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COVID-19 Claim for wage costs through the Coronavirus Job Retention Scheme

This is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. HMRC expect the scheme to be up and running by the end of April.

Employers can use a portal to claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated employers’ NIC and minimum automatic enrolment employer pension contributions on that wage. The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020 and have a UK bank account. Where a company is being taken under the management of an administrator, the administrator will be able to access the scheme.

Public sector organisations
Where employers receive public funding for staff costs and that funding is continuing, the Government expects employers to use that money to continue to pay staff in the usual fashion and not furlough them.

Furloughed employees
Employers should discuss with their staff and make any changes to the employment contract by agreement and may need to seek legal advice on the process. Furloughed employees must have been on the relevant PAYE payroll on 28 February 2020 and can be on any type of contract including employees on agency contracts or on flexible or zero-hour contracts. The scheme also covers employees who were made redundant since 28 February 2020 if they are rehired by their employer.

When on furlough, an employee can not undertake work for or on behalf of the business and the employee’s wage will be subject to the usual income tax and other deductions. If an employee is working but on reduced hours or pay, they will not be eligible for this scheme. Employers will need to write to their employee confirming that they have been furloughed and keep a record of this.

Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February. Employees on sick leave or self-isolating should get SSP but can be furloughed after this. Employees who are self-isolating can be placed on furlough.

If workers are required to 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.

Employees on maternity leave, contractual adoption pay, paternity pay or shared parental pay
If an employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply. If an employer offers enhanced (earnings-related) contractual pay to women on Maternity Leave, this is included as wage costs that can be claimed through the scheme. The same principles apply where an employee qualifies for contractual adoption, paternity or shared parental pay.

What can be claimed
Businesses will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated employers’ NIC and minimum automatic enrolment employer 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 but is not obliged to do so.

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February 2020, should be used to calculate the 80%.

For those whose pay varies, then if an employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, a claim can be made for the higher of either the same month’s earnings from the previous year or the average monthly earnings from 2019/20. If the employee has been employed for less than a year, a claim can be made for an average of their monthly earnings since they started work. If the employee only started in February 2020, use a pro-rata for their earnings so far.

Making a claim
Various information will be required including the ePAYE reference number, the number of employees being furloughed, the claim period (start and end date), the amount claimed (per the minimum length of furloughing of 3 weeks) and the bank account number and sort code.
Only one claim can be submitted at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.

Business treatment of the Job Retention Grant
Payments received by a business under the scheme must therefore be included as income in the business’s calculation of its taxable profits. Businesses can deduct employment costs as normal when calculating taxable profits.

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