This article on COVID 19: Applying for 80% of furloughed staff wages looks at the eligibility and qualify criteria for employers planning to apply to HMRC for help under the government’s Coronavirus Job Retention Scheme.
Coronavirus Job Retention Scheme
Under the Coronavirus Job Retention Scheme, Employers who have had to put staff on furlough leave during COVID-19 are eligible to apply for a grant to cover 80% of furloughed staff wages up to £2,500 per month.
On 27 March 2020, the government issued new guidance which:
- Extended the scheme to cover the associated Employer National Insurance contributions, as well as the minimum employer pension contribution (currently 3%) on that wage
- Allowed companies to reemploy staff made redundant after 28 February and place them on furlough.
Eligibility Criteria
Under the scheme, the grant of 80% of furloughed staff wages can be claimed for any of the following groups provided they are paid via PAYE:
- Employees of businesses, charities, recruitment agencies and public authorities
- Company directors of limited companies
- Members of Limited Liability Partnerships (LLP)
- Agency staff, including those paid via umbrella companies
- Zero-hours contract staff
Staff consultation
Employers must engage in formal consultation with staff representatives concerning changes employment contracts of staff expected to be put on furlough leave.
The government has advised employers that the decision process to decide who to offer furlough leave must comply with the equality and discrimination laws,
The consultation should explain that only staff who were on the payroll on or before 28 February 2020 will be eligible for furlough leave. However, based on new guidance from the government, companies may reemploy staff made redundant after 28 February 2020 and place them on furlough leave.
The government has indicated that furlough leave should be approved for 3-weekly intervals and employers can claim the 80% grant from the date that staff have been placed on furlough leave which can be backdated to 1 March 2020 until 30 June 2020. The scheme may be extended beyond June 2020 if the government decides it’s necessary to extend the social distancing measure beyond this date.
Changes in contracts of employment
Changes to employment contracts should highlight that:
- the employer might be able to keep them on the payroll if they’re unable to operate or have no work for them during COVID-19, and
- the employer will pay 80% of wages up to a monthly cap of £2,500 during COVID-19 furlough leave
Furlough leave confirmation
In order to be eligible for the job retention grant, employers must write to all affected staff to confirm that they have been placed on furlough leave and a record of this communication must be kept for five years.
HMRC Step by Step Guide for submitting claims
Getting the calculation right
Employees on the payroll for over 12 months
Where the employee has been employed for 12 months or more, employers can claim the highest of either the:
- same month’s earning from the previous year and
- the average monthly earnings for the 2019-2020 tax year
Employees on the payroll for less than 12 months
Where the employee has been employed for less than 12 months, employers can claim for 80% of their average monthly earnings since they started work
Employees on the payroll for less than 12 months
If the employee only started in February 2020, then employers need to pro-rata for their earnings to date, and claim for 80%.
Getting the prerequisites right
Once HMRC completes the new Coronavirus Job Retention Scheme online application portal, it’s important for employers to get their prerequisites in order before applying for the grant.
Suggested checklist before making an application
- COVID-19 staff consultation notice
- COVID-19 agreed changes to employment contracts
- Furlough leave confirmation letters
- Online account for PAYE, register with HMRC if you don’t have one already
- A P11 payroll report for each affected employee as at 28 February 2020.
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