The Government announced on 20 March 2020 the Coronavirus Job Retention Scheme (CJRS).
Whilst the finer details of the scheme are still being finalised, we thought it would be helpful to outline how businesses can utilise this scheme and the steps they will need to take to access it.
This is on our understanding of the policy to date and how this is likely to be implemented based on the information published so far.
What is the Coronavirus Retention Scheme?
The scheme will enable eligible businesses to continue paying the salary for employees who would otherwise have been made redundant or laid off by furloughing them (granting a leave of absence). The scheme covers 80% of the cost to the employer, up to a monthly amount of £2,500. We do not yet know if this amount would include employers National Insurance contributions and any pension contributions required by auto-enrolment.
It is the employers’ discretion as to whether they choose to top up the remainder of the salary. It is a point of employment law and negotiation as to whether an employee would accept a variation in their employment terms and agree to a lower salary.
Staff members who are furloughed must not work for the employer during the period of furlough.
The overall aim of the scheme is to keep people at home while enabling employers to retain staff who will be required when the business begins to rebuild itself, following the impact of COVID-19. The Government hopes that this keeps staff employed and will enable businesses to rebuild as quickly as possible.
Which businesses are eligible?
- All UK Businesses are eligible
- These include charities and not-for-profit organisations
- They also include single director companies
Who is eligible to be paid?
- All UK-wide employers with a PAYE scheme are to be eligible
- For owner-managed company director/shareholders the scheme does not extend to dividends, but would apply to salaries
How will payment work?
- Our understanding is that employers will continue to pay the contractually agreed amounts as required by the employment contract as usual (any agreement to vary the total pay is, as mentioned, a matter of negotiation and employment law)
- Employers will pay the employee and pay HMRC the PAYE and the relevant National Insurance contributions. If applicable, pension contributions will also need to be paid
- The grant will be paid directly to the employer up to £2,500 per month of 80% of monthly salary costs – we do not yet know whether this figure is gross or net
What steps do I need to take now?
- Note that whilst the scheme is backdated to 1 March 2020, a business will only be eligible to claim the grant once they have agreed the furlough with their staff in writing and these staff have stopped working for the employer. This is subject to employment law in the usual way.
- The employer will be required to continue paying the employee. Also, it will be a while (1 May has been mentioned) before the system is set up to be able to process the grant to employers. If cashflow is an issue, a business may want to consider applying for the Coronavirus Business Interruption Loan
- An employee does not have the right to furlough, this is the decision of the employer
How is the scheme accessed?
- This will be via a new online portal, which is yet to go live and we understand still being built
- On the portal you will be able to submit information to HMRC regarding those employees that have been furloughed together with their earnings
- Further details will be set out by HMRC on the information required to be entered on the system in due course
What are the key dates?
- It is available to employees that were on a company’s payroll on 29 February 2020
- The date that furlough can begin has been backdated to 1 March 2020
- The scheme will initially last for is 3 months and will be extended if necessary
Questions requiring further clarification
There are several scenarios that currently require further clarification:
- The earning period to determine the salary, this will be of relevance for new employees and those that are paid a basic salary plus commission or monthly bonuses or those working variable hours.
- It is not clear if any other employee benefits will need to be paid during this period
- Sick pay and holiday pay entitlement
- As eligible employees are those on the payroll on 1 March 2020, it is likely this will cover any employee that had their services terminated after this date
- The question of whether a furloughed worker can be reemployed on a temporary basis to cover say sick leave and then return to furlough
Contact us for assistance
We will provide more information on this as it becomes available. For further information on how we can support your business and the reliefs packages available for businesses impacted by COVID-19, please get in touch by emailing firstname.lastname@example.org or simply fill out the form below.