Category Archives: The Coronavirus Job Retention Scheme

COVID 19: Applying for 80% of furloughed staff wages

This article on COVID 19: Applying for 80% of furloughed staff wages looks at the eligibility and qualify criteria for employers planning to apply to HMRC for help under the government’s Coronavirus Job Retention Scheme.

Coronavirus Job Retention Scheme

Under the Coronavirus Job Retention Scheme, Employers who have had to put staff on furlough leave during COVID-19 are eligible to apply for a grant to cover 80% of furloughed staff wages up to £2,500 per month.

On 27 March 2020, the government issued new guidance which:

  1. Extended the scheme to cover the associated Employer National Insurance contributions, as well as the minimum employer pension contribution (currently 3%) on that wage
  2. Allowed companies to reemploy staff made redundant after 28 February and place them on furlough.

Eligibility Criteria

Under the scheme, the grant of 80% of furloughed staff wages can be claimed for any of the following groups provided they are paid via PAYE:

  1. Employees of businesses, charities, recruitment agencies and public authorities
  2. Company directors of limited companies
  3. Members of Limited Liability Partnerships (LLP)
  4. Agency staff, including those paid via umbrella companies
  5. Zero-hours contract staff
COVID 19: Applying for 80% of furloughed staff wages

Staff consultation

Employers must engage in formal consultation with staff representatives concerning changes employment contracts of staff expected to be put on furlough leave.

The government has advised employers that the decision process to decide who to offer furlough leave must comply with the equality and discrimination laws,

The consultation should explain that only staff who were on the payroll on or before 28 February 2020 will be eligible for furlough leave. However, based on new guidance from the government, companies may reemploy staff made redundant after 28 February 2020 and place them on furlough leave.

The government has indicated that furlough leave should be approved for 3-weekly intervals and employers can claim the 80% grant from the date that staff have been placed on furlough leave which can be backdated to 1 March 2020 until 30 June 2020. The scheme may be extended beyond June 2020 if the government decides it’s necessary to extend the social distancing measure beyond this date.

Changes in contracts of employment

Changes to employment contracts should highlight that:

  1. the employer might be able to keep them on the payroll if they’re unable to operate or have no work for them during COVID-19, and
  2. the employer will pay 80% of wages up to a monthly cap of £2,500 during COVID-19 furlough leave

Furlough leave confirmation

In order to be eligible for the job retention grant, employers must write to all affected staff to confirm that they have been placed on furlough leave and a record of this communication must be kept for five years.

Getting the calculation right

Employees on the payroll for over 12 months

Where the employee has been employed for 12 months or more, employers can claim the highest of either the:

  1. same month’s earning from the previous year and
  2. the average monthly earnings for the 2019-2020 tax year

Employees on the payroll for less than 12 months

Where the employee has been employed for less than 12 months, employers can claim for 80% of their average monthly earnings since they started work

Employees on the payroll for less than 12 months

If the employee only started in February 2020, then employers need to pro-rata for their earnings to date, and claim for 80%.

Getting the prerequisites right

Once HMRC completes the new Coronavirus Job Retention Scheme online application portal, it’s important for employers to get their prerequisites in order before applying for the grant.

Our suggested checklist include:

  1. COVID-19 staff consultation notice
  2. COVID-19 agreed changes to employment contracts
  3. Furlough leave confirmation letters
  4. Online account for PAYE, register with HMRC if you don’t have one already
  5. A P11 payroll report for each affected employee as at 28 February 2020.

This post on COVID 19: Applying for 80% of furloughed staff wages was sponsored by Canalitix.com

COVID-19: Job Retention Scheme Update

Today, the COVID-19 Job Retention Scheme Update was announced by the government to provide further clarity on how the scheme will operate.

According to the announcement, the scheme will be backdated to 1 March 2020 and provided staff remain employed throughout the crisis the funding will be open to all employers with a PAYE payroll scheme that was created and started on or before 28 February 2020, including charities.

The announcement further explained that the grants will cover 80% of furloughed employees’ (employees on a leave of absence) monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

COVID-19: Job Retention Scheme Update

The cashflow dilemma for employers

The major stumbling block for employers is cashflow to fund the March 2020 payroll because the government is expected to cover 80% of both March and April payrolls at the end of April 2020.  

One option is to take out a business interruption loan or overdraft which is being guaranteed by the government and interest free for 12 months. Unfortunately, some banks are requesting personal guarantees which may deter some directors from considering this option.

Employers may also utilise the COVID-19 Time to Pay Scheme and the VAT Deferral scheme to free up cash resources to pay employees while waiting on the government Job Retention Scheme funds.

However, it is almost predictable that the majority of the business interruption loans and overdrafts secured under the government’s 80% guarantee will go bad and get hived off to the British Business Bank as COVID-19 bad loans.

The government’s 80% guarantee doesn’t equate to free money to employers and directors giving personal guarantees. These loans and overdrafts will have to be paid back by employers for as long as it takes or they will go to the wall.

Therefore, the dilemma is whether employers protect their own future or act in the national interest and provide for their staff during the COVID-19 crisis.

The COVID-19: Job Retention Scheme Update was sponsored by Canalitix.com

HMRC to fund 80% of wages for furloughed staff

On Friday 20/03/2020, The Chancellor made the historic announcement that the UK government was to step in and help to pay the wages and salaries of retained workers up to a maximum of £2,500 a month. This announcement placed the responsibility on HMRC to fund 80% of wages for furloughed staff.

The Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme has been set up to allow employers to contact HMRC for grants to cover most of the wages of staff who are not working but are furloughed and kept on the payroll instead of being laid off. The scheme will be backdated to 1 March 2020 and is intended to last for 3 months, initially, after which it will be reviewed.

How will HMRC fund 80% of wages for furloughed staff?

HMRC to fund 80% of wages for furloughed staff

HMRC is currently working on the mechanism for reimbursing employers directly into their bank accounts.

In the meantime, employers need to:

  1. designate affected employees as ‘furloughed workers’ and notify them of this change
  2. submit information to HMRC about the employees that have been furloughed and their earnings through a dedicated HMRC portal
  3. HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month

Canalitix Accountants would welcome the opportunity to act as your agent in relation to HMRC taxes. Once authorised by HMRC, we will manage the Coronavirus Job Retention Scheme application process on your behalf.

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