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March 27th 2020, by Calvin Cooper

The government has now announced full details of how the Job Retention Scheme will work.

To help you understand how it’s relevant to your situation, we’ve read the guidance, and answered all the questions you might be asking.

Before you start, go and get a cuppa. This is a biggie....

Ready? Let's go...

I just set up as an employer last week. Will I be able to claim?

No. This is only open to employers who were registered with HMRC prior to 28 February 2020.

Some of my employees started in March 2020. Are they eligible?

No. Only employees who were on the payroll on 28 February 2020 are eligible.

What types of employee contracts are eligible?

All contracts, including full time, part time, agency and flexible/zero hours contracts will be eligible.

When will I be able to claim the JRS?

The system for processing claims is expected to go live by the end of April.

Therefore, maintaining good cashflow throughout this period is going to be key. We're more than happy to help you with this.

Do I pay my employees as normal meantime?

This will depend on the cashflow situation of your business.

It might be that you can afford to pay your employees as normal, and that you as a business then claim the money back from the government.

Alternatively, if your cashflow will not permit this, you will need to agree the specific nature of the furlough arrangement with your employees, and ensure they understand that they will not receive pay throughout this period. They will then be entitled to be reimbursed once you receive the funds from the government.

Somewhere in the middle of that, it might be that you can initially pay them 'as normal', but if the period of business closure continues, they may have to go without pay.

Key point: Clearly, keeping your employees within your business during this difficult time is going to be key to ensuring you can continue to trade as normal once the lockdowns pass. Therefore, paying them, and ensuring they do not look for work elsewhere, will be an important factor in retaining staff. Seeking financial assistance to enable you to do this should be possible, and we've found the banks have been very willing to help business owners navigate this period, whether that's through increased overdrafts, loan holidays, or other new short term loans.

Ok. So how much do I have to pay them?

Thoughout the furloughed period, you are only obliged to pay the employees 80% of their normal amount (see below for calculations). You will then be able to reclaim this portion from the government, rather than each employee having to claim it directly themselves.

The payments made meantime are subject to the normal PAYE and NI deductions.

Do I have to pay the additional 20% which isn’t covered by the JRS?

No. This is not compulsory, but you may wish to top up their pay to keep good relationships and ensure they return to you once this has all passed.

If you pay the additional 20%, this will not be covered by the JRS, so you must consider if your business can afford to pay all, or even some, of this top up.

It may be that you don't pay this topup now, but aim to repay your employees for this 'missed pay' once normal trading resumes. Be careful not to create a binding commitment to the employees, incase the trading outlook changes further, but it is an option you can keep up your sleeve!

What period does the JRS cover?

It covers the costs of workers furloughed between 1 March 2020 to 31 May 2020. The government may extend that if coronavirus continues past that date.

How do I furlough my employees?

You must write to them to confirm that their status is now ‘furlough’ and confirm the date on which this took effect. Keep hold of a copy of that correspondence for future JRS claims.

How long must they be furloughed?

The minimum period an employee can be furloughed for is 3 weeks. Anything less than this will not qualify for reimbursement under the JRS.

Can my employees still work for me whilst they’re marked as furloughed?

No. The expectation is that furloughed employees cannot perform the duties of their employment as a result of Coronavirus.

My employees are still able to work for the business part time. Do they still qualify?

No. Even though the employees hours might be reduced due to the Coronavirus outbreak; doing any work at all for the company means that they will not be eligible for the JRS.

For example, an employee who is normally office based 2 days a week (and is on-site the other 3 days a week), might be able to carry on their office duties from home. Despite their workload having dropped from a 5 day week to a 2 day week, they will not be eligible for the JRS.

We therefore advise that you carefully assess who you furlough, and who you keep working.

Key point: consider very carefully which employees you confirm as being furloughed. Once this is done, they cannot work for your business for 3 weeks (minimum) – not even in a part-time capacity.

For example, using job shares between two different part-time employees for one full-time role within the business would mean neither would qualify for the JRS, unless they rotate 3 weeks about, with each doing 3 full time working weeks in one solid run.

To furlough or not to furlough? There is ultimately a commercial decision to be made here; how much will your employees safely be able to do/earn for the business if they keep working, and will this outweigh the cost of you paying them yourself throughout this time? If not, seeking furlough will be the more financially beneficial route.

What do I pay employees in this ‘able to work part-time’ position?

You must continue to pay them in line with their employment contract, albeit on reduced hours.

Can furloughed employees do anything for my business meantime?

They are permitted to undertake training or volunteer work, so long as they do not provide services to your organisation or generate revenue for it.

Do I have to pay employees who undertake training during this time?

Yes. You must pay them at least the National Living Wage for any time spent training, even if this is more than the 80% which will be covered under the JRS.

I made some employees redundant in March. I will now be able rehire them as a result of this scheme. Do they qualify for the JRS?

Yes. This is what the scheme was aimed at assisting – it’s there to prevent redundancies. Despite those employees coming back onto the payroll after 28 February 2020, they will still be eligible for the JRS. [UPDATE: this has now been extended to 19 March 2020]

My employees work for other businesses. Do they still qualify?

Yes. The JRS is assessed on an employer-by-employer basis. If your employees are still able to work elsewhere whilst furloughed from you, this will not jeopardise your JRS claim.

I have employees on Maternity Leave. Do they qualify?

No. The normal Statutory Maternity Pay or Maternity Allowance will apply to them in the same way as it would if the JRS were not in existence.

My business is not on the list of businesses which was ordered to close. If I close voluntarily, will I still be entitled to claim the JRS?

Yes, based on current guidance, we believe that if you’ve closed as a result of following guidance and due to disruption caused by Coronavirus, you will be eligible to claim the JRS.

I own and manage my own company. I take a small salary, and top up my income with dividends. What am I eligible for?

In theory, directors can be furloughed in the same way as normal employees. Therefore, the JRS will cover the cost of your salary, in line with the claim details below.

The loss of dividends will not be covered by the JRS.

Key point: although directors can in theory be furloughed, it is more difficult in practice to show that they did not perform any ‘services for the organisation’ during this time, especially if you are the sole director. In order to prove this, you may wish to contact all customers, suppliers, and other stakeholders to notify them that the business has been suspended owing to the coronavirus outbreak, and will resume once it has passed. You could then reasonable furlough yourself.

However, this is likely to be impractical, and undesirable, as it will be in you and your business’s interest to continue to work on the business so that you are ready to trade again as soon as conditions permit. Therefore, we advise caution at wishing to seek the JRS as a company owner-director.

HOW MUCH CAN I CLAIM?

We’ve broken this down into a few more questions!

Is it the employee’s pay before tax or after tax that is covered?

The JRS calculation is based on the gross salary before tax. 80% of this will be covered under the JRS, up to a limit of £2,500 per month.

Therefore, if you have an employee earning a gross salary of £37,500 or less per annum, you will be able to claim 80% of their actual gross salary.

For employees earning over £37,500 per annum, you will only be able to claim £2,500 per month.

I pay my employees bonuses and commissions. Is that covered?

No. Fees, bonuses and commissions are all excluded from the JRS calculation.

My employees pay varies from month to month. What can I claim?

This is common for zero-hours contracts, or employees who have a lot of flexible overtime as part of their job. The calculation here is split into two parts.

1. For employees who have been employed for at least 12 months

In this case, you base the claim on the higher of:

  • The same month’s earnings from the previous year, i.e. March 2019 for a claim being made for March 2020, or
  • The average monthly earnings from the 2019/20 tax year.

2. For employees who’ve worked for you for less than 12 months

You simply take an average of their monthly earnings so far.

For any employees who started in February 2020, you can use a pro rata for their earnings, e.g. if they worked 2 weeks but are contracted to work 4 weeks per month, you can double the earnings from the two weeks in which they actually worked.

Is the cost of Employers National Insurance covered?

Yes. You are also eligible to claim 80% of the Employers NI cost on any gross payments covered by the JRS.

Are employer pension costs (autoenrolment) cost covered?

Yes. It is covered, but it is restricted to the minimum autoenrolment amount. For any employers paying over the minimum amount, this portion of the contribution will not be covered.

The minimum threshold is currently 3% of pensionable earnings.

I pay the National Minimum/Living Wage (NMW). Will the employee end up with less pay than the NWM?

Yes, it's possible. You are only obliged to pay them 80% of their normal wage - if this is the NWM, this will mean they are paid less than that. Current NMW rules only apply to hours in which an employee works.

As mentioned above, should you wish to top up the employees wages, this is entirely your choice and you are free to do so, but this uplift will not be covered by the JRS.

How often can I submit a claim?

No more than once every 3 weeks, as this is the minimum period in which employees can be furloughed for.

Can claims be backdated?

Yes. Claims can be backdated to 1 March 2020, if you have qualifying employees from that time.

How will the claim be paid out?

HMRC will transfer you the money by BACS directly to your bank account.

What happens once the scheme ends?

At the end of the scheme, if you are unable to afford to take the employee back to your business, you may need to consider making them redundant at that time.

Is the grant received under the JRS taxable?

Yes. This scheme is create to offset normal trading costs (the cost of wages) and therefore it will effectively be cost neutral from a tax perspective, i.e. you pay out £800 and receive £800, therefore no profit or loss has been made.

Can HMRC audit my claims?

Yes – and we expect them to do so. Therefore keeping evidence of furlough confirmation and demonstrating that they did not work for your business will be key.

Aaaaaaand breathe!

Well done for getting to the end of this epic! We’ll continue to update this page with any and all new guidance concerning the JRS as it develops.

As always, if any of you have any questions on your situation, please don’t hesitate to contact us.

Meantime, for anyone concerned about the massive list of things you have to think about at this current time, you can join us for our 'Business Continuity Planning' webinar online this Saturday. Full details can be found here.

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