As of this morning, 25th March 2020 the government has provided very little more in the way of detailed guidance around the Coronavirus Job Retention Scheme. We simply do not know all the answers as yet and we continue to wait until the government announces anything new as an update.
- All UK employers with a PAYE scheme (including sole traders, partnerships, LLPs, limited companies and charities) can claim a grant from HMRC to cover 80% of the wages of “furloughed” employees who are not working, but kept on the payroll, up to £2,500 per month.
- The scheme will be backdated to 1 March 2020 and open for at least 3 months, with scope to be extended if necessary.
- Employers will be able to claim furlough pay through a new online portal.
Under the scheme, employers will be able to access support to continue paying part of their employees’ salary for “those employees that would otherwise have been laid off during this crisis“.
While layoff is a specific statutory concept in employment law, the Chancellor’s statement and the guidance strongly suggest that the government is not just looking to support employees who may be laid off under the statutory rules, but wants to capture under the scheme all employees at risk of redundancy due to COVID-19. The Chancellor also referred to the scheme as supporting all those on payroll which may include workers on the PAYE system and not just those who meet the statutory definition for employment. We wait clarification on this.
For our small business clients who employ employees, from 1 to 100, there are still so many unanswered questions (specifically around the PSC Personal Service Company) where there may only be one employee on the books. This is the main area we await more guidance on from HMRC as we believe there is a grey area around the requirement for no work to be carried out by any employee who is classified as ‘Furloughed’.
Here’s what they have said so far:
If your employer intends to access the Coronavirus Job Retention Scheme, they will discuss with you becoming classified as a furloughed worker. This would mean that you are kept on your employer’s payroll, rather than being laid off.
To qualify for this scheme, you should not undertake work for them while you are furloughed. This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month.
You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to.
If your salary is reduced as a result of these changes, you may be eligible for support through the welfare system, including Universal Credit.
We intend for the Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary.
We are hoping for further clarifications on this as soon as possible. The current announcement sits perfectly for restaurants and larger retailers that are now being shut down, but what about this requirement to not undertake work for the employer while you are furloughed? Where does this leave a micro/small business or Personal Service Company?
Our concern here is that the position of owner directors looks to be very difficult to comment or advise on at this time: if they have to work to, at the very least, ensure that the payroll is processed (and that would seem inevitable) then they cannot, apparently, be furloughed, and as such be subject to the scheme, which is absurd if they have losing their income as a result of this virus.
We simply do not yet know if the rules on this will change – although we hope to see this happen.
Eligibility. How to be determined?
Whilst we all await further information from UK Government, the questions still remain on;
- To what extent will the employer need to prove the employee was a furloughed worker
- Would otherwise have been made redundant
- Is not working
- Is furloughed as a result of the COVID-19
Can employees work for the employer when furloughed?
Currently – to qualify for the scheme, employees must not undertake work for the employer while furloughed. The grants do not cover the wages of employees working a reduced schedule due to the virus; the employees must not work for the employer at all during the furlough period.
If there is any update on this, we will of course keep you informed.
How to access the scheme?
Employers who wish to benefit from the scheme will need to:
Identify their affected employees who should be designated as “furloughed workers”. At present, the term furloughed workers is not defined in UK employment legislation. It is thought a concept used in other jurisdictions, such as the US to refer to an employee who are essentially put on unpaid leave, that is they do not work and are not paid but remain an employee.
- A furloughed worker will need to be notified of their change in employment status and agree.
- The employer must then submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal – yet to be launched.
HMRC will be setting out further details on the information that is required and are working “urgently to set up a system for reimbursement”.
With the Chancellor announcing that he expects the first grants under the scheme to be paid before 1 April, more detail is expected soon.
For now it is understood that employers will continue to process and pay the payroll (including any Furloughed workers) and a claim for repayment of the 80% will then be made by the employer at a later date, when the new system has been built.
Until then, the employer will still need to ‘cash-flow’ the salary payments for furloughed workers until the repayment system is ‘live’.
For our clients, we are currently holding all payroll processing back until the 30th/31st March in order that we may capture any further updates on this and be better positioned to confirm eligibility for owner/directors.
We will update you accordingly.