Updated 3 June 2020
We’re getting some great questions about the Job Retention Scheme from our business community and wanted to share them (and the answers!) with as many of you as possible. Information is still coming out on this so we’ll update regularly as we learn more. Also, keep the questions coming, if it’s not covered here, let us know and we’ll add it!
Announced on 20 March, this scheme is available to all employers.
It is designed to provide up to 80% (max of £2,500 a month) of furloughed workers wages to employers, allowing them to retain employees through the outbreak.
Initially intended to last three months the chancellor has suggested it could be available longer if needed. Update: at the end of May the chancellor announced the extension of the scheme – read more here.
Important note regarding PAYE scheme and employee start dates
The scheme is open to all employers who had created and started using a PAYE scheme on 28 February – i.e. you can’t start a scheme now and claim the grant.
Further, it is only open to employees who were on your payroll on 28 February 2020, so new starters would be excluded.
Grant income is taxable – a common misconception is that these grants are ‘free money’. Note that this and the Self-Employed Income Protection Scheme grants are taxable and should be included in your relevant accounts/tax returns.
What is a furloughed worked?
It’s an employee who is forced temporarily to be absent from work but is not made redundant.
E.g. where bars and restaurants have been forced to close and staff don’t have a job to go to.
How do we apply for the grant?
This will be done online via the HMRC website. If Raedan complete your payroll we will handle this all for you.
The following is needed when making a claim and claims cannot be made more than once every three weeks:
- 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
How much will we get?
If eligible, the employer can claim the lower of 80% or £2,500 of each furloughed employees regular wage.
Fees, commission and bonuses should not be included.
What if employees pay varies?
If the employee has been working for you for 12 months or more they can have the 80% applied to the higher of:
- the same month’s earning from the previous year
- average monthly earnings from the 2019-20 tax year
If less than 12 months, apply the average from the months worked.
If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Can we get it if we've already made someone redundant?
Yes! If they were made redundant after 28 February 2020 and you rehire the employee, you can. Speak to your payroll provider about getting them back on your payroll.
Do we still have to pay the other 20%?
Contractually all employees are still due their full salary, however, employers can discuss with their teams the possibility of reducing to 80%. Most have agreed to this due to the awareness of the financial difficulties the businesses face.
Is there a minimum length of time someone can be furloughed?
Yes, HMRC have stated a furlough must last for at least three weeks.
Do we have to furlough all employees?
No. You can furlough just part of the team if they do not have work.
Do we still pay the PAYE and NI?
Yes. PAYE, NI and indeed pension contributions must still be made.
Does it apply if we've agreed to reduce the number of days worked because there isn't enough to do?
No, this can feel quite harsh too but if you’ve agreed with employees to reduce their hours they haven’t been furloughed and the support isn’t available.
Does it apply if we've agreed to reduce their salary because there isn't enough to do?
As above, no, unfortunately this doesn’t count.
Can we get it if an employee says they can't work due to childcare commitments?
This answer has changed: the Government have confirmed that employees who can’t work due to caring arrangements can be furloughed, of course that is if the employer agrees.
As far as we are aware HR law still applies so you can’t just not turn up for work if you’re employer expects you to!
We were going to add a new staff member next month but now don’t know if we can afford it. Would it cover them?
No. It has been confirmed that employees must have been on your payroll on 28 February 2020 for you to receive the grant.
We are a new business and were due to start our payroll scheme in April for the new tax year. We still intend to do so but are now facing having no work, can we claim the grant?
Unforuntately, the PAYE scheme must have been created and started before 28 February to receive the grant.
Can we get it for our freelancers?
No, freelancers aren’t included. Only people on your payroll.
Freelancers may be able to claim the Self-Employed Income Protection Scheme, point them here if they need help.
Can you claim the grant if staff have to work from home?
No, if they have work to do, from home or otherwise they are not eligible.
As a director on a salary, can I claim the grant?
Yes, Directors can be furloughed and receive the grant if they are paid through the company PAYE scheme.
Directors can and should also continue to fulfil their required duties but no more. The exact HMRC wording is:
Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
I’m a director and claim a small salary and dividends, will it cover both?
No. The scheme is for payroll only so the dividend will not be covered.
How do we furlough an employee on payroll?
We use Paycircle who are adding the ability to do this within their software so we can support our clients. You should check with your software provider to ensure they can support this for you too.
For any further questions please do get in touch, we’re here to help.
You can also check the HMRC website for latest updates.