The Coronavirus Job Retention Scheme

Friday March 27, 2020

Updated: 13/05/20

The ongoing COVID-19 outbreak is putting businesses at every level of the UK's economy under unprecedented pressure. To ease that strain and prevent affected workers losing their jobs altogether, the government's doing something basically unheard of. It's stepping in to pay 80% of the wages of people unable to work because of the pandemic. Any UK business whose employees are facing the axe because of COVID-19 can qualify. While the scheme was initially set to run for 3 months, the Chancellor announced on the 12th of May 2020 that it would continue until the end of October.

PAYE Workers

80% of workers' wages will be covered, up to £2,500 per month, theoretically saving thousands of jobs in vulnerable businesses. Payments will be backdated to the 1st of March, meaning it could actually see people who've already been laid off given a lifeline (and their old jobs back). The cash will start flowing within a few weeks. Here's how it works:

  • Instead of laying its employees off, a business will designate them as “furloughed workers”. Obviously, this is a change in employment status so it might mean some extra paperwork and contract negotiation. Employers need to write to affected employees to confirm that they’ve been “furloughed”.
  • The employer sends word to HMRC about all of its furloughed employees, listing their earnings and any other essential information. This will include each employee’s name, National Insurance number, the claim period and the claim amount. While optional, their PAYE/employee numbers may be helpful.
  • If you’ve furloughed fewer than 100 employees, you’ll need to enter all their details directly into the system. If you’ve furloughed more, you’ll use one of the following file formats: .xls, .xlsx, .csv or .ods.
  • Since this is a reimbursement scheme, the business continues to pay its employees as normal. The money is then claimed back through the system.
  • You can use the scheme for full-time and part-time employees, along with people on agency, flexible or zero-hour contracts. In all cases, employees are only eligible if they aren’t taking on any work for you because of the pandemic. Employees on reduced hours or pay won’t count. Furloughed employees can still take on volunteer work or training, as long as they’re not generating income or providing services for on behalf of their employer.
  • You can claim for employees who were on your payroll as of the 19th of March 2020. In addition, anyone who was employed as of the 28th of February 2020 - but was made redundant or stopped working for you prior to the 19th March - can also qualify for the scheme if you re-employ and furlough them.
  • Anyone on paid leave won’t qualify if their leave started before the 28th of February.
  • Employees on Statutory Sick Pay can’t be classed as furloughed until after their SSP ends. However, people who are self-isolating because of public health guidance can still qualify.
  • People with more than one job can be furloughed for each. The £2,500 cap counts separately per job.
  • The standard rules on Maternity Leave still apply, meaning employees have to take at least 2 weeks off after giving birth. People eligible for Statutory Maternity Pay or Maternity Allowance will still get it as normal.
  • For people whose pay varies, the rules say that employers can claim either for the same month’s earnings from a prior year or an average of their monthly earnings from the 2019/20 tax year. Whichever’s higher applies, as long as they’ve been employed for at least 12 months. For people employed more recently than this, the average can be worked out based on what they’ve earned to date – or pro rata if they were only taken on in February.
  • Employers are still responsible for Employer National Insurance Contributions and automatic enrolment pension contributions for furloughed employees. When you claim for them under the scheme, those costs are added to your claim.
  • Coronavirus Job Retention scheme payments are counted among a business’ taxable profits for Income Tax and Corporation Tax purposes. Employment costs are deducted as normal, though.
  • Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.
  • Finally, claims will cover a minimum of 3 weeks, backdated to the 1st of March if necessary. You have to pass the entire grant onto the employees you’re claiming for. You can choose to give them more than the grant amount, but not less.
  • In his announcement on the 12th of May, Chancellor Rishi Sunak extended the scheme to run until the end of October 2020. He also said that, from August, some of the details will change so that employers have some flexibility in phasing employees back into work part-time. In practice, this means employers doing this will be asked to contribute more toward their furloughed employees’ pay. As the scheme evolves in coming months, there are suggestions that all employers’ share of furloughed workers’ pay will rise, with the government’s 80% dropping. There are still plenty of details to be ironed out, to check back here for updates.

How to make your claim

The launch date for the online claim form is the 20th of April 2020. You won’t be able to access it before that date, and it’s the only way you’ll be able to use the scheme. When you make your claim, you’ll find support available for things like calculating how much you can actually get.

You can use the online form even if you usually handle things through an agent, but HMRC won’t be able to deal with queries from employees. You’ll have to handle those yourself. Your authorised agent can make your claim for you if you prefer, using their ID and password. You’ll need to let them know which bank account you need the claim to be paid into, to keep things moving smoothly.

Once your claim’s put through, it should be paid out within 6 working days. HMRC’s expecting to be extremely busy running the scheme, so you should only contract them directly about your claim in an emergency. Anything else should be addressed to your agent or representative. Alternatively, you can use the HMRC webchat service.

The Coronavirus Job Retention Scheme’s mainly targeted at private sector businesses, meaning the government expects businesses that receive public funding to carry on as normal. Once the system ends, it’ll be up to employers to decide which employees should come back to work. Depending on the circumstances, they may need to consider redundancies then.

In the meantime, there's a range of other measures in place to help tide businesses over the rough waters ahead, including:

  • A 3-month VAT deferral for businesses and a 6-month deferral of July's Self Assessment payments for the self-employed.
  • Support for small businesses paying out Sick Pay to employees, covering 14 days of Statutory Sick Pay costs. Only businesses with fewer than 250 workers can get this.
  • A 1-year business rates holiday for firms in the retail, hospitality and leisure sectors. These sectors can also get grants of between £10,000 and £25,000, depending on their rateable values.
  • A Small Business Grant scheme offering £10,000 for firms eligible for Small Business Rate Relief or Rural Rate Relief.
  • Business Interruption Loans for SMEs, offering as much as £5 million for up to 6 years, with the first 12 months being interest-free. Larger firms will be able to benefit from a Bank of England system that sees the Bank buying up their short-term debt.

Whatever impact COVID-19 is having on your business, don't suffer in silence. Talk to RIFT to find out what help you qualify for, and to make sure you and your employees are protected.

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