Coronavirus Job Retention Scheme - Furlough of staff
The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers that allows employers to furlough staff and receive support from the government to pay for staff on furlough. The original scheme started on 1st March 2020. In May 2020 the chancellor announced changes to the scheme from 1st July. The scheme will cease completely on the 31st October 2020.
Up until 31 July 2020 employers can use an online HMRC portal to claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month. From 1st August 2020 the amount you can claim will be tapered down.
You must furlough your employee (temporary lay off) to be able to access this grant. You must get your employees to agree to furlough.
Who can claim
Any UK organisation with employees can apply, including:
- recruitment agencies (agency workers paid through PAYE)
- public authorities
You must have created and started a PAYE payroll scheme on or before 19th March 2020 and have a UK bank account.
Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme.
A note on Public sector organisations: The government expects that the scheme will not be used by many public sector organisations, as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak. Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion.
Employees you can claim for
Furloughed employees must have been on your PAYE payroll on 19th March 2020, and can be on any type of contract including: full-time employees; part-time employees; employees on agency contracts; employees on flexible or zero-hour contracts.
The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
An employee cannot undertake work for or on behalf of the organisation whilst furloughed.
To be eligible for the subsidy, employers should write to their employee confirming that they have been furloughed and keep a record of this communication.
The last date you can furlough an employee is 10th June 2020. After this date you cannot add new employees to the scheme.
What can you claim - scheme to 30th June 2020
Below you will find guidance for the original scheme which applies from March 2020 to 30th June 2020. The scheme has been extended and amended. See the next section for further details.
Employers need to make a claim for wage costs through this scheme.
You 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.
Fees, commission and bonuses should not be included.
At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month.
An employer can also choose to top up an employee’s salary beyond this but is not obliged to do so under this scheme.
HMRC have issued guidance on how to calculate claims for Employer National Insurance
Contributions and minimum automatic enrollment employer pension contributions.
How does it work for salaried employees (full time or part time)?
Salaried employees are really straight forward. For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%.
How does it work for employees who are paid hourly so pay varies?
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.
If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Once you (or we) have worked out how much of an employee’s salary you can claim for, you then work out the amount of Employer National Insurance Contributions and minimum automatic enrollment employer pension contributions you are entitled to claim.
What can you claim - scheme from 1st July 2020
Below you will find guidance for the extended scheme which applies from 1st July 2020 to 31st October 2020. The scheme will cease on 31st October 2020.
From the 1st July you will be able to bring employees back part-time. You can decide the hours and shift patterns employees work on their return.
Changes to what you can claim:
The government will continue to pay 80% of the wages for furloughed employees up to £2500. They will also pay the employer NI and pension contributions. Details on calculating pay and grants for employees who have returned part time is yet to be published.
In August the government will pay 80% of wages up to a cap of £2500.
EMPLOYERS will pay employer national insurance and pensions contributions.
The government will pay 70% of wages to a cap of £2187.50.
Employers must pay 10% to make this up to 80% of wages. With the total cap at £2500 as before.
Employers must also pay employer national insurance and pensions contributions.
The government will pay 60% of wages to a cap of £1.875.00
Employers must pay 20% to make this up to 80% of wages. With the total cap at £2500 as before.
Employers must also pay employer national insurance and pensions contributions.
The government will issue guidance on how to calculate pay under the new scheme on 12th June 2020.
How to claim
You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.
Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.
To make a claim you will need:
- 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 weeks
- your bank account number and sort code
- your contact name
- your phone number
HMRC expect to audit all claims at some stage but will not do this prior to payment.
Job Retention Scheme FAQs
What does furloughed mean?
Furloughed means your employee remains employed by you and maintains their employment rights. It is like a temporary lay off.
Do I have to close my business and furlough all of my staff?
No. You do not need to furlough all of your employees, you can simply opt to do this with some of them. Your business can continue to trade if you have staff who have not been furloughed doing the work.
What if the employee started work for us after 19th March?
Employees hired after 19 March 2020 cannot be furloughed or claimed for in accordance with this scheme.
What if we normally make large contributions to an employee's pension?
This scheme will not cover any voluntary automatic enrollment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).
What if an employee is off sick and claiming SSP at the moment?
Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.
Employees who are shielding in line with public health guidance can be placed on furlough.
What if my employee has more than one job?
An employee can be furloughed from each job. They could also be furloughed from one and not the other. Each job is separate and the furlough applies to each individually.
What if an employee is on maternity leave, paternity leave, share parental leave or contractual adoption pay?
The normal rules apply here. The employee would receive the normal rates of pay for SMP during this time. They would not revert to the 80% of pay.
If an employee is due to return to work during this time and on return you furlough them they should qualify for the job retention scheme.
Can an employee volunteer to work for us?
An employee cannot provide services which generate revenue for or on behalf of your organisation. They can take part in volunteer work or complete training but that is it.
If your employees are required to complete online training whilst furloughed they must be paid the national minimum wage for this time, even if this is more than the 80% of their wage that will be subsidised.