The world of COVID 19 is a totally new one for everyone, and that includes business owners. Many do not know what to do for the best for everyone that includes the business, their customers, their staff, the community at large and themselves as business owners and workers. The main advice at the moment seems to be stay at home. How does an employer follow this general advice, keep the business running and keep employees paid?
The Government has announced many different options designed to help the business owners. Some may have more success than others. However, it appears that the most straight forward tool that is available is the “Furlough Scheme”. Of all the announcements this seems to be one that will have an immediate positive impact.
The actual formal name is the Coronavirus Job Retention Scheme. The aim of the scheme is to allow all UK employers with employees on a PAYE scheme to designate those employees as ‘furloughed workers’. The employer will have access to Government support to continue paying part of these furloughed employees’ salaries and protect the employees from redundancy. This scheme has commonly become known as furlough.
What is furlough?
Generally furlough means to grant leave of absence to someone. Until now this phrase has not had any meaning in UK law and has been temporarily introduced by the Government to allow employers to keep staff on the payroll in circumstances where they may have laid them off due to lack for work.
All employers or any size are eligible for the scheme provided they had created and started a PAYE payroll scheme on or before 19 March 2020 and have a UK bank account.
Under the scheme furloughed workers will receive either 80% of their regular wage or £2,500 per month, whichever is lower. Employers can choose to top up the employee’s salary above 80% but they are not obliged to. All of the monies paid by the government must be paid to the employee. Employers must not divert any part of the reclaimed grant, for example by deducting administration charges.
Which Employees are eligible?
Employees on the payroll on 19 March 2020 including:
- full-time
- part-time
- agency employees on agency contracts (provided they are not working at all)
- zero-hour contract workers (provided that they are employees albeit on flexible contracts).
Any employee on sick leave can be placed on furlough once the sick leave has ended, provided there is no work for them to do,
Employees must be consulted and agreed to be furloughed. An employer must keep details of the decision to furlough and the employees’ agreement for at least 5 years.
The period of the furlough must be for a minimum of 3 weeks and the employee cannot do any work for the employer in that period.
How to apply
The Government has announced that it will have the portal for making the claim on line from 20 April 2020. The employer will need to have registered with the HMRC web site and have login details. If the employer uses a PAYE agent they may make the claim on their behalf, but they should check with agent first to ensure that they are doing this.
To make the claim you will need the following information:
1. The number of employees being furloughed
2. The date the employees have been furloughed to and from
3. Details of employees – the name and National Insurance Number of each furloughed employee
4. Your employer PAYE scheme reference number
5. Your Corporation Tax Unique Taxpayer Reference, Self-Assessment Unique Taxpayer Reference or Company Registration Number as appropriate for your entity
6. Your UK bank account details
7. Your organisation’s registered name
8. Your organisation’s address
You then need to calculate the claim (the PAYE agent should be able to assist with this). The claim is calculated looking at:
1. The total amount being paid to furloughed employees (up to 80% of £2,500 a month before tax per employee)
2. The total employer NICs
3. The total employer pension contributions (up to 3%)
You must keep the calculations of the claims in case HMRC need further information,
Then go online to make the claim (it must be made on line) you will need a Government Gateway ID and password and an active PAYE enrolment.
Claims can be made from 20 April 2020. Once received HMRC will verify the claim and payments should be made in six working days.
Once a claim is made the employees should be notified.
As with everything in this brave new world we wait to see how the system copes, whether there are any queries from HMRC on the validity of claims (now or in the future) and how efficient the portal is.
We at NTF would love to hear your experiences of the Scheme once you have used it so please leave a comment below on how you found the experience.
If you are experiencing any issues at these times, or have any general queries please contact the team.
DISCLAIMER: This article is provided for general information purposes and is not to be considered legal or other professional advice. While the information is considered to be true and correct at the date of publication, changes in circumstances may impact the accuracy and validity of the information. NTF Financial Solutions Limited are not responsible for any errors or omissions, or for any action or decision taken as a result reading this article. You should consult a professional adviser for legal or other advice where appropriate.