In order to qualify for the funding the employee must be classified as a furloughed worker. A furloughed employee must be told to stand down and do no further work. This is crucially important.
How much can I claim and what does the job retention scheme cover?
Funding for up to 80% of employee costs
HMRC guidelines state that the scheme allows employers to claim funding of up to 80% of an employee’s wage for all employment costs, up to a cap of £2,500 per month. The government has not fully confirmed what is covered under the term “all employment costs”. Whether this will cover only the employee’s basic salary, or include additional costs such as pension contributions and benefits is currently unknown. However, it is understood that the maximum an employee can receive is £2,500 per month.
What about the remaining 20%?
Employers are not obliged to top up the remaining 20% but employers can ask employees for their consent to this reduction in their wages. However, it is expected that they will consent if this is considered preferable to redundancy or unpaid leave.
How do I access the job retention scheme funding?
There are a number of steps that you will need to consider:
1. Decide which employees to classify as furloughed
The decision of whether or not to place an employee on furlough leave ultimately lies with the employer.
2. Notify all furloughed employees in writing
Firstly discuss with your employee their change in employment status to a furloughed worker. Further explain that this means that the employee remains on the payroll, but that they cannot undertake any work whilst classified as a furloughed worker. Importantly not performing any work is crucial.
In addition, it may make sense to mirror HMRC’s time frames by placing all of your furloughed employees on leave for an initial 3 month period, subject to review.
Most importantly, we recommend that you take advice from a HR professional before changing anyone’s employment status.
3. Submit information to HMRC to claim your grant
HMRC are setting up a new portal through which employers should submit information about furloughed employees and their earnings. This system will be separate to the current PAYE system used to report employee earnings.
1. When will the job retention scheme funding be available?
It is understood that funding will become available in April 2020 and that it will be possible to backdate claims to 1 March 2020. We also believe that funding will be available to all employees who were on the payroll as at February 2020.
2. Who will receive the funds?
It is not totally clear who will receive the funding whether this will be paid to the employer or directly to the employee. However, from an administrative perspective, it is likely that claims will be made by the employer and they will receive the funding. This funding can then be used to pay employees. We will update you as we know more.
3. How long will the job retention scheme last?
The Scheme is intended to run for 3 months from the 1st March 2020 until 31 May 2020, and may be extended beyond this as the situation develops.
4. Can furloughed employees work part time?
No the definition of a furloughed worker means that it is important that they undertaken no work for the business during this period, otherwise they may not qualify for the funding.
5. I’m self employed – can I claim under the job retention scheme?
No, this funding does not apply to consultants and self employed workers.
6. I receive dividends are these included in the £2,500?
It is unlikely that employees (usually director/shareholders) who get paid wholly or partly in dividends, will be able to include dividends in their earning figures when making a claim. We will provide further details as they become available from HMRC.