Covid-19 Business Update 5 – Tuesday 31st March 2020

Following our previous update on 27th March 2020, please find below notable changes that have been released via

Coronavirus Job Retention Scheme

Further guidance on this scheme has now been released and all the scheme details to the best of our knowledge are summarised below:

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19) and safeguard workers from being made redundant.

You can claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

What to do next:

1. Designate affected employees as ‘furloughed workers,’ and notify your employees of this change. This is a change in the status of employees and remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.

2. Write to your employee confirming that they have been furloughed and keep a record of this communication.We have prepared a template letter that you can use however please note that this is an area of employment law not an accountancy matter and therefore we cannot take legal liability for the content of the letter. Please let us know if you wish for us to forward the template to you.

Rules to be aware of:

• Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including full time, Part time, agency contract workers and those on flexible or zero-hour contracts.

• Employees hired after 28 February 2020 cannot be furloughed. It does cover employees who were made redundant since 28 February 2020, if they are rehired by their employer.

• When on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. The employee’s wage will be subject to usual income tax and other deductions.

• 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.

• You do not need to place all your employees on furlough.

• 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 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 employer they can be furloughed for each job.

• A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.

• If workers are required to, for example, complete online training courses whilst they are furloughed, then they must be paid at least the National Minimum Wages for the time spent training.

• 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.The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.

What you can claim for:

For staff with regular wages it should be based upon:
• 80% of an employee’s regular wage (based on)to a maximum of £2,500 per month as of the actual salary at 28 Feb 2020

• The associated Employer National Insurance (Er’s NI) contributions
• Minimum automatic enrolment employer pension contributions on that subsidised wage. (We are awaiting more guidance on this calculation from HMRC)
• Fees, commission and bonuses should not be included.

For staff with variable pay it depends how long they have been working for you:
If employed:

1. For a full twelve months you can claim for the higher of either:
• The same month’s earning from the previous year, or,
• average monthly earnings from the 2019-20 tax year.

2. For less than a year, you can claim for an average of their monthly earnings since they started work.

3. Only started in February 2020, use a pro-rata for their earnings so far to claim.
You can choose to top up an employee’s salary beyond this but you are not obliged to under this scheme.

You will need to calculate the amount you are claiming and HMRC will retain the right to retrospectively audit all aspects of your claim.

HMRC Online Service to make a claim

The information you will need:

• your ePAYE reference number
• the number of employees being furloughed
• the claim period (start and end date)
• amount claimed (per the minimum length of furloughing of 3 weeks)
• your bank account number and sort code
• your contact name
• your phone number

The online service you’ll use to claim is not available yet. We expect it to be available by the end of April 2020.

You can submit only one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for.

Claims can be backdated to 1st March if applicable.

Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.

You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.

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