’ scheme).

Further details on this particular scheme are now available directly here.

Key issues

The main aspects of the scheme which are most relevant to you (based upon our review of the rules and feedback we’ve received from the clients we have been discussing this with in detail) are as follows:

  • There doesn’t appear to be any restriction for directors/family member, which was one of our initial concerns – so everyone may apply.
  • Companies will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.
  • Furloughed employees must have been on your company payroll on or before 28 February 2020
  • If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can 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 has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

  • You can choose to provide a top-up salary in addition to the grant. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme
  • Grants will be paid by BACS, after providing your bank account details, although there is no timescale for home quickly companies will be reimbursed.

This is a very rapid piece of legislation and is consistent with the Governments initial announcement. The main issue still not resolved is the timescale from submission of a claim to payment. Be assured that we will keep monitoring the situation and share key details and updates as they emerge.

If you require specific advice and support to implement this scheme in your business please speak directly to Murray Patt.

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How to implement the ‘80% of salary’ ‘Job Retention Scheme’

How to implement the '80% of salary' Job Retention Scheme

In these challenging times and with many businesses looking for answers to questions about the Government backed support, the following information, which relates to payroll & staff costs, may be useful to you:

Support for Businesses through the Coronavirus Job Retention Scheme

  • The scheme will enable businesses to recover 80% of wage costs for employees on ‘furlough leave’ – which is an entirely new concept and is a new class of indefinite leave where the government will reimburse the employer for wage costs.
  • This has been introduced as an alternative for employers who might have otherwise implemented redundancies, lay-offs, unpaid leave or other measures for their employees.
  • All UK businesses are eligible to claim under the scheme. It seems that employees will be covered, but not other workers (such as casual staff or contractors) or the self-employed, although we expect support for these classes of worker to be announced shortly.
  • The government has announced that the scheme is available for at least three months from 1 March 2020 and will be extended if necessary.

 What costs can employers recover?

  • The coronavirus job retention scheme allows for 80% of wage costs to be recovered up to £2,500 per month per employee. There is no limit on the number of employees or the duration. Wage costs are expected to include wages, pension contributions and employer national insurance (NI) contributions, although this has not yet been confirmed.

What do employers need to do?

  • Employers and employees will need to agree the members of staff being designated as ‘furloughed workers’. This should be straightforward because this route will no doubt be more attractive to employees than redundancy, lay off, unpaid leave or a reduction in pay.
  • We recommend employers send a letter/email to each employee concerned and get them to agree to the change in status formally in writing.
  • Employers will then need to submit details to Her Majesty’s Revenue and Customs (HMRC) through a new online portal, which is being set up urgently.
  • The portal is expected to be in place by the end of April, so the 1st claim will cover the months of March & April 2020.
  • The timescale for payments to businesses is not yet known.

Does the employer have to top up the employee’s pay to 100%?

  • No, they do not. Some employers may wish to make up the shortfall, while others may not be able to. This just needs to be made clear to all employees concerned.

What about employees that have already been dismissed or taken unpaid leave?

  • The scheme is backdated to 1 March 2020 and employers are urged by the government to take back anyone they had already dismissed and convert them to this leave instead. Likewise, with anyone who is on unpaid leave.

What situations will this not help with?

  • Furlough leave is recommended for anyone that would have otherwise been laid off or made redundant due to the impact of coronavirus on the employer’s business.
  • It does not help with any situations where employees had agreed to reduce their hours, or to a pay cut but where they are still required to work. There is currently no option to do a mixture of reduced hours and furlough leave.

Support for Businesses who are paying sick pay to employees

All small and medium-sized businesses and employers will be able to reclaim Statutory Sick pay (SSP) paid for sickness absence due to COVID-19.

The eligibility criteria is as follows:

  • The refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
  • Employers with fewer than 250 employees will be eligible – the size of an employer will be determined by the number of people they employed as of 28 February 2020
  • Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
  • Employers should maintain records of staff absences and payments of SSP (if we look after your payroll this matter is already being dealt with for you), but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website
  • Eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force
  • The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible

Further information is being provided by the Government regularly and you should keep up to date with these fast moving developments.

If you have any questions please do not hesitate to contact Murray Patt, or a member of my team – we are all working remotely, fully operational and we are available to speak with you.

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