Coronavirus job retention scheme

The scheme was put in place to stem the flow of businesses who faced no other choice but to lay staff off. Now, with the option to furlough staff instead, businesses can make more informed decisions, and their employees will be able to receive 80% of their wage whilst they are furloughed.

There are still a number of details that need to be released from the government and we expect to have these over the next few days, so caution should be exercised at this point. We have however, collated several FAQ’s that we have received from our clients and we hope this will answer some questions you may have.

FAQs

What does furlough mean?

The term ‘furlough’ relates to the temporary leave of an employee or employees due to the special needs of a company or employer, attributable to the economic conditions at a specific employer, or in the economy.

Which employees can be furloughed?

Any employee who would otherwise be laid off. Many people are unable to work from home, including those with jobs in restaurants, pubs or shops. But it may also be office workers who have no work now, due to the UK shutdown.

How do I furlough a worker?

The employer must tell the employee to stop working, so no answering emails or taking phone calls. The employer must change the employment status of the employee to ‘furloughed’ and notify each employee of this change, with an effective date. Employee contracts may need to be updated and we suggest you contact an Employment Law specialist in this regard. We can provide you with a directory of Employment Law firms who will be happy to support you during this period.

What date does the Coronavirus Job Retention Scheme start from? Can payments be backdated?

The furlough period will be effective from 1st March 2020 and in place for up to three months but will be extended ‘for longer if necessary’. The scheme will be backdated to the same date (useful for employers who have already had to make layoffs) and will apply for employees who were on the payroll as of the 29th February 2020.

How do employers apply for the grant and do all employers qualify for this scheme?

All UK businesses are eligible. Government advice refers to businesses who have a PAYE reference.

In order to apply, you will need to:

  •  designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required in due course)

Your agent, will we be able to process the application on your behalf?

At present, we are awaiting clarification as to what access we will have, as your agents, to complete the forthcoming application forms on your behalf. If we are unable to access the application form for you, then we will work together with you to support you through the process.

Do employers have the option to pay employees 100% gross salary and claim 80% (they fund 20%) or pay 80% of gross salary and recover all that?

The reporting guidelines have not yet been released but you can choose to pay your employees their full wage, however, you will only be able to claim back 80% of these employment costs, up to a monthly capped amount of £2,500. You do not have to pay the additional 20% to top up their wage, however, you will need to let staff know what you intend to pay them.

How will the employers receive the reimbursement and how long before they receive the grant?

HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

The Chancellor has stated that the first payments are expected to be processed in a few weeks’ time, with an aim of the end of April 2020. We have been told the current system is not set up to make payments to employers, so this will take time. Businesses who cannot afford to wait until then are urged to consider the other business support measures introduced by the Government, such as business interruption loans and other tax relief measures.

Does the reimbursement include ER NIC’s and ER’s Pensions Contributions costs?

Guidance states that reimbursement will be 80% of ‘employment costs’ up to a cap of £2,500 per month. It is our understanding that this will include employers’ NIC and pension contributions, but this is not a confirmed point. It is understood that wages will be determined by reference to a defined period (yet to be announced).

SSP RULES FOR CORONAVIRUS

How long should you stay at home?

  • If you have symptoms – a high temperature and a new continuous cough – you will need to stay at home for 7 days (if you are not already self-isolating and have to leave the house for work/If you are a keyworker etc) – you can get a fit note from NHS 111 online https://111.nhs.uk/covid-19
  • If you live with someone who has symptoms, you will need to stay at home for 14 days from the day the first person started having symptoms (if you are not already self-isolating and have to leave the house for work/If you are a keyworker etc) – you can get a fit note from the NHS website https://111.nhs.uk/isolation-note/
  • If you are high risk, then the NHS will contact you in writing.

What SSP is payable?

  • The three-day waiting day rule does not apply to COVID-19 related illness. SSP is payable for 1 or 2 weeks in full at the statutory rate and will be refundable for employers with fewer than 250 employees as at 28 February 2020.
  • Standard SSP rules apply for further/longer absences.
  • Fit Notes are not required but may be claimed from the link above, if the employer requires you to produce one.

Can employees who own shares in the business be furloughed?

This has not been addressed directly yet, but we believe that if the employee would qualify for furloughed status, they should not be excluded from the scheme. This makes sense on the basis a shareholding employee could still be made redundant.

Can company directors be furloughed?

Directors would need to show that they are not working (effectively laid off) to be furloughed but we believe this will be difficult to achieve, as Directors are ‘office holders’ and as such are effectively running a live company; which we consider would exclude them from being furloughed.

This question has not been addressed by the government yet and our view is based on the interpretation of the ‘no work’ requirement. We are expecting this to be included when further detailed guidance is published.

Low salary, dividend arrangements in Personal Service Companies. Can the low salary be increased to take advantage of the 80% grant?

Despite the 80% grant being available from 1st March 2020, we expect there to be a prior qualifying reference period which will determine the level of salary. If the director or a family member employed in the business was able to and received an uplifted salary in order to gain a larger government grant, it is highly likely to be challenged by HMRC.

Does the 80% include pension payments?

Although this must be confirmed when the final details are published, indications are that like Employer Class1 national insurance pension contributions, for employees who have not opted out of Auto-enrolment, these will be included in the 80% of wage consideration.

What about employees on zero-hour contracts? Can they be included as furloughed employees if they have no pay in the reference period?

We do not know at present and are awaiting guidance on this question. However, the Chancellor has made a commitment for the scheme to cover as many employees as possible.

If you would like to know more information please contact your local Baldwin office 

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