Job Retention Scheme & Furlough

What Is It? – All UK employers with a current PAYE scheme that was started before 28th February 2020 should be able to access support from the government to pay part of your employees salary to prevent the need to lay off and avoid redundancies during the Covid 19 crisis.

The Job Retention Scheme & Furlough It is expected to run for a minimum of 3 months from 1 March 2020, but could be extended. It will cover the cost of wages back dated to 1st March 2020. It is anticipated to be up and running by the end of April.

HMRC will pay employers a grant worth 80% of an employee’s regular wage costs, up to £2,500 a month, plus the associated employer National Insurance Contributions (NIC) and minimum automatic enrolment employer pension contributions on that subsidised wage.

Tax and National Insurance Contributions should still be paid as normal.

Qualifying employers include:

  • Businesses
  • Charities

  • Recruitment Agencies (agency workers paid via PAYE)
  • Public Authorities
  • The business must have a UK bank account.

Furloughed Employees

Employees who have their salaries paid as part of this scheme are described as being “furloughed”, they cannot work whilst being furloughed. It is effectively a hibernating of freezing of the employees contract of employment until being taken off of furlough when conditions allow, they return to work on exactly the same agreements as when they were furloughed.

Employees should not undertake any work for you whilst they are furloughed (including emails, calls etc) but they can take part in volunteer work or training, so long as it does not provide support to or generate revenue for their employer.

Furloughed employees be on the PAYE (pay as you earn) payroll on 28 February 2020, and can be either;

  • Full-time employees
  • Part-time employees
  • Employees on agency contracts
  • Employees on flexible or zero hour contracts

How to Work It Out

Full and part time employees work out the actual salary before tax (gross) as at the 28th February 2020. This amount should be used to calculate the 80%. The calculation should not include bonuses, commission or fees.

Zero Hours or Employees with Varying Pay –

If they have been employed for 12 months or more (prior to making the claim), you can claim for either, the average monthly earnings in 2019 / 2020 financial year or the same months earning from the previous year, whichever is the higher.

If they have been employed for less than 12 months you can make a claim for an average of their monthly earnings since they started working for you.

You should discus furloughing with your employees and make any changes by agreement. You will need to have confirmation in writing that you have furloughed employees to be able to get the grant, don’t forget to keep a record of the agreement.

For employees off sick during that 12 weeks, base furloughed pay on the amounts excluding sick pay

We hope you found this article helpful. If you would like any more information on this or any other HR issue, please get in contact with us.

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