Claim for your employee’s wages through the Coronavirus Job Retention Scheme

Hmrc have released further details on the Coronavirus Job Retention scheme and confirmed that you can claim a grant from HMRC to cover wages for a furloughed employee, equal to the lower of 80% of an employee’s regular salary or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.

 Which businesses are eligible?

1. Eligible businesses include charities and not-for-profit organisations and will include single director companies, although the same rules will apply as to other businesses. The grant applies to all UK based businesses.

Owner/managed companies

2. Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme. Such companies must have been paying a salary through a payroll to be eligible for a grant.

How is payment going to work in practice?

3. We understand that the employer will pay the contractually agreed amounts as required by the employment contract in the usual way. This will involve paying the employee the net salary, and HMRC the PAYE and both primary and secondary national nsurance Contributions. The grant will be paid directly to the employer. We do not know how this will operate for employers which use a payroll agency.
4. Employers will claim the grant through a new separate portal to be built by HMRC.

What is the £2,500 maximum grant based on?

5. As the £2,500 limit to the monthly grant appears to cover all employment costs, it is unclear how benefits in kind, and in particular those being payrolled, will be reflected in the calculation.
6. For full-time and part-time employees, the base for the 80% calculation is the employee’s actual salary as of 28 February 2020.

For employees whose pay varies, HMRC guidance advises the following:

“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 earnings from the previous year; or
• *   average monthly earnings for the year.

“If the employee has been employed for less than a year, 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’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.”

Will entitlement to other employment benefits continue during the period of furlough?

7. The rules for the grant will not displace the existing employment contract. So for example, we would expect the entitlement to holiday and sick pay would depend on the contract.

Employees eligible

8. Eligible employees are those on the payroll on 28 February 2020. Any employee who was made redundant after that date but who was employed then, can be re-employed and furloughed.
9. We have had many questions asking if workers can be moved in and out of being furloughed if work becomes available to an employer and then ceases again? The scheme is being designed to allow for flexibility so that furloughed staff can be brought back to work, for example, to replace those still working who later become sick. An employee must remain on furlough for a minimum period of three weeks, although a further period may immediately follow the previous furlough if agreed. This will ensure flexibility and permit furloughed employees being brought back to cover, for example, sickness of others.

This will again depend on the employment contracts of those affected.

10. The matter of which employees an employer decides to furlough will be a matter for negotiation with staff and employment law. 
11. The impact on job sharing employees and the decision to furlough will be a matter for negotiation with staff and employment law. 
12. We presume that, subject to anything different stated in the employment contract, eligible employees will include apprentices.
13. Agency workers are eligible.
14. We do not yet know whether the scheme will include deemed employees under the off payroll working rules.
15. An employee does not have to accept furlough if offered, but the employer could then make the employee redundant instead using the usual employment law procedure.
16. 16. The rules allow furloughed workers to undertake training while they are on furlough. The condition is that the worker must not be making money for the employer.
17. It is a condition of the scheme that the employee must do no work at all during the furlough period. The intention of the scheme is to allow employers to pay staff who are without work.  HMRC will of course have visibility of pay records.

Employees with more than one employment

18. While we understand that an employee who is furloughed can do no work at all, the employee can hold a separate employment with a different and unconnected employer which will be unaffected.

What you’ll need to make a claim

Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

To 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

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

Claim

The online service you’ll use to claim is not available yet. We expect it to be available by the end of April 2020.

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.

 What to do after you’ve claimed

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.

You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.

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Ishan Madan( CHARTERED CERTIFIED ACCOUNTANT (FCCA) )

Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.

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