Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
Furlough Scheme Extended to October 2020
The flexible furlough scheme will be introduced as a new scheme, with the current system coming to a close on 30 June. However, claims will be restricted to employees already furloughed before this date. This means any organisation wanting to make use of the new scheme’s flexibilities will need to have furloughed these staff by 10 June, to allow them to complete the minimum three weeks required by the current scheme before it comes to an end.
June and July
The government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICS) and pension contributions. Employers are not required to pay anything.
July: part-time furloughing
From 1 July employers will be able to return furloughed workers on a part-time or reduced-hours basis while still claiming from the job retention scheme for the hours the employee isn’t working.
The government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICs and pension contributions – for the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.
The government will pay 70% of wages up to a cap of £2,187.50. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 14% of the gross employment costs the employer would have incurred had the employee not been furloughed.
The government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.
All UK businesses are eligible.
How to access the scheme
- There is no need to wait until the Government issues further guidance on this scheme and you can Furlough your employees now.
- All you are required to do is inform your employees that their employment status has been updated to Furlough.
- You should then follow this up with written correspondence via email attaching a letter, or by letter informing them of this change, which the HMRC may request and which will enable you to claim the grant.
- Peninsula has created this draft letter for you to use which will allow you to Furlough your employees now.
Remember, you can access this letter and up to date information in your COVID-19 toolkit.
Coronavirus Job Retention Scheme: further details
The full guidance is available here: https://www.gov.uk/guidance/claim-for-wage-coststhrough-the-coronavirus-job-retention-scheme
The scheme is expected to open for applications on Monday 20 April 2020, and the main details which have been given are as follows:
- The scheme is open to all UK employers that had a PAYE scheme on or before 19 march 2020
- Any organisation with employees can apply, including charities, recruitment agencies and public authorities. With agency employees, the scheme is only available for agency employees who are not currently working.
- Employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month, plus (not including) the associated employer NICs and minimum auto-enrolment pension contributions on that wage. Fees, commissions and bonuses are not included.
- An employer can choose to top up to 100%, but does not have to.
- For employees whose pay varies, the employer can claim for the higher of (i) the same month's earning from the previous year (e.g. earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year
- Individuals are only entitled to the minimum wage for the hours they work. So if they are furloughed and do not work, and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working.
- To be eligible, the employee must have been on the payroll on 28 February 2020. If they were hired later, they are not eligible. Anybody who was on the payroll on 28 Feb and has since been made redundant can be re-hired and put on the scheme.
- Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding.
- The guidance does not mention rotating furlough leave amongst employees. Therefore it is expected that furlough rotation can be done, provided each employee is off for a period of at least three weeks.
- The employee must not be working at all. If they work for even an hour they are not eligible. However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer.
- When agreeing changes in hours (and acceptance of 80% pay), assuming the contract does not already allow for that, normal employment law applies. The employer must be careful not to discriminate in deciding who to offer furlough too. • Employees on sick pay or self-isolating cannot be furloughed, but can be furloughed afterwards. Employees who are shielding can be placed on furlough.
- Employees on maternity (or similar) leave can continue to draw SMP (or similar) payments. The guidance does not prohibit women on maternity leave agreeing to return to work early and then being furloughed, or electing to change to shared parental leave and then being furloughed.
- Employers can only claim once every three weeks, i.e. they cannot get weekly reimbursement. Claims can be backdated to 1 March 2020.