Covid-19 Job Retention Scheme – Furloughed Workers
Some further guidance on how the scheme is going to work and what action you need to be taking.
This is subject to change as & when the HMRC release exact calculations and processes for the scheme & claiming of the grant.
- All employers are expected to carry on paying their employees, even if it is just the 80% of the normal salary
- HMRC are saying that if employees are processing £0.00 through the payroll & RTI returns, then they may not be able to claim on the furloughed scheme. (This is only guidance & could be subject to change)
- Businesses that are struggling with cash flow can use the below options to continue payment to employee:
- Use VAT
- Use PAYE
- Use Corporation tax
- Business Interruption Loans
These are the options employers should be using to continue payment of wages.
Full Time and Part Time Salaried employees
For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.
Employees whose pay varies
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:
- the same month’s earning from the previous year (Claiming for April 2020, look back to earnings for April 2019)
- average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
Employer National Insurance and Pension Contributions
All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.
You can claim a grant from HMRC to cover wages for a furloughed employee, equal to the lower of 80% of an employee’s regular salary or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.
You can choose to provide top-up salary in addition to the grant, but this is not compulsory. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).
You 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. (can only be backdated to the date the employee was furloughed).
What you’ll need to make a claim
Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.
To claim, 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
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
*** If we process your payroll, we can help calculate and should be able to submit for you ***
Income tax and Employee National Insurance
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.
Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.
Any questions please don’t hesitate to contact us
- Pensions – 0113 4574574
- Payroll – 0113 4574565