Coronavirus FAQ’s: Furlough & Accessing The Retention Scheme

In light of the Government update on Friday, please see below a summary of the current guidance.  If you would like to discuss any points further please do not hesitate to get in touch.

What is the Coronavirus Job Retention Scheme?

It was announced on Friday 20th March that Businesses will now be able to claim a grant from the Government to cover 80% of furloughed employees’ wages, to a maximum of £2,500 per employee per month.   Guidance on how to claim will follow.  All businesses will be able to access the grant, regardless of size or type.   Claims will be able to be backed dated to 1st March.

What does furlough mean?

“If workers are given furlough, they are told to stay away from work for a certain period because there is not enough for them to do” (Collins Dictionary).  The Job Retention Scheme now enables employers to make the decision to send employees home, without the need to lay them off on nil pay.  Due to the Coronavirus pandemic the government will now be paying 80% of each employees wages up-to £2,500 per month.

Who can be furloughed?

In theory any employee can be furloughed, they need be on PAYE in order for a business to be able to claim the grant for their wages.  You will need to consider the £2,500 per employee cap (per month), for those on higher pay will mean a greater cost to the business if they are furloughed.

Do contracts need to include a furlough clause?

It is unlikely that many contracts will refer to furlough, however contracts that contain a right to lay-off employees on no pay already gives businesses the right to send employees how and not pay them for a temporary period and so can likely to be used for furlough employees.

If your employment contracts don’t include a lay off clause you can ask employees to agree to furlough.  Although 80% of wages may not be initially an attractive option next to full pay, it is likely to be more attractive that redundancy, which may be the end result if alterative options cannot be found.  It would be advisable in this case to meet with employees to explain the business situation and see if employees can be agreeable.

If you are moving employees to furlough then please make us aware as we have letters that we can share with you.

What if I have already laid-off employees?

In this situation we could suggest that you get in touch with your employees and agree to change their current status from lay-off to furlough.  Employees need to be made aware they will move from nil pay to 80% wages (up to £2,500 per month) Please get in touch as we have letters confirming this amendment that can be issued to those employees affected.

How do I select who should be furloughed?

If you are not placing all employees on furlough, you need to carefully consider who it should be.  You need to consider which skills will continue to be in demand, if the role critical and if so can it be done wholly from home? You must ensure that your decision for placing employees in furlough is robust and agreed by each employee in order to avoid age, disability or pregnancy discrimination claims.

You may wish to ask for volunteers from across your workforce and then select based om skills and risk of remaining at work.

There does not appear to be a maximum or minimum number of employees who can be furloughed.

Do I need to pay the 20% shortfall in wages for those furloughed?

There is no requirement to do this but a business can do so if they wish.  If you don’t have a layoff clause in your employment contracts do be mindful that if you furlough employees and don’t pay the 20% you could be seen as being in breach of contract.  You must ensure that the arrangements in this instance are agreed by the employee.

If an employee is furloughed am I able to ask them to work from home?

A furloughed employee is they are theoretically laid-off, therefore, to amend this status engage with the employee and confirm the amendment from being furloughed to working from home in writing.  If you need a template letter please get in touch.

Are casual workers / zero-hour employees entitled to furlough?

There is no clarity on this yet, but the Chancellor has said the intention was to try to cover as broad a group of people as possible.

What should I do if I have a new starter joining the business next week?

If the employee is not needed in the short term consider furloughing them, alternatively if they have a required skill then considered if the role can be performed from home.

What other changes have occurred:

What is the process to make a claim for furlough?

You will need to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement

IR35 postponed

Expected IR35 rules for off-payroll workers within the private sector has been postponed for 12 months.  This will allow business to review preparation and auditing prior to April 2021.  If you need assistance with IR35 please do not hesitate to get in touch.

VAT Deferral

For VAT, the deferral will apply from 20 March 2020 until 30 June 2020.  All business will be eligible for this postponement.

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.

Income Tax

For Income Tax Self-Assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021. If you are self-employed you are eligible.

This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period. HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of Covid-19 and have outstanding tax liabilities.

Sick Pay

The Government will bring forward legislation to allow small-and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:

  • this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
  • employers with fewer than 250 employees will be eligible - the size of an employer will be determined by the number of people they employed as of 28 February 2020
  • employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
  • employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website
  • eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force
  • the government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible

You are eligible for the scheme if:

  • your business is UK based
  • your business is a small or medium-sized and employs fewer than 250 employees as of 28 February 2020

A rebate scheme is being developed. Further details will be provided in due course once the legalisation has passed.

The Government are also offering financial support for retail, hospitality and leisure businesses that pay business rates, Cash grants for retail, hospitality and leisure businesses and also Support for businesses that pay little or no business rates.  For more information please visit:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-through-the-coronavirus-job-retention-scheme

 

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