Covid-19 and furloughed workers

by | Mar 26, 2020 | Albert's Knowledge Share, Business, Funding, HMRC, Payroll, Self Employed | 0 comments

Updated 9th April

HMRC will set up a new online portal so that ALL UK employers this month (proposed for launch on 20 April 2020) , regardless of size, will be eligible for assistance where an employee has been designated as a ‘furloughed worker.’ HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. The scheme does not allow for payments directly to employees, the responsibility for paying wages and salaries remains with the employer and must be recorded and reported in the normal way.

The current guidance states ‘You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to’.

The HMRC portal will be operational (as of latest guidance seen 8th April) on the 20th April and employers should expect to receive the grant within a few days of making a claim.

Where applicable, claims can be backdated to the 1st March. Although not wholly clear, we presume that this applies to employees that had been laid off before the job retention scheme was announced.

A claim can be made as frequently as once every 3 weeks and as such claims are not linked to your pay period, but rather they are made at your discretion.

Claims can be made by employers and agents authorised to act on PAYE matters. Claimants will need to provide the following information via the Online Portal.
• employer PAYE reference number;
• bank account and sort date; and
• contact name and sort code.
• the number of employees being furloughed;
• the claim period – start and end date;
• amount claimed (per the minimum length of furloughing of 3 weeks);

Claims are to be made on 80% of Gross salary up to a maximum of £2,500 per employee.

The Gross salary does not include fees, bonuses and commission. However, it can include regular compulsory contractual commission and past overtime. There is no universally agreed definition of ‘compulsory contractual commission’ however, our interpretation is that this relates to the commission that the employee is contractually entitled to receive as opposed to the less certain, discretionary commission that an employee has no right to expect.

The gross salary will not include non-monetary benefits, nor will it include benefits that are provided through a salary sacrifice scheme (including pension contributions)

 

How it works 

  1. An employee has to have been employed prior to 19th March 2020 to receive furloughed pay. Individuals employed after this date cannot be furloughed or claimed for.
  2. It covers staff made redundant since 28/02/20 and then rehired by the employer
  3. When furloughed the employee cannot undertake work for, or on behalf of, the employer.
  4. Employees on reduced hours or reduced pay will not be eligible for the scheme.
  5. Any necessary changes to employment contracts should be made in respect of furloughed working by agreement.
  6. To be eligible employers should write to the employees confirming they have been furloughed and keep a record of the communication.
  7. Employees on unpaid leave cannot be furloughed.
  8. Employees on SSP or self- isolating should get SSP and can then be furloughed.
  9. An employee can be furloughed from more than one job.
  10. Apprentices can be furloughed and still receive training.
  11. Salaried Directors can be furloughed and still perform directors duties per the Companies Act 2006.
  12. Salaired LLP members, agency workers and limb workers also qualify.
  13. Normal rules apply for SMP, Maternity Allowance etc.
  14. Employees that are furloughed have the same rights as they did previously.
  15. The employer needs to make the claim for wage costs through the scheme.
  16. The grant from HMRC will cover the lower of 80% of the employees regular wage or £2,500/month PLUS the associated Employer NIC and minimum Auto Enrolment Pension Contributions. Fees, commission and bonuses should NOT be included.
  17. At a minimum the employer must pay the lower of 80% of an individuals regular wage or £2,500/month. Employers can pay more if they wish but anything over and above this is not covered by the grant and cannot be claimed.
  18. Employees have to be furloughed for a minimum of 3 weeks.
  19. Tax, NIC and Pension contributions will be calculated as normal on furloughed pay.
  20. The claims system will be up and running by the end of April. Grants will not be available before then.
  21. Guidance re how to calculate the claims for Employers NIC and AE pension will follow.
  22. A claim can be made every 3 weeks

 

Calculating Pay

For full Time/ part time regular salaried employees

  • The Employees actual salary before tax as of 19th March 2020 should be used to calculate the 80%. Fees, commission and bonuses should NOT be included.

Variable Hours employees

  • If the employee has been employed a full 12 months prior to THE CLAIM  they can they can claim for the higher of either:

The same months earnings from the previous year

Average monthly earnings from the 2019/20 tax year

  • If an employee has been employed for less than a year a claim can be made for an average of their monthly earnings since they started.
  • If an employee started in February 2020 use a pro-rata of their earnings to claim.
  • Once the employees salary has been worked out the Employers NIC & Pension must be worked out for the claim.

NLW/NMW

  • Employees are only entitled to the NLW/NMW for the hours they are working.
  • Furloughed workers MUST be paid the lower of 80% of their salary or £2,500 even if based on their usual working hours this comes out below the NLW/NMW.

 

How to claim

  1. The employer has to calculate the amount they are claiming. HMRC have the right to audit these claims.
  2. Claims will be able to be made by the End of April (current proposal)
  3. Claims have to be in accordance with the payroll amounts, at the point at which the payroll is run or in advance of an imminent payroll. Clearly this will be done retrospectively for at least part of March and some of April until the claim system is up and running.
  4. Fees cannot be charged from the money granted.
  5. Once the scheme is closed, HMRC will continue to process claims before terminating the scheme altogether.

 

Further detail can be found here

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme