Following the announcement of the Corona Job Retention Scheme by the Government on Friday 20th March 2020, last night the Government set out further clarification of how the Scheme is intended to work.
We are conscious that people are looking for guidance in the matter of what they should be doing and paying for the current month and we present below our immediate as of 9:00 am on 27th March 2020) understanding of the Scheme to try to assist you to understand what it might mean for your business.
We caution that whilst more detailed guidance has been published by the Government, there still appears to remain a number of uncertainties in relation to the latest announcement inevitably.
Should you want to review the latest Scheme details yourself please follow this link:
In the interim, we have tried to pick up some immediate consideration for you to try to ensure that you protect your business as far as you are able, whilst also trying to do the same for your employees.
- Work out what you can claim
Employers need to make a claim for wage costs through this scheme.
You 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 Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
At a minimum, employers must pay their employees the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
- What is Regular Pay?
Currently, we cannot locate a definition for regular pay.
We assume that the intention is to cover basic contractual hours and any regular elements of pay that the employee may receive – for example, many employees will have a contractual right to an element of pay that is paid to them that relates to performing their job to a standard on the assumption that they lose the bonus for poor performance rather than gain it for good.
We cannot be sure in the context of the statement in the same paragraph as regular pay is referred to that such bonuses will prove eligible.
So you need to consider your position and we believe these are as follows:
- Do not pay anything that has historically been termed as a bonus/commission and only pay contracted hours – this should guarantee that all payments qualify for the Scheme and the employer incurs no cost for furloughing employees including e’ers NI and Auto Enrolment contributions;
- Pay what you consider to be “regular” wages and make the claim – risking rejection at a later point (now likely to be late April at the earliest);
- Or reach an agreement with your employees to pay only contractual minimums excluding bonuses and commissions this month, seek clarification of what is and is not covered as the legislation unfolds and backdate any claims that would have been covered on a later payroll.
- What Employees Can I Claim For?
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:
- full-time employees
- part-time employees
- employees on agency contracts
- employees 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.
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
This scheme is only for employees on agency contracts who are not working.
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
- If your employee is on unpaid leave
Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
- If your employee is on Statutory Sick Pay
Employees on sick leave or self-isolating get Statutory Sick Pay, but can be furloughed after this.
Employees who are shielding in line with public health guidance can be placed on furlough.
- If your employee has more than one job
If your 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 your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay
Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.
If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.
Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.
If you offer enhanced (earnings-related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.
The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.
- Do You Intend Seeking Assistance?
Please try to limit your enquiries where you can as we are experiencing high volumes of enquiries and the payroll division, in particular, is trying to make sure that people are paid something at least.
If you need advice, please e-mail one of the following in the first instance and one of us will get back to you as soon as we can:
firstname.lastname@example.org / email@example.com / firstname.lastname@example.org / email@example.com / firstname.lastname@example.org