The scheme is live from today (Monday 20 April) and the link to the portal can be found here.
Employers will be able to use a portal to claim for 80% of furloughed employees’ usual wage costs, up to £2,500 a month.
This temporary scheme is open to all UK employers for at least three months, starting from 1 March 2020.
- Furloughed employees must have been on your PAYE payroll on 19 March 2020. They can be:
- Full-time employees
- Part-time employees
- Employees on agency contracts
- Employees on flexible or zero-hours contracts
- Employees who were made redundant since 28 February 2020
- Furloughed employees can not undertake work for or on behalf of the organisation, including providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
- The scheme is available for employees on agency contracts who are not working. If they are working on reduced hours or for reduced pay, they will not be eligible for the scheme and will have to paid through payroll and pay their salary subject to the employment terms in the contract agreed.
- Employers should discuss this with staff and make any changes to the employment contract by agreement. Equality and discrimination laws will apply in the usual way when decisions are being made in relation to the process.
- To be eligible for the subsidy, employers should write to their employee, confirming they have been furloughed and keep a record of this.
- Employees who cannot be furloughed:
- Hired after 28 February
- On unpaid leave, unless they were place on this after 28 February
- Employees on sick leave or self-isolating should get statutory sick pay but can be furloughed after this and those who are shielding in line with public health guidance can be placed on furlough.
- If the employer has more than one job, they can be furloughed for each because each job is separate and the cap applies to each employer individually.
- Furloughed employees can take part in voluntary work or training as long as it doesn’t provide services or generate revenue for, or on behalf of the organisation.
- If workers are required to undertake training such as online courses while they are furloughed, they must be paid at least the national living wage or minimum wage for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
Employees on leave
- Those who are on or will be on maternity leave must take at least two weeks off work immediately after the birth of their baby.
- This is a health and safety requirement and, in practice, most women start maternity leave before they give birth.
- For employees eligible for statutory maternity pay or maternity allowance, the normal rules apply and they are entitled to claim up to 39 weeks of this pay.
- Employees that qualify for statutory maternity pay will still be eligible for 90% of their average weekly earnings in the first six weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower) – the rate is currently £148.68, rising to £151.20 a week from April 2020.
- The same principles apply when the employee qualifies for contractual adoption, paternity or shared parental pay.
- Salaried company directors are eligible to be furloughed and receive support through this scheme.
- Company directors owe duties to their company (set out in the Companies Act 2006).
- Where a company (acting through its board of directors) considers it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide to furlough directors.
- Where one or more individual directors’ furlough is decided by the board, this should be formally adopted as a decision of the company, noted in company records and the director (or directors) concerned should be notified in writing.
- Where furloughed directors need to carry out particular duties to fulfil the statutory obligations owed to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose.
- Employers will receive a grant from HMRC to cover the lower of either 80% of an employee’s regular wage or £2,500, as well as associated employer national insurance contributions and minimum automatic enrolment pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
- An employer can choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
- The Government announced (at 1pm on Friday 27 March) that it would cover national insurance and pension contributions of furloughed workers.
- If the employee has been employed for a full 12 months prior to the claim, employers can claim for the higher of the same month’s earning from the previous year or the average monthly earnings from the 2019-20 tax year.
- If the employee has been employed for less than 12 months, the employer can claim for an average of their monthly earnings since they began.
- If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
- Once the employer has worked out how much of the employee’s salary they can claim for, they must then work out the amount of employer national insurance contributions and minimum automatic enrolment employer pension contributions they are entitled to claim.
- The Government announced, at 1pm on Friday 27 March, it would cover employer’s national insurance contributions and minimum automatic enrolment employer pension contributions on behalf of furloughed employees.
- Employers can claim a grant from HMRC to cover the wages of a furloughed employee, equal to 80% of an employee’s regular salary up to a maximum of £2,500 a month, plus the associated contributions on paying those wages.
What is needed to make a claim
- To claim, employers will need:
- Their ePAYE reference number
- Number of employers being furloughed
- Claim period (start and end date)
- Account claimed (per minimum length of furloughing of three weeks)
- Their bank account number and sort code
- Contact name
- Phone number
- It falls down to the employer to work out the amount they are claiming and HMRC will retain the right to retrospectively audit all aspects of the claim.
- Employers can only submit one claim at least every three weeks, which is the minimum length an employee can be furloughed for and claims can be backdated until 1 March if applicable.
- Once HMRC has received the claim and the employer is eligible for the grant, it will be paid via BACS payment to a UK bank account.
- Employers should make the claim in accordance with actual payroll amounts at the point at which they run the payroll or in advance of an imminent payroll.
- Employers must pay the employee all the grant received for their gross pay and no fees can be charged from the money granted.
At the end of the scheme
- Once the Government ends the scheme, employers decide whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
- When the scheme has been closed by the Government, HMRC will continue to process remaining claims before terminating the scheme.
- They have the same rights as they did previously, including statutory sick pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
- Furloughed employees’ wages will be subjected to income tax and national insurance as usual. The Government will now also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt out or to cease saving into a workplace pension scheme.
- The Government will now pay employer national insurance contributions on wages paid and automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.
- The payments under the scheme are made to offset businesses’ deductible revenue costs and must be included as income in the company’s calculation of its taxable profits for income and corporation tax purposes in accordance with normal principles.
- Businesses can deduct employment costs as usual when calculating taxable profits for income and corporation tax purposes.