Coronavirus: Job Retention Scheme…
On Friday 20 March the chancellor announced his latest measure as part of a wider attempt to reduce the economic impact of COVID-19.
The government is offering support to cover up to 80% of an employee’s wages, where that employee would otherwise have been laid off due to coronavirus.
**UPDATE 1 APRIL 2020** : Our latest blog covers some Frequently Asked Questions relating to the Job Retention Scheme and furloughing.
Details on the Scheme
- The scheme covers any staff employed through PAYE. The payment goes from the government to the employer.
- The concept of ‘furloughed workers’ is important, as only these workers’ salaries can be supported by the measure.
- An employer will need to discuss with the employee the prospect of them becoming a furloughed worker. Employees must be notified that they have been designated a furloughed worker.
- Furloughed workers are kept on the employer’s payroll, rather than being laid off. However, they cannot complete any work for the employer whilst furloughed.
- Employees can only become furloughed where they would otherwise have been laid off. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. Therefore, employers considering making employees furloughed will need to go through the same employment law steps, checks and legal procedures that they would before laying an employee off. We recommend seeking employment law specialist legal advice if you are at all unsure where you stand in this regard. If you need some help finding an employment law specialist to speak to we have a number of contacts we can put you in touch with.
- Once an employer has designated affected employees as furloughed workers, the employer will need to submit this information to HMRC through a new online portal.
- HMRC will then reimburse the employer with 80% of the furloughed workers wage costs, up to a cap of £2,500 per month.
- The employer may choose to fund the gap between the 80% payment they get from the government, and the employee’s full salary. In these scenarios the employee would retain their full pay whilst furloughed.
- HMRC are working urgently to set up a system for reimbursement and the new online reporting portal. Existing systems cannot currently handle this type of transaction. Everything is expected to be up and running before the end of April.
- The period of wages covered can be backdated to 1 March 2020 and can include workers who were in employment on 28 February. The scheme is expected to be open for at least three months, but may run for longer.
- Casual staff can be furloughed. Average monthly earnings need to be calculated for the last 12 months or from the date they started if less than a year.
Various information still to be clarified.
There are details still pending in relation to this scheme.
For example, an employee’s salary typically costs their employer more than their gross salary because of additional employer costs (such as employer pension contributions and employer’s national insurance). It is not yet clear whether the government intend to reimburse 80% of total costs to the employer, or total gross salary. Similarly, its not clear whether the £2,500 cap applies to all costs to the employer, or just gross salary.
Once again Sowerby want to ensure you of our commitment to our clients during this time. If you have any questions or concerns please do not hesitate to get in touch.