Update 29 June 2020
On 29 May 2020 the Government announced an extension of the Furlough Scheme to the end of October 2020.
Flexible furlough is available from 1 July 2020 and the grant available decreases from August 2020 with the employer paying NI and pension costs in August and the 80% grant reducing to 70% in September and 60% in October.
Further details on the scheme are here:
We expect that, while answering a number of issues raised since the scheme was announced, this will raise still further questions from businesses as to how the scheme might apply to their specific circumstances.
We recognise that not all businesses are the same and so have put together a list of our client’s most commonly asked questions which we hope you will find useful.
Please do read the guidance at the above link and then our FAQs below.
As ever, please call or email your usual contact at Rayner Essex to discuss any specific issues you have with this or any of the Coronavirus business support measures that have been announced.
Do we have to contact HMRC to register and instigate this scheme?
The scheme is open to all UK employers that had created and started a PAYE scheme on 19 March 2020. Claims are made via the Government Gateway.
Note that to claim from 1 July 2020 employers must have must have made a claim for employees furloughed for a minimum period of 3 weeks on or before 10 June 2020.
How often can I claim?
For periods up to 30 June 2020 you can only submit a claim once every three weeks, which is the minimum length an employee can be furloughed for.
Claims can be backdated until 1 March if applicable as the scheme also covers employees who were made redundant since 28 February 2020 and prior to 19 March, if they are rehired by their employer.
Claims covering any period up to 30 June 2020 must be submitted by 31 July 2020.
From 1 July 2020 claims cannot overlap calendar months but can be made more frequently. Each claim should normally be for at least one calendar week, although some claims may need to be shorter or longer to cover the month. E.g. for July claims could be made as follows:
1-4 July 4 days
5-11 July 7 days
12-18 July 7 days
19-25 July 7 days
26-31 July 6 days
This could equally be made as one 31-day claim or 3 claims of 11 (1-11 July), 7 (12-18 July) and 13 (19-31 July) days.
How is the scheme going to work – do we pay the staff and then reclaim the amount back from HMRC or are they going to pay employees direct?
You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll. You must pay the employee all the grant you receive for their gross pay.
Do I have to top up my staff’s salaries?
For periods up to 30 June 2020 an employer can choose to top up an employee’s salary beyond this but is not obliged to under this scheme. In September and October 2020, the grants are reduced to 70% and then 60% with the employer making the difference up to at least 80% as follows:
The government will pay 80% of salaries (capped to £2,500 per month) and employers will pay the Employer’s NI and Pension Contributions.
The government will pay 70% of salaries (capped to £2,187.50 per month) and employers will pay Employer’s NI, Pension Contributions and 10% of salaries to make up to 80% total to the cap of £2,500 per month.
The government will pay 60% of salaries (capped to £1,875 per month) and employers will pay Employer’s NI, Pension Contributions and 20% of salaries to make up to 80% total to the cap of £2,500 per month.
Is the figure of £2,500 a gross figure and will tax and Employers/Employees NIC contributions still be deducted?
The £2,500 (£2,187.50 in September and £1,875 in October) is the gross figure payable to the employee, and this is taxable in the normal way.
For claims up to 31 July 2020 the employer’s claim will be the gross payable plus the associated Employer National Insurance contributions and minimum automatic enrolment pension contributions on that subsidised wage based on qualifying earnings. Fees, commission and bonuses should not be included.
From 1 August 2020 the employer cannot claim the Employers National Insurance and pension contributions and from 1 September 2020 the grant reduces to 70% of gross wages (capped at £2,187.50) and then 60% from 1 October 2020 (capped at £1,875)
How do we go about putting staff on the scheme?
Employers must discuss this with their staff and make any changes to the employment contract by agreement.
To be eligible for the subsidy, employers should write to their employee confirming they have been furloughed and when they have been furloughed from and keep a record of this communication.
Employees must have been furloughed for a minimum of three weeks prior to 30 June 2020 (i.e. be furloughed by 10 June 2020) to be eligible for inclusion on a claim post 1 July 2020.
Can Company Directors be included in the scheme?
Company directors, as office holders, are eligible to be furloughed though the scheme, provided that the director is able to meet his or her duties owed to the company as set out in the Companies Act 2006 and does not carry out any work of a kind that they would carry out in normal circumstances to generate commercial revenue.
Where directors are to be furloughed, we recommend that a board minute to formally adopt the decision is prepared for the company records stating the reasoning behind the decision and the period for which it runs.
Can Members of a Limited Liability Partnership (LLP) be included in the scheme?
Salaried members of an LLP are eligible to be furloughed and receive support through the scheme, provided that they are designated as employees for tax purposes. In order to furlough a member, the terms of the LLP agreement may need to be varied by a formal decision of the LLP. This variation would reflect the fact that a member will perform no work in the LLP and the effect of this on their remuneration.
Who else does the scheme cover?
The scheme will also cover:
- Employees with more than one job (the cap will apply to each employment individually)
- Employees on fixed term contracts
- Agency workers (including those employed by umbrella companies)
- Limb (b) workers (“dependent contractors”) – although such workers may be eligible for the Self-Employed Income Support Scheme instead.
- Nannies (or other such employees) employed by individuals
A new member of staff joined my organisation and I am now struggling to keep them busy. Can I furlough them?
Under the rules of the scheme employees hired after 19 March cannot be furloughed.
Can furloughed employees still carry out small basic tasks?
Quite simply – prior to 30 June 2020 – No.
To be eligible for the subsidy, when on furlough prior to 30 June 2020, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.
However, a furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.
If workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
How does flexible furlough work?
From 1 July 2020 employees that are or have previously been furloughed can be flexibly furloughed, enabling part-time working, with no minimum furlough period.
The furlough period can vary from day to day, or week to week, but it will be important to keep accurate records of the hours worked/furloughed.
Employers must also agree any working arrangements with the previously furloughed employee and ensure that employment law continues to be observed. This means that contracts may need to be varied and amended, perhaps several times in the scheme period.
There is a limit to the number of employees who can be claimed for in a single claim and this is set at the maximum ever claimed on single claim submitted for the first period of the scheme.
Do we now stop making auto-enrolment pension contributions if our employees go on the Coronavirus Job Retention Scheme?
No. The grant will cover the minimum automatic enrolment pension contributions on the subsidised wage. If you top up an employee’s salary, then normal auto enrolment should still be applied.
What is the submission deadline and when will I get the money for my first claim?
Claims are submitted via the Government Gateway and must be submitted by the end of the following calendar month (e.g. by 31 August 2020 for any July 2020 claims).
Claims should be paid within 6 working days of submission.
Can Rayner Essex assist with and/or make claims on my behalf?
This is a separate process to the payroll. Rayner Essex can assist you with considering eligibility and calculating the amounts to claim. We can also assist with making the claim on your behalf.
Can employees make a request to be furloughed?
Guidance on this is not provided. However, we are aware that if staff are not busy then they may raise the issue of furloughing. Ultimately any decision must be the employers and must be based on the needs of the business and whether there is sufficient work or alternative work for that person.
Can furloughing be backdated in relation to employees who have already been made redundant?
The scheme also covers employees who were made redundant since 28 February 2020 and prior to 19 March 2020, if they are rehired by their employer.
Will they retain their continuous employment?
Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
Will holiday pay continue to accrue?
Employees that have been furloughed have the same rights as they did previously.
If we decide to keep staff of say 5 people in the office is there any further aid available to us?
Additional support is available through VAT payment deferral, Small Business Grant Funding (if you already receive small business rate relief or rural rate relief) and the Coronavirus Business Interruption Loan Scheme.
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