The Coronavirus Job Retention Scheme (‘Scheme’)
The Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. The Government guidance confirms that the scheme can be accessed by an Administrator of a company.
The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 28 February 2020 and pays a grant (not a loan) to the employer.
Employers can claim 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated employers’ national insurance contributions (NIC) on this amount and the minimum automatic enrolment employer pension contributions on that wage provided they keep the worker employed. The scheme will cover the cost of wages backdated to 1 March 2020, if applicable.
Fees, commission and bonuses should not be included. Employers can use this scheme anytime during the three month period starting from 1 March 2020.
Employers are to continue to pay the employee(s) through payroll, using the Real Time Information system as usual, as required by the employment contract.
Relevant employees must be designated as furloughed employees.
The Scheme will be administered by HMRC. Employers will submit information to HMRC through a new online portal, when available. The portal is expected to be operational by the end of April 2020.
What is a ‘Furloughed’ employee?
Furlough is a leave of absence. For the purposes of the Scheme, furloughed members of staff must not work for the employer during the period of furlough.
Employees you can claim for
Furloughed employees must have been on the 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
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with the scheme.
How it works?
Ms L is employed by ABC Limited and has an annual salary of £30,000 equating to £2,500 per month. Ms L has opted in for auto enrolment at 3%.
On a monthly basis, Ms L receives a net pay of £1,947 after the below deductions:
(1) PAYE – £280
(2) NIC – £214
(3) Pension – £60
The employer pays employers’ NIC of £245.
The grant available for the employer will be the lower of:
80% of usual monthly wage costs or £2,500
Plus the associated employers’ NIC on this amount and auto- enrolled pension contribution.
In this scenario, the above will equate to:
In this instance, the grant will be £2,000 + £245 + £60 = £2,305
The balance required by ABC Limited to furlough based on maintaining the existing salary is £195 per month. The payment of this balance will be a matter for employment law and legal advice should be sought accordingly.
For further guidance on the Scheme, please visit Gov.uk.
This guidance note is not intended to be a statement of law or a substitute for specific professional or legal advice. We have made every effort to ensure that the guide is accurate but R3 cannot accept any responsibility for the consequences of any action taken in reliance of its contents.