COVID-19: Welcome Guidance for Employers on the Job Retention Scheme

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Almost a week after the Scheme was announced, the Government issued much needed guidance on 26 March. We have summarised the key elements as follows:

It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19) but there is no express requirement, as yet, to adduce proof of inability to pay wages;
Monthly wage costs include Employer National Insurance and minimum automatic enrolment pension contributions on that wage;
Employers can use the scheme anytime during the initial 3 month period;
The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020;
The Scheme is open to Recruitment agencies who engage agency workers through PAYE;
The Scheme can be used for full time and part time employees, agency workers. zero hours workers and employees made redundant since 28 February who have been re-hired;
An employee cannot undertake work for or on behalf of the organisation aside from training or voluntary work that generates no revenue and they are not providing services to the employer. Employees engaging in training 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 short time working or reduced hours are not eligible;
When making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way;
Employers should write to their employee confirming that they have been furloughed and keep a record of this communication;
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this Scheme;
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 shielding in line with public health guidance can be placed on furlough;
If an employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually;
If an employer offers enhanced (earnings related) contractual pay to employees on Maternity Leave, Adoption, Paternity leave or Shared Parental Pay, this is included as wage costs that can be claimed through the Scheme;
Fees, commission and bonuses should not be included in wage costs calculations
An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme;
For employees whose pay varies who have been employed for a full twelve months prior to the claim, employers can claim for the higher of either:

1. the same month’s earning from the previous year;
2. average monthly earnings from the 2019-20 tax year.

If the employee has been employed for less than a year, an employer can claim for an average of their monthly earnings since they started work;
Employers can choose to provide top-up salary in addition to the grant;
Furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW;
Employers can only submit one claim 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;
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme;
Payments received must be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

This note reflects Government Guidance as at 26 March 2020 and may be subject to change. This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Employment team at Cleaver Fulton Rankin for further advice or information.