Coronavirus Job Retention Scheme
Under the new Coronavirus Job Retention scheme, government grants will cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis. The scheme, open to any employer in the country, will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It will continue for at least three months and can include workers who were in employment on 28 February.
To claim under the scheme employers will need to:
- designate affected employees as ‘furloughed workers’ and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
While HMRC is working urgently to set up a system for reimbursement, we understand existing systems are not set up to facilitate payments to employers.
Business that need short-term cash flow support, will not benefit from this scheme immediately
What is a furloughed worker?
The definition of furlough is to allow or force someone to be absent temporarily from work.
In this case that means anyone asked to stop working during the coronavirus pandemic but not made redundant.
An employee should not undertake work for the employer while they are furloughed. This will allow the employer to claim a grant of up to 80% of their wage for all employment costs, up to a cap of £2,500 per month.
If an employer intends to access the Coronavirus Job Retention Scheme, they need to discuss with their employees about becoming classified as a furloughed worker. This would mean that they are kept on the payroll, rather than being laid off.
To qualify for this scheme, they will need to remain employed while furloughed. An employer could choose to fund the differences between the grant payment and their salary, but they do not have to.
If any employee’s salary is reduced as a result of these changes, they may be eligible for support through the welfare system, including Universal Credit.
How do I go about doing this?
You would need to discuss this with your employee. Williams Denton Accountants have kindly produced a template letter which you are free to use and/or adapt.