Financial support for “furloughed workers” will be provided to employers through the ‘Coronavirus Job Retention Scheme’.
This scheme is available to all employers who have a PAYE payroll scheme in place as at 28 February 2020. Workers that can be furloughed include:
- Full and part-time employees on the payroll as at 28 February 2020
- those who do casual work or are on flexible contracts
- those who have zero-hours contracts
Employees need to be on the payroll as at 28 February 2020 to be eligible for furlough, you cannot use the scheme to furlough new joiners. Employees hired after 28 February 2020 cannot be furloughed or claimed for under this scheme.
Eligibility
To be eligible for the scheme, you will need to:
- select and tell (‘designate’) your employees that they will be furloughed
- keep your employees on the payroll
- make sure any furloughs last at least 3 weeks, the minimum period under the scheme.
What if someone was made redundant on or after 28 February 2020
You can decide to rehire them and put them on the furloughed workers scheme instead.
What if my employee has more than one job
Each job is treated separately. This means your employee may be able to either:
- continue to work for you and be placed on furlough for the other job, or vice versa
- be furloughed for both jobs
If they are furloughed for both jobs, they will be eligible for financial support for each job.
Selecting and telling your employees
You must select your employees for furlough in a fair way to avoid any discrimination. Workers who cannot work from home and who currently have no work to do will be the obvious candidates for furloughing. You may need to consider a process of calling for volunteers, pooling and selection – as with a redundancy process. You need to make sure the process is fair and does not discriminate.
You will need to get agreement from your employees to do this, unless there is a clause in the employment contract that allows you to lay staff off temporarily. You will need to clearly explain how much your employee will get paid in total whilst on furlough.
If you need a template letter please get in touch and we can send you one.
The government will pay you 80% of your employees’ wages whilst they are furloughed. You can decide to top up the wages to 100%, but you do not have to. If you decide not to top up the wages, you should tell the employee that this is the case and explain why not.
Employees cannot do any work for you whilst they are on furlough. They can do volunteer work, or training providing this does not provide services or generate revenue.
A furloughed employee can return to work and be placed on furlough again later, if needed.
If an employee disagrees with your decision, they'll need to talk to you and try to come to an agreement.
Changing an employment contract
If you cannot reach an agreement, you may need to change the written terms in an employee’s contract and you should seek appropriate legal advice before doing so.
If more than 20 employees are to be furloughed then you will need to consult staff or other union representatives before placing employees on furlough.
Furlough agreements
Any furlough agreements should be in writing. It's a good idea to include:
- the date furlough starts
- how much the person will be paid
- when it will be reviewed
- how to keep in contact during the furlough period.
How much can I claim?
HM Revenue & Customs (HMRC) will reimburse 80% of furloughed workers’ usual wage costs, up to a cap of £2,500 (gross) per worker per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
Fees, commission and bonuses are excluded and cannot be claimed.
For salaried employees, you must use the actual salary before tax, as of 28 February.
For employees whose pay varies (for example because they work shifts or irregular hours) you can claim for the higher of:
- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 year
If an employee with variable pay has been employed for less than a year, you can claim for an average of their monthly earnings since they started working for you. If the worker only started in February 2020, you should use a pro-rata of their earning so far.
What if the subsidy is less than the minimum wage? Do we have to top it up?
No, you only need to ensure that workers receive the National Minimum Wage/National Living Wage for the hours that they actually work for you. You do not need to ensure that the received NMW/NLW when on furlough.
However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
Tax Treatment of the Coronavirus Job Retention Grant
Payments received by a business under the scheme are made to offset tax deductible wages costs. They must therefore be included as income in your taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.
