The Government have launched a grant scheme to support employers to retain those employees who will be needed when they begin to re-establish your businesses in the aftermath of COVID-19.
Below we have included a summary of the rules together with our most frequently asked questions. More detail and details on how to deal with employees on sick leave, maternity or unpaid leave are included in the HMRC guidance.
The detailed guidance can be found here.
Calculation of the grant
The maximum grant will cover the lower of 80% of the employee's regular wage or £2,500 per month, plus the associated Employer's NIC and auto-enrolment pension contributions on that subsidised wage. Fees, commission and bonuses are not to be included.
As a minimum you must pay your employee the lower of 80% or £2,500 per month. You may choose to top up to the usual salary and beyond if you wish. Guidance on how to calculate the Employers NIC and auto-enrolment pension contributions will be issued before the scheme goes live.
Full and part-time salaried employees actual salary before tax, as at 28 February 2020, should be used to calculate the 80%, not including fees, commission and bonuses.
For employees whose pay varies, if the employee has been employed for a full twelve months prior to the claim, you will claim for the higher of:
If the employee has been employed for less than a year, you will claim for an average of their monthly earnings since they started work. If the employee started in February 2020, you will calculate their earnings on a pro-rata basis.
If we prepare your payroll we will do this for you, if not, we will be able to assist you with calculations if required.
I’m am director and shareholder taking a small salary and extracting profits via dividend. Are my dividends covered?
No, the scheme does not extend to dividends. It covers payments made through payroll only.
Also as a director you are likely to still be dealing with company administration, making decisions about the future of the business and looking at accessing government support for the business so you are unlikely to qualify as a furloughed employee because you will be undertaking work for the business.
HMRC have however confirmed that any director can be furloughed provided that they are not working for the company and the only duties they undertake are statutory duties as a director (e.g. filing of accounts).
I need to make a decision now about whether to furlough an employee, but we still aren’t quite sure of the impact. Can I buy some time?
You can insist that employees take annual leave at any time, so you make wish to make use of this provision. According to ACAS, unless the contract of employment states otherwise, you should notify the employee at least twice as many days before as the number of days you want them to take. For example, if you want them to take 2 days annual leave you should tell them 4 days before.
Can my employees be moved in and out of furloughed status?
The scheme has been designed to allow for some flexibility. You may need this flexibility so that furloughed employees can be brought back to work to replace those who become unwell, or where employees agree to rotate to enable them to share the workload. The minimum period of furlough is 3 weeks.
What about National Living Wage and National Minimum Wage?
These provisions do not apply as individuals are entitled to these based on the hours they are working. However, if workers are required to complete online training (which is allowed) during the period of furlough, they must be paid at least the National Living Wage of National Minimum Wage for the time spent training, even if this is more than the 80% subsidised sum.
Do my employees have to accept furlough?
No, an employee does not have accept furlough. If they refuse you could then follow usual employment law procedures to make them redundant or lay them off.
I have already agreed furloughed status with an employee but they did not commence employment until after 28 February, can I recover 80% of their wages?
No, your employee will still have furlough status but because they were not on the payroll at 28 February you will not be able to recover costs. At the first review date of the furlough you could then follow usual employment law procedures to make them redundant or lay them off.
How do I pay my furloughed employees?
You should continue to pay your furloughed employees through payroll using RTI in the usual way. These details will then be reported to HMRC via the online portal so that they can calculate and refund eligible costs. You cannot recover costs before you pay your employees. The portal is expected to be live towards the end of April.
Are my employees still entitled to holiday and sick pay?
We don’t expect the scheme to impact existing employment contracts, therefore employees will still accrue holiday during a period of furlough. Sick pay will depend on the terms of the contract of employment.
What about agency employees and apprentices?
Subject to the terms of their contracts of employment, we believe that agency employees and apprentices will be included. We do not know whether it will include ‘deemed’ employees under the off payroll working rules (IR35).
What if my employee has another employment?
If you furlough an employee, they cannot undertake any work for you, however if they hold a separate employment with an unconnected employer and that will be unaffected. Each job is separate.