Coronavirus Job Retention Scheme

What is it?

Under the Coronavirus Job Retention Scheme, all UK employers with a PAYE scheme that was created and started on or before 28 February 2020, will be able to access support to continue paying part of their employees’ salary for those that would otherwise have been laid off during this crisis. This applies to employees who have been asked to stop working, but who are being kept on the pay roll, otherwise described as ‘furloughed workers’. HMRC will pay employers a grant worth 80% of an employee’s usual wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. This is to safeguard workers from being made redundant. The Coronavirus Job Retention Scheme will cover the cost of wages backdated to March 1st if applicable and is initially open for 3 months, but will be extended if necessary.

On the 12th May 2020 Rishi Sunak has announced the Coronavirus Job Retention Scheme will be extended for four months, until the end of October 2020.

Until the end of July, there are no changes.

From August to October 2020, the scheme continues on the basis furloughed employees can be brought back part-time.  Full details will be published by the end of May.

 

Am I eligible?

All UK-wide employers with a PAYE scheme will be eligible – this includes the public sector, Local Authorities and charities.

 

How do I access it?

You will need to:

1. Designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.

2. Once the new online portal is live, submit information to HMRC about the employees that have been furloughed and their earnings (HMRC will set out further details on the information required)

 

When can I access it?

Log-In via Government Gateway to make a claim

 

 

HMRC Updates

 

Update from 03/04/20

HMRC provided additional guidelines including :-

  • The update clarifies that employees are able to take on a new job whilst furloughed.  If an employee wants to do this, it is up to the employer whether or not they agree to waive any terms in the employment contract preventing work for other employers.
  • Up to 80% of compulsory commission can be claimed back by employers from HMRC, which is good news for estate agents.  This will only apply to past sales, as furloughed employees obviously won’t be completing new ones.
  • The 80% of salary that employers can claim from HMRC does not include non-monetary benefits such as car allowance or health insurance.
  • Company directors can be furloughed, and will still be able to perform their statutory duties but not any other work for the company.
  • The guidance states that employers must notify employees of their furlough status in writing and keep the record of that written notification for five years.

Update from 15/04/20

HMRC provided additional guidelines including :-

An important change to the scheme relating to employee eligibility:

  • you can claim for employees that were employed as of 19 March 2020 and were on your PAYE payroll on or before that date; this means that you will have made an RTI submission notifying us of payment of that employee on or before 19 March 2020
  • employees that were employed as of 28 February 2020 and on payroll (i.e. notified to us on an RTI submission on or before 28 February) and were made redundant or stopped working for you after that, and prior to 19 March 2020, can also qualify for the scheme if you re-employ them and put them on furlough.

More information on this can be found on GOV.UK.

How to claim

As you prepare to make a claim, please note:

  • the online claim service will be launched on GOV.UK on 20‌‌ April 2020 – please do not try to access it before this date as it won’t be available
  • the only way to make a claim is online – the service should be simple to use and any support you need available on GOV.UK; this will include help with calculating the amount you can claim
  • you can make the claim yourself even if you usually use an agent
  • claims will be paid within 6 working days; you should not contact us unless it is absolutely necessary – any queries should be directed to your agent, representative or our webchat service
  • we cannot answer any queries from employees – they will need to raise these with you, as their employer, directly.

Information you will need before you make a claim

In addition to the information in our previous email, you will need to have the following before 20‌‌ April 2020:

  • a Government Gateway (GG) ID and password – if you don’t already have a GG account, you can apply for one online, or by going to GOV.UK and searching for ‘HMRC services: sign in or register’
  • be enrolled for PAYE online – if you aren’t registered yet, you can do so now, or by going to GOV.UK and searching for ‘PAYE Online for employers’
  • the following information for each furloughed employee you will be claiming for:
  1. Name.
  2. National Insurance number.
  3. Claim period and claim amount.
  4. PAYE/employee number (optional).
  • if you have fewer than 100 furloughed staff – you will need to input information directly into the system for each employee
  • if you have 100 or more furloughed staff – you will need to upload a file with information for each employee; we will accept the following file types: .xls .xlsx .csv .ods.

If you want an agent to act for you

Please note:

  • agents authorised to act for you on PAYE matters can make the claim on your behalf using their ID and password
  • you will need to tell your agent which UK bank account you want the grant to be paid into, in order to ensure funds are paid as quickly as possible to you.

You should retain all records and calculations in respect of your claims.

Update from 17/04/20

HM Treasury has announced the coronavirus job retention scheme (the furlough scheme) has been extended from 31 May 2020 to the end of June.

03/04/20

Update from 03/04/20

HMRC provided additional guidelines including :-

  • The update clarifies that employees are able to take on a new job whilst furloughed.  If an employee wants to do this, it is up to the employer whether or not they agree to waive any terms in the employment contract preventing work for other employers.
  • Up to 80% of compulsory commission can be claimed back by employers from HMRC, which is good news for estate agents.  This will only apply to past sales, as furloughed employees obviously won’t be completing new ones.
  • The 80% of salary that employers can claim from HMRC does not include non-monetary benefits such as car allowance or health insurance.
  • Company directors can be furloughed, and will still be able to perform their statutory duties but not any other work for the company.
  • The guidance states that employers must notify employees of their furlough status in writing and keep the record of that written notification for five years.
15/04/20

Update from 15/04/20

HMRC provided additional guidelines including :-

An important change to the scheme relating to employee eligibility:

  • you can claim for employees that were employed as of 19 March 2020 and were on your PAYE payroll on or before that date; this means that you will have made an RTI submission notifying us of payment of that employee on or before 19 March 2020
  • employees that were employed as of 28 February 2020 and on payroll (i.e. notified to us on an RTI submission on or before 28 February) and were made redundant or stopped working for you after that, and prior to 19 March 2020, can also qualify for the scheme if you re-employ them and put them on furlough.

More information on this can be found on GOV.UK.

How to claim

As you prepare to make a claim, please note:

  • the online claim service will be launched on GOV.UK on 20‌‌ April 2020 – please do not try to access it before this date as it won’t be available
  • the only way to make a claim is online – the service should be simple to use and any support you need available on GOV.UK; this will include help with calculating the amount you can claim
  • you can make the claim yourself even if you usually use an agent
  • claims will be paid within 6 working days; you should not contact us unless it is absolutely necessary – any queries should be directed to your agent, representative or our webchat service
  • we cannot answer any queries from employees – they will need to raise these with you, as their employer, directly.

Information you will need before you make a claim

In addition to the information in our previous email, you will need to have the following before 20‌‌ April 2020:

  • a Government Gateway (GG) ID and password – if you don’t already have a GG account, you can apply for one online, or by going to GOV.UK and searching for ‘HMRC services: sign in or register’
  • be enrolled for PAYE online – if you aren’t registered yet, you can do so now, or by going to GOV.UK and searching for ‘PAYE Online for employers’
  • the following information for each furloughed employee you will be claiming for:
  1. Name.
  2. National Insurance number.
  3. Claim period and claim amount.
  4. PAYE/employee number (optional).
  • if you have fewer than 100 furloughed staff – you will need to input information directly into the system for each employee
  • if you have 100 or more furloughed staff – you will need to upload a file with information for each employee; we will accept the following file types: .xls .xlsx .csv .ods.

If you want an agent to act for you

Please note:

  • agents authorised to act for you on PAYE matters can make the claim on your behalf using their ID and password
  • you will need to tell your agent which UK bank account you want the grant to be paid into, in order to ensure funds are paid as quickly as possible to you.

You should retain all records and calculations in respect of your claims.

17/04/20

Update from 17/04/20

HM Treasury has announced the coronavirus job retention scheme (the furlough scheme) has been extended from 31 May 2020 to the end of June.

How To Process Your Furlough Claim

 

This step by step guide will take you through five sections:

Step 1: Essential information

Step 2: Before you make your claim

Step 3: Calculating your claim

Step 4: Making a claim

Step 5: What to do next

General information about the scheme

• To be eligible for CJRS an employer must agree with the employee that they are

a ‘furloughed worker’.

• Employees must be notified that they have been furloughed.

• Employees must be furloughed for a minimum of three weeks.

• The employee cannot do any work for the employer that has furloughed them.

• You can claim 80% of wages up to a maximum of £2,500 per month per furloughed employee.

• A separate claim is needed for each PAYE scheme.

• You can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020.

• An RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.

• You must have a UK bank account.

For more information on the scheme and further eligibility requirements, visit guidance on GOV.UK

Please support HMRC in keeping our lines open for those who need our help most. Do not call us unless you have an issue that cannot be resolved using our guidance or webchat facility.

If you are an employee please speak to your employer if you have any questions. We are not able to provide information on individual claims.

 

Step 2: Before you make your claim

Getting ready to make your application

The scheme will open on 20 April for claims. You will receive payment six working days after making an application. If you wish to receive a payment from the scheme by the end of the month, you will need to submit your claim at least six working days in advance for the money to clear into your bank account.

If you have an authorised agent, decide whether you want to make your own claim or if you want your agent to act on your behalf.

Applying through an agent

If you have an agent that has authorisation to act for you on PAYE matters online, they can make a claim for CJRS on your behalf.

If an agent is making the claim for you, tell them which bank account you want the funds to be paid into.

To make a claim yourself, you must gather the following information before you can

proceed to step 3:

1. The number of employees being furloughed

2. The dates employees have been furloughed to and from

3. Details of employees – the name and National Insurance Number of each furloughed employee

4. Your employer PAYE scheme reference number

5. Your Corporation Tax Unique Taxpayer Reference, Self-Assessment Unique Taxpayer Reference or Company Registration Number as appropriate for your entity

6. Your UK bank account details

7. Your organisation’s registered name

8. Your organisation’s address

You should make sure you have this information ready before you access the system to make a claim.

 

Step 1: Essential information

You must read the guidance set out here before you proceed with your claim.

Further advice is also available in pre-recorded webinars on our YouTube channel.

The service is designed to be simple to use. The information you will be required to provide should be details that you currently use for your payroll run. To help you get through the process as smoothly as possible, please ensure you have all the information required in steps 2 and 3 before you make your claim online.

It is the claimant’s responsibility to ensure that the information provided in the application is accurate.

You cannot make more than one claim during a claim period – you should make your claim shortly before or during running payroll. You must claim for all employees in each period at one time as you cannot make changes to your claim.

 

Step 3: Calculating a claim

For the majority of employers with full-time or part-time employees on a set salary, you will need to work out the following for the claim period:

1. The total amount being paid to furloughed employees (up to 80% of £2,500 a month before tax per employee)

2. The total employer NICs

3. The total employer pension contributions (up to 3%)

Example calculation for an employee on a fixed salary

An employee started work for Smith Ltd in 1997 and is paid a regular, fixed monthly salary on the last day of each month. They are also auto-enrolled into the workplace pension. The employee agreed to be placed on furlough from 21 March 2020, at 80% of their salary.

A. Calculating the grant for gross pay

The employee was paid £2,400 in gross salary for February, the last full monthly pay period before 19 March 2020.

21 March to 31 March is 11 days. So the reference salary for the part of March in which the worker is furloughed is:

£2,400 divided by 31 days in March = £77.42

£77.42 multiplied by 11 days of furlough = £851.62

Smith Ltd can claim 80% of this amount, up to the ‘maximum amount’ for the time on furlough in March:

80% of £851.62 is £681.30

The maximum amount test is:

Monthly maximum of £2,500 divided by 31 days in March = £80.65

£80.65 x 11 days of furlough = £887.15

Smith Ltd claims the lower amount, £681.30, for the employee’s gross pay in March.

B. Calculating the grant for employer National Insurance contributions (NIC)

The employee’s gross pay at the end of the month is made up of £1,548.40 of salary funded by Smith Ltd, for 1 to 20 March (20 days), and £681.30 of pay funded by CJRS for the remaining 11 days of March.

The employer NICs due on the total gross pay of £2,229.70 is £208.48

Step 1: £208.48 divided by 31 days in March = £6.73

Step 2: Daily employer NIC amount of £6.73, multiplied by 11 furlough days = £74.03

Smith Ltd claims £74.03 for employer NIC’s due on the employee’s March pay.

C. Calculating the grant for employer pension contributions

The monthly lower level of qualifying earnings of £512 (for March 2020) is apportioned based on the number

of days in the month to the qualifying furlough days:

£512 divided by 31 = £16.52

£16.52 multiplied by 11 days = £181.72

The minimum level of auto-enrolment pension contributions on the £867.10 furlough pay is therefore:

(£681.30 – £181.72) x 3% = £14.99

This is the lower of £14.99 or the employer pension contributions due on the furlough pay under the terms of the pensions scheme.

Smith Ltd claims £14.99 for the employer pension contributions for March.

TOTAL CLAIM FOR EMPLOYEE

Smith Ltd claims a total of £770.32 from the CJRS for the employee in March. This is made up of £681.30 for gross pay, £74.03 for employers NIC and £14.99 for employer pension contributions.

Smith Ltd has checked that they are not claiming for more than they are going to pay out.

For more information and further examples on more complex contracts and variable pay please visit the guidance.

We will also be providing a claim calculator, when the service launches, to allow you to check your claim.

If you have an agent (including file-only agents or payroll providers), they should be able to assist with calculating your claim.

 

Step 4: Making a claim

Do not start a claim until you have gathered all the information required in steps 2 and 3.

To access the system on GOV.UK you or your agent will need to have:

• A Government Gateway ID and password

• An active PAYE enrolment

If you do not have these, you can register for them at

HMRC services: register > PAYE Online for employers

The application needs to be done in one session. There is currently no save and return option. Sessions will time out after 30 minutes of inactivity.

Now you are ready to make a claim. Go to GOV.UK to make your claim

The service will be available for claim submissions from 20 April. You will not be able to access it before this date.

You will be taken through a series of steps in the online service. You will need to confirm that you have furloughed your employees, then you will need to input the information about your organisation which you prepared in step 2.

After this, you will need to confirm the amount of the claim – split into the total amount to be paid to furloughed employees and the total pension and national insurance contributions, that you will have prepared at step 3. Before you submit the application, you will also need to confirm your employees’ details, enter your UK bank details and your address.

Once you have submitted the claim, you will see a confirmation screen where a claim reference number will be provided. Print the confirmation screen or note down the claim reference number provided –

you will not receive an email confirmation.

If you are submitting the claim yourself, it is your responsibility to check the accuracy of your claim.

If you are using an agent, ask them to note down and share the calculations that form the basis for your claim and the claim reference number provided. They will not receive an email confirmation, but they can print the confirmation screen.

To ensure that the funds are paid as quickly as possible to you, your agent should input your bank details into the system, not theirs.

If you are an employer with more than 100 employees you will need to provide more detail in your submission:

• Claim amount per furloughed employee

• Claim period for each furloughed employee

You will also need to upload the claim information in one of the following formats:

• XLS, XLSX, CSV, ODP

 

Step 5: What to do next

1. HMRC will verify your claim and you will receive the funds in six working days. To help us to support as many businesses as possible, please do not contact HMRC before six working days have passed as we will not be able to help you with your claim.

2. Keep hold of your claim reference number – one way of doing this is to print out the confirmation screen.

3. You should retain calculations that form the basis of your claim in case further information is required by HMRC.

4. Tell your furloughed employees that you have made a claim and that they do not need to take any further action. They should not contact HMRC to check the status of a claim as we will not be able to provide them with that information.

5. For any further information, please read the guidance on GOV.UK

6. Only call us if you cannot find what you need on GOV.UK – this will leave our lines open for those who need our help most. HMRC will check claims made through the scheme.

7. Payments may be withheld or may need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information or found to be fraudulent. Dishonest or deliberately fraudulent claims put our essential public services and the protection of livelihoods at risk during these challenging times.

This product will be reviewed for accessibility and will be made fully accessible shortly.

To process a furlough payment in Sage 50cloud Payroll, we recommend that you create a new furlough payment. You can then process up to 80% of the employee’s pay using this.

If you’re going to top-up the employee’s payment, you can pay the relevant amount using the employee’s existing payment. Any top up payments to the Job Retention scheme are not reclaimable.

Set up a furlough pay element

  1. Click Company, then click Pay Elements.
  2. Click the Payments tab, then click New.
  3. In the Status drop-down list, select Variable.
  4. In Description, enter Furlough.
  5. In the This payment is subject to section, select the PAYE and National Insurance check boxes. and others as applicable.
  6. Select all other applicable check boxes then click OK.

Add the pay element to an employee record

    1. Double-click the relevant employee, then click the Employment tab.
    2. Click Pay Elements, then click the Payments tab.
    3. On the drop-down list, click the Furlough payment and click OK.
    4. Click Save, then click Close.

You can now record the amount in the payments tab within Enter Payments.

Add the pay element to multiple employees

    1. On the Employee List, click the relevant employees.
    2. On the menu bar, click Tasks then click Global Changes.
    3. Click Payments, then Add Payment.
    4. Select the Furlough payment, then click OK.
    5. Click Yes, then click OK.

You can now record the amount in the payments tab within Enter Payments.

Keep track of your furloughed payments

To keep track of how much furloughed payments that you’ve paid to your employees, you can run the payment type history report.

  1. On the employee list, select the required employees.
  2. Click Reports then click Employee.
  3. Click Payment Type History (Detailed) then click Preview.
  4. In the Criteria Values, enter the required Processing Date.
  5. Click OK the print or export the report.
 

For more information from Sage Payroll, click here 

Before you start

There are a few things you need to check or adjust in an employee’s Employment tab before processing employees as furlough in Xero. You should look at the following:

  • The employee’s start date – Employees must have been employed on or before 19 March 2020.
  • The Holiday Group assigned – If an employee is assigned to a specific holiday group, edit this to temporarily set it to None. This ensures public holidays are included in the furlough period.
  • Salary and wages information – The employee should be set up with their full salary and wages information if they were previously reduced. Xero uses this information to automatically calculate the 80 percent furlough rate.

If you had employees who were made redundant or left the business on or after 28 February 2020, you can reinstate them, then put them on furlough.

Enter a time off request

  1. In the Payroll menu, select Time off.
  2. Click New, then select Furlough leave.
  3. Select an employee, then enter the Start and End date. The leave period must be a minimum of three weeks.
  4. Review the number of hours in the time off request.To pay the employee any past overtime you want to claim through the scheme, include these hours in the time off request. For more information, see the GOV.UK website.
  5. Click Approve.

Once you’ve entered a time off request for all furloughed employees, process these requests through the pay run period they relate to.

Process time off in a pay run

You might need to process part of an employee’s furlough time off request in a pay period that’s already been processed. In this case, revert the pay run to draft. For pay run periods not yet processed, include the request in the employee’s next pay run.

Revert and edit a posted pay run

Warning

To process furlough leave in March pay runs, revert the relevant pay runs to draft, include the furlough leave request, then re-post the pay run. You must do this on or before 19 April 2020 to meet filing deadlines for the 2019/20 tax year.

  1. In the Payroll menu, select Pay employees.
  2. Click on the pay run for the period you want to revert, then click Revert Pay Run.You can only revert the most recently posted pay run for the pay calendar. To edit pay runs posted earlier, revert the recent pay runs to draft and delete them.
  3. Click into an employee’s payslip to check the furlough time off request has pulled through. If it doesn’t appear, click Reset Payslip.
  4. (Optional) If your employee is on paid maternity leave, a negative line is automatically added to the payslip. Change the hours shown to zero to reflect the employee’s correct earnings for the period.
  5. (Optional) Add a new earnings line or adjust an existing one to top up the employee’s earnings for the period, or to pay additional earnings not eligible for this scheme.
  6. Click Save to keep any changes made to the payslip.
  7. Follow the process for all other employees included in the pay run.
  8. Once the pay run is complete, click Post.
  9. When confirming the pay run, select Correction to earlier submission, then click Complete Pay Run.

Create a new pay run

  1. In the Payroll menu, select Pay employees.
  2. In the New Pay Run field, select the next pay period you want to process, then click Process Pay Run.
  3. Click into an employee’s payslip to check it’s correct. The furlough leave request should also appear if the period falls within the pay period being processed.
  4. (Optional) Add a new earnings line or adjust an existing one to top up the employee’s earnings for the period, or to pay additional earnings not eligible for this scheme.
  5. Follow the process for all other employees included in the pay run.
  6. Once the pay run is complete, click Post.
 
For more information from Xero, click here

Tracking furloughed employees in Advanced Payroll

  1. Start by going to Payroll settings.
  2. Now select Pay Categories, and then Add.
  3. Set the pay category as Taxable, and Niable.
  4. Go back to your list of Employees.
  5. Select a furloughed employee.
  6. On the left, go to Pay rates.
  7. Select your newly created category, and select Show in Pay Run.

Repeat the process with all impacted employees.

 

Tracking furloughed employees in Standard Payroll

  1. Start your pay run, and then click Edit next to one employee.
  2. Select Add/edit a Bonus or Other Payment.
  3. Click the Plus icon at the top of the box and select Other Earnings as the type.
  4. Name the item something along the lines of Furloughed Employee Pay.
  5. Enter in the employee’s payment amount for the period.
  6. Edit all other Furloughed employees on the pay run, and add in the payment category you have created.

Save and View draft, and then submit your payroll to HMRC as normal.

 

Tracking furloughed employees in PaySuite

To pay your employees in PaySuite:

  1. Navigate to Variable Input.
  2. Under the Payments section select Absence.
  3. Enter the number of hours, and adjust the rate if required.
  4. Select Save changes.

To prevent paying your employee both their normal wage/hours and the furloughed payment.

  1. Click on Edit employee.
  2. Go to Payments & Deductions and clear the figures for salary/wages.
  3. Complete your payrun as normal.

 

For more information from Quickbooks, click here

HMRC Step by Step

This step by step guide will take you through five sections:

Step 1: Essential information

Step 2: Before you make your claim

Step 3: Calculating your claim

Step 4: Making a claim

Step 5: What to do next

General information about the scheme

• To be eligible for CJRS an employer must agree with the employee that they are

a ‘furloughed worker’.

• Employees must be notified that they have been furloughed.

• Employees must be furloughed for a minimum of three weeks.

• The employee cannot do any work for the employer that has furloughed them.

• You can claim 80% of wages up to a maximum of £2,500 per month per furloughed employee.

• A separate claim is needed for each PAYE scheme.

• You can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020.

• An RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.

• You must have a UK bank account.

For more information on the scheme and further eligibility requirements, visit guidance on GOV.UK

Please support HMRC in keeping our lines open for those who need our help most. Do not call us unless you have an issue that cannot be resolved using our guidance or webchat facility.

If you are an employee please speak to your employer if you have any questions. We are not able to provide information on individual claims.

 

Step 2: Before you make your claim

Getting ready to make your application

The scheme will open on 20 April for claims. You will receive payment six working days after making an application. If you wish to receive a payment from the scheme by the end of the month, you will need to submit your claim at least six working days in advance for the money to clear into your bank account.

If you have an authorised agent, decide whether you want to make your own claim or if you want your agent to act on your behalf.

Applying through an agent

If you have an agent that has authorisation to act for you on PAYE matters online, they can make a claim for CJRS on your behalf.

If an agent is making the claim for you, tell them which bank account you want the funds to be paid into.

To make a claim yourself, you must gather the following information before you can

proceed to step 3:

1. The number of employees being furloughed

2. The dates employees have been furloughed to and from

3. Details of employees – the name and National Insurance Number of each furloughed employee

4. Your employer PAYE scheme reference number

5. Your Corporation Tax Unique Taxpayer Reference, Self-Assessment Unique Taxpayer Reference or Company Registration Number as appropriate for your entity

6. Your UK bank account details

7. Your organisation’s registered name

8. Your organisation’s address

You should make sure you have this information ready before you access the system to make a claim.

 

Step 1: Essential information

You must read the guidance set out here before you proceed with your claim.

Further advice is also available in pre-recorded webinars on our YouTube channel.

The service is designed to be simple to use. The information you will be required to provide should be details that you currently use for your payroll run. To help you get through the process as smoothly as possible, please ensure you have all the information required in steps 2 and 3 before you make your claim online.

It is the claimant’s responsibility to ensure that the information provided in the application is accurate.

You cannot make more than one claim during a claim period – you should make your claim shortly before or during running payroll. You must claim for all employees in each period at one time as you cannot make changes to your claim.

 

Step 3: Calculating a claim

For the majority of employers with full-time or part-time employees on a set salary, you will need to work out the following for the claim period:

1. The total amount being paid to furloughed employees (up to 80% of £2,500 a month before tax per employee)

2. The total employer NICs

3. The total employer pension contributions (up to 3%)

Example calculation for an employee on a fixed salary

An employee started work for Smith Ltd in 1997 and is paid a regular, fixed monthly salary on the last day of each month. They are also auto-enrolled into the workplace pension. The employee agreed to be placed on furlough from 21 March 2020, at 80% of their salary.

A. Calculating the grant for gross pay

The employee was paid £2,400 in gross salary for February, the last full monthly pay period before 19 March 2020.

21 March to 31 March is 11 days. So the reference salary for the part of March in which the worker is furloughed is:

£2,400 divided by 31 days in March = £77.42

£77.42 multiplied by 11 days of furlough = £851.62

Smith Ltd can claim 80% of this amount, up to the ‘maximum amount’ for the time on furlough in March:

80% of £851.62 is £681.30

The maximum amount test is:

Monthly maximum of £2,500 divided by 31 days in March = £80.65

£80.65 x 11 days of furlough = £887.15

Smith Ltd claims the lower amount, £681.30, for the employee’s gross pay in March.

B. Calculating the grant for employer National Insurance contributions (NIC)

The employee’s gross pay at the end of the month is made up of £1,548.40 of salary funded by Smith Ltd, for 1 to 20 March (20 days), and £681.30 of pay funded by CJRS for the remaining 11 days of March.

The employer NICs due on the total gross pay of £2,229.70 is £208.48

Step 1: £208.48 divided by 31 days in March = £6.73

Step 2: Daily employer NIC amount of £6.73, multiplied by 11 furlough days = £74.03

Smith Ltd claims £74.03 for employer NIC’s due on the employee’s March pay.

C. Calculating the grant for employer pension contributions

The monthly lower level of qualifying earnings of £512 (for March 2020) is apportioned based on the number

of days in the month to the qualifying furlough days:

£512 divided by 31 = £16.52

£16.52 multiplied by 11 days = £181.72

The minimum level of auto-enrolment pension contributions on the £867.10 furlough pay is therefore:

(£681.30 – £181.72) x 3% = £14.99

This is the lower of £14.99 or the employer pension contributions due on the furlough pay under the terms of the pensions scheme.

Smith Ltd claims £14.99 for the employer pension contributions for March.

TOTAL CLAIM FOR EMPLOYEE

Smith Ltd claims a total of £770.32 from the CJRS for the employee in March. This is made up of £681.30 for gross pay, £74.03 for employers NIC and £14.99 for employer pension contributions.

Smith Ltd has checked that they are not claiming for more than they are going to pay out.

For more information and further examples on more complex contracts and variable pay please visit the guidance.

We will also be providing a claim calculator, when the service launches, to allow you to check your claim.

If you have an agent (including file-only agents or payroll providers), they should be able to assist with calculating your claim.

 

Step 4: Making a claim

Do not start a claim until you have gathered all the information required in steps 2 and 3.

To access the system on GOV.UK you or your agent will need to have:

• A Government Gateway ID and password

• An active PAYE enrolment

If you do not have these, you can register for them at

HMRC services: register > PAYE Online for employers

The application needs to be done in one session. There is currently no save and return option. Sessions will time out after 30 minutes of inactivity.

Now you are ready to make a claim. Go to GOV.UK to make your claim

The service will be available for claim submissions from 20 April. You will not be able to access it before this date.

You will be taken through a series of steps in the online service. You will need to confirm that you have furloughed your employees, then you will need to input the information about your organisation which you prepared in step 2.

After this, you will need to confirm the amount of the claim – split into the total amount to be paid to furloughed employees and the total pension and national insurance contributions, that you will have prepared at step 3. Before you submit the application, you will also need to confirm your employees’ details, enter your UK bank details and your address.

Once you have submitted the claim, you will see a confirmation screen where a claim reference number will be provided. Print the confirmation screen or note down the claim reference number provided –

you will not receive an email confirmation.

If you are submitting the claim yourself, it is your responsibility to check the accuracy of your claim.

If you are using an agent, ask them to note down and share the calculations that form the basis for your claim and the claim reference number provided. They will not receive an email confirmation, but they can print the confirmation screen.

To ensure that the funds are paid as quickly as possible to you, your agent should input your bank details into the system, not theirs.

If you are an employer with more than 100 employees you will need to provide more detail in your submission:

• Claim amount per furloughed employee

• Claim period for each furloughed employee

You will also need to upload the claim information in one of the following formats:

• XLS, XLSX, CSV, ODP

 

Step 5: What to do next

1. HMRC will verify your claim and you will receive the funds in six working days. To help us to support as many businesses as possible, please do not contact HMRC before six working days have passed as we will not be able to help you with your claim.

2. Keep hold of your claim reference number – one way of doing this is to print out the confirmation screen.

3. You should retain calculations that form the basis of your claim in case further information is required by HMRC.

4. Tell your furloughed employees that you have made a claim and that they do not need to take any further action. They should not contact HMRC to check the status of a claim as we will not be able to provide them with that information.

5. For any further information, please read the guidance on GOV.UK

6. Only call us if you cannot find what you need on GOV.UK – this will leave our lines open for those who need our help most. HMRC will check claims made through the scheme.

7. Payments may be withheld or may need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information or found to be fraudulent. Dishonest or deliberately fraudulent claims put our essential public services and the protection of livelihoods at risk during these challenging times.

This product will be reviewed for accessibility and will be made fully accessible shortly.

Sage Payroll

To process a furlough payment in Sage 50cloud Payroll, we recommend that you create a new furlough payment. You can then process up to 80% of the employee’s pay using this.

If you’re going to top-up the employee’s payment, you can pay the relevant amount using the employee’s existing payment. Any top up payments to the Job Retention scheme are not reclaimable.

Set up a furlough pay element

  1. Click Company, then click Pay Elements.
  2. Click the Payments tab, then click New.
  3. In the Status drop-down list, select Variable.
  4. In Description, enter Furlough.
  5. In the This payment is subject to section, select the PAYE and National Insurance check boxes. and others as applicable.
  6. Select all other applicable check boxes then click OK.

Add the pay element to an employee record

    1. Double-click the relevant employee, then click the Employment tab.
    2. Click Pay Elements, then click the Payments tab.
    3. On the drop-down list, click the Furlough payment and click OK.
    4. Click Save, then click Close.

You can now record the amount in the payments tab within Enter Payments.

Add the pay element to multiple employees

    1. On the Employee List, click the relevant employees.
    2. On the menu bar, click Tasks then click Global Changes.
    3. Click Payments, then Add Payment.
    4. Select the Furlough payment, then click OK.
    5. Click Yes, then click OK.

You can now record the amount in the payments tab within Enter Payments.

Keep track of your furloughed payments

To keep track of how much furloughed payments that you’ve paid to your employees, you can run the payment type history report.

  1. On the employee list, select the required employees.
  2. Click Reports then click Employee.
  3. Click Payment Type History (Detailed) then click Preview.
  4. In the Criteria Values, enter the required Processing Date.
  5. Click OK the print or export the report.
 

For more information from Sage Payroll, click here 

Xero

Before you start

There are a few things you need to check or adjust in an employee’s Employment tab before processing employees as furlough in Xero. You should look at the following:

  • The employee’s start date – Employees must have been employed on or before 19 March 2020.
  • The Holiday Group assigned – If an employee is assigned to a specific holiday group, edit this to temporarily set it to None. This ensures public holidays are included in the furlough period.
  • Salary and wages information – The employee should be set up with their full salary and wages information if they were previously reduced. Xero uses this information to automatically calculate the 80 percent furlough rate.

If you had employees who were made redundant or left the business on or after 28 February 2020, you can reinstate them, then put them on furlough.

Enter a time off request

  1. In the Payroll menu, select Time off.
  2. Click New, then select Furlough leave.
  3. Select an employee, then enter the Start and End date. The leave period must be a minimum of three weeks.
  4. Review the number of hours in the time off request.To pay the employee any past overtime you want to claim through the scheme, include these hours in the time off request. For more information, see the GOV.UK website.
  5. Click Approve.

Once you’ve entered a time off request for all furloughed employees, process these requests through the pay run period they relate to.

Process time off in a pay run

You might need to process part of an employee’s furlough time off request in a pay period that’s already been processed. In this case, revert the pay run to draft. For pay run periods not yet processed, include the request in the employee’s next pay run.

Revert and edit a posted pay run

Warning

To process furlough leave in March pay runs, revert the relevant pay runs to draft, include the furlough leave request, then re-post the pay run. You must do this on or before 19 April 2020 to meet filing deadlines for the 2019/20 tax year.

  1. In the Payroll menu, select Pay employees.
  2. Click on the pay run for the period you want to revert, then click Revert Pay Run.You can only revert the most recently posted pay run for the pay calendar. To edit pay runs posted earlier, revert the recent pay runs to draft and delete them.
  3. Click into an employee’s payslip to check the furlough time off request has pulled through. If it doesn’t appear, click Reset Payslip.
  4. (Optional) If your employee is on paid maternity leave, a negative line is automatically added to the payslip. Change the hours shown to zero to reflect the employee’s correct earnings for the period.
  5. (Optional) Add a new earnings line or adjust an existing one to top up the employee’s earnings for the period, or to pay additional earnings not eligible for this scheme.
  6. Click Save to keep any changes made to the payslip.
  7. Follow the process for all other employees included in the pay run.
  8. Once the pay run is complete, click Post.
  9. When confirming the pay run, select Correction to earlier submission, then click Complete Pay Run.

Create a new pay run

  1. In the Payroll menu, select Pay employees.
  2. In the New Pay Run field, select the next pay period you want to process, then click Process Pay Run.
  3. Click into an employee’s payslip to check it’s correct. The furlough leave request should also appear if the period falls within the pay period being processed.
  4. (Optional) Add a new earnings line or adjust an existing one to top up the employee’s earnings for the period, or to pay additional earnings not eligible for this scheme.
  5. Follow the process for all other employees included in the pay run.
  6. Once the pay run is complete, click Post.
 
For more information from Xero, click here
Quickbooks

Tracking furloughed employees in Advanced Payroll

  1. Start by going to Payroll settings.
  2. Now select Pay Categories, and then Add.
  3. Set the pay category as Taxable, and Niable.
  4. Go back to your list of Employees.
  5. Select a furloughed employee.
  6. On the left, go to Pay rates.
  7. Select your newly created category, and select Show in Pay Run.

Repeat the process with all impacted employees.

 

Tracking furloughed employees in Standard Payroll

  1. Start your pay run, and then click Edit next to one employee.
  2. Select Add/edit a Bonus or Other Payment.
  3. Click the Plus icon at the top of the box and select Other Earnings as the type.
  4. Name the item something along the lines of Furloughed Employee Pay.
  5. Enter in the employee’s payment amount for the period.
  6. Edit all other Furloughed employees on the pay run, and add in the payment category you have created.

Save and View draft, and then submit your payroll to HMRC as normal.

 

Tracking furloughed employees in PaySuite

To pay your employees in PaySuite:

  1. Navigate to Variable Input.
  2. Under the Payments section select Absence.
  3. Enter the number of hours, and adjust the rate if required.
  4. Select Save changes.

To prevent paying your employee both their normal wage/hours and the furloughed payment.

  1. Click on Edit employee.
  2. Go to Payments & Deductions and clear the figures for salary/wages.
  3. Complete your payrun as normal.

 

For more information from Quickbooks, click here

Additional Guidance

 

Mandy Fitzmaurice from purple HR provides us with an update on the latest guidance :- 

Job Retention Scheme Update – 23 April 2020 

 

Furlough FAQ’s

 

Q:        How long is Furlough?

A:        An employee must be on Furlough for blocks of 3 weeks at a time. Blocks of Furlough can run concurrently or have breaks in between of any amount – we’ve nick-named it Flip-Flop Furlough!  For example, after the first 3 weeks, an employee may be asked to come back to work for a period of time or continue on Furlough.

 

Q:        Do we need a written agreement in place to put someone on Furlough?

A:        Yes, as it is a change to their terms and conditions that is going to allow you to pay them 80% of their normal salary. Any documentation must be kept for 5 years. 

 

Q:        How do I get on the Furlough portal to make my claim?

A:        You can only access the Furlough Claim Portal through your Government Gateway.  If you haven’t set up your Gateway account, you will have to do this before you make a claim. This normally takes about 10 days – there is no short-cut!

 

Q:        Can employees take holiday whilst on Furlough?

A:        Yes, but on those days they must be paid 100% of their normal pay.   

 

You may ask them to take some of their holiday whilst on Furlough as you may need all hands on-deck when the lock-down is removed. If you want to do this, you must give twice as much notice as the amount of holiday you wish them to take. In other words, if you want employees to take 1 week of their holiday, you need to give them 2 weeks’ notice. 

 

Q:        Will employees still have to pay tax and national insurance on Furlough pay?

A:        Yes, normal deductions still apply, but will be based on the actual pay they receive. This includes any attachment of earnings, pensions, student loans etc.

 

Q:        How is pay calculated?

A:        For employees who are paid a standard monthly salary, it is 80% of their salary as showing on the RTI report with HMRC as at 19 March 2020.

 

For people whose earnings vary month to month, week to week, it will be 80% of either:

 

  • their average earnings for the 2019/20 tax year or
  • the same month last year ie April 2019

 

If they have been employed for less than 12 months, you will base the calculation on their average monthly earnings since they started work.

 

Q:        We have just started a new tax year, so we get the £4,000 employer allowance.  Can we claim this as well as claiming the NI cost through the Furlough Scheme?

A:        No, that would be double claiming, you can’t have both.

 

Q:        What do we include when calculating Furlough pay?

A:        You should include anything that makes up an employee’s normal pay, ie regular wages, overtime and any ‘contractual’ payments, eg a car allowance as this makes up normal salary each month.

 

You cannot include any values associated with any non-cash benefits, eg medical cover, company cars, tips etc.

 

Q:        Do I have to top up Furlough pay?

A:        Only if you want to and/or can afford to.

 

Q:        Can employees work somewhere else whilst on Furlough?

A:        Yes, they can, providing you are happy for them to do so. They will need to complete a HMRC Starter Checklist form with the other employer and will be taxed at basic rate tax on the second job. If they do take another job during Furlough, make it clear to them that their job with you must remain their priority and that they must be ready to return to work when asked.

 

Q:        Can employees do any training when on Furlough?

A:        Yes, Furloughed employees can engage in training, as long the training being done does not provide services to, or generate revenue for, or on behalf of the business.

The guidance is saying that Furloughed employees should be encouraged to undertake training, but that where training is undertaken, they are entitled to be paid at least their appropriate national minimum wage for any time spent training.

 

The guidance is now saying that in most cases, the Furlough payment of 80% of an employee’s regular wage, up to the value of £2,500, will provide sufficient monies to cover these training hours. However, where the time spent training attracts a minimum wage entitlement in excess of the Furlough payment, you would need to pay the additional wages.

 

Q:        Can employees volunteer whilst on Furlough?

A:        Yes, they can, but we recommend they keep you informed of what they are doing and that you remind them that their job with you must remain their priority and be ready to return to work when you need them to, which could be before the end of a 3 week period.

 

Q:        Can employees do any work whilst on Furlough (even a little bit)?

A:        No, absolutely nothing.

 

Q:        I’m a Director, can I Furlough myself?

A:        Yes you can, but be very clear, you MAY NOT do any work, other than undertake your fiduciary duties ie file annual accounts and basic Company Secretarial duties – definitely no social media, marketing, quotes, emails – NOTHING!

 

Q:        We may still have to let some of staff go.  Can we put people on notice of redundancy if they are on Furlough?

A:        Yes, all the normal rules of consultation and fair selection for redundancies still apply.  Guidance is still unclear as to whether notice pay can be paid at 80% or full pay.  We strongly recommend you pay any notice at 100% to avoid potential claims later down the line.   Statutory Redundancy Pay should be based on the contracted salary, not the Furlough pay.

 

Q:        Do we based redundancy figures on Furlough pay (80%) or the full contractual salary?

A:        On the contractual salary.

 

Q:        If we do have to make redundancies, do we still have to do the 30-day consultation period if we have more than 20 employees who we need to let go?

A:        Yes, and if the numbers exceed 100, then the consultation period will be 45 days.  We strongly recommend you take advice before embarking on any redundancy process or collective consultation.

 

Q:        I selected an employee to go on Furlough last week, but things have changed and I need them back, can I change my mind and bring them back?

A:        Yes of course you can.  Talk to them, bring them back and pay them full pay. You will not be able to claim any Furlough.

 

Q:        I have a lady on maternity leave and she has said that she would be better off if she could go on Furlough.  Can we do this?

A:        Technically yes.  She would be well within her rights to ‘curtail’ her maternity leave early and return to work, however, if you didn’t have any work for her to do at the moment, you would then place her on Furlough at 80% of her normal ‘contractual’ pay up to the cap of £2500. 

 

Normally the lady on maternity leave would have to give you 8 weeks’ notice to return, but you can waive this. 

 

Q:        I have an employee who is fit and well, has no symptoms and has no one at home with any symptoms and is not in a high-risk category, can I insist they have to come to work?

A:        Yes, but you must allow them to work from home if you can possibly do so.

 

 

Q:        Can we place sick employees on Furlough or do we keep paying them SSP?

A:        The guidance says that an employee on sick leave, or any other form of unpaid leave, will not qualify for Furlough.   If you just think – in other circumstances, if an employee is not fit for work, they would be on sick leave and receive the relevant company sick pay or SSP, therefore if an employee is unwell and unfit for work, they would not be eligible for Furlough.  However, once the employee is fit to return to work, they could be placed on Furlough leave if there is no work for them to do. 

 

Q:        I have an employee who has a young family and has to look after them, are they entitled to Furlough?  Do I have to agree to them being Furloughed?

            Yes, you do.

 

Q:        I have an employee who has been self-isolating for 2 weeks but is now well but wants to stay at home because they are worried. Do I have to agree to them being Furloughed?

            If neither they or any member of their household has any symptoms or has been notified by the NHS that they are in the high-risk category and you can’t give them any work to do at home, then they would be required to come into work (providing you are not a business that the government has deemed must close). 

 

If they refuse, then this would technically be unauthorised absence and any time off would be unpaid or they would have to take it from their holiday allowance.  Please note you may not discipline or dismiss any employee on these grounds, it will be an automatic unfair dismissal and be treated the same as a discriminatory claim, ie the 2 year service requirement does not apply and any award would be uncapped.

 

Q:        Does the £2500 cap include Employers National Insurance and pension contributions?

A:        No, employers NICs and basic auto enrolment employer contributions (3%) can be claimed ON TOP of the £2500 cap.

 

Q:        How often will we be able to claim the Furlough grant?

A:        Once every pay period. 

 

Q:        I have an employee who resigned and left us to work somewhere else after 28th February.  We’ve issued their P45 and they’ve had their final pay, do I have to take them back on?

A:        No.  They left voluntarily, it is unfortunate that the timing of their departure coincided with the COVID-19 pandemic, but you are under no obligation to reinstate them and place them on Furlough.  They are no longer your responsibility, rough as that may sound.

www.purplehr.co.ukhello@purplehr.co.uk  01202 801047 

The ICAEW have produced a summary of their understanding of the Furlough Scheme :-

 

Rules as outlined in official statements released at 23 March 2020

  1. Furloughed members of staff must not work for the employer during the period of furlough.
  2. Furlough is from 1 March 2020, so is to be backdated. It will last for at least 3 months and will be extended if necessary. Note that while the scheme is backdated to the beginning of March as it is intended to support all those employed then, a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. This will of course be subject to employment law in the usual way.
  3. It is available to employees on the payroll at 28 February 2020.
  4. All UK businesses are eligible, ‘any employer on the country, small or large, charitable or non-profit’ to use the Chancellor’s words.
  5. The scheme pays a grant (not a loan) to the employer.
  6. The grant will be paid to the employer through a new online system which is being built for this purpose.
  7. The employer will pay the employee through payroll, using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll will continue as normal.
  8. Scheme will be administered by HMRC:
    • Relevant employees must be designated as furloughed employees.
    • Employers will submit information to HMRC through a new online portal.
    • As this will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. The narrative used in the information released so far says ‘if your employer cannot cover staff costs due to COVID-19 they may be able to access support…’. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined, nor whether there is a bar of some description.
  9. Maximum grant will be calculated per employee and is the lower of:
    • 80% of ‘wages’. The notes published so far, use the phrase ‘wage for all employment costs up to a cap of £2,500 per month’. It is our understanding that this includes employers’ NIC and pension contributions. Wages will be determined by reference to a defined period (yet to be announced).
    • £2,500 per month.

Illustration

X Ltd employs Mr A at an annual salary of £24,000, so £2,000 per month. Mr A has opted out of auto enrolment.

Each month, Mr A currently receives net pay of £1,665 which is after deducting PAYE of £191 and employees NIC of £144. On this salary, the employer pays employers’ NIC of £174.

The available grant for the employer is the lower of

(a) 80% of (£2,000 + £174), and 

(b) £2,500

So a grant of £1,739.

The cash required by X Ltd to furlough based on maintaining the existing salary is £435 per month. It is a matter for employment law whether the employer is required to pay this top up. Discussions with employees may have agreed that the employee has agreed to a different arrangement during their furlough.

Notes to illustration based on an extended understanding of how the scheme will work

  1. If Mr A had not opted out of auto enrolment, X Ltd would also be making pension contributions on his behalf. If so, the available grant is based on 80% of (gross salary + Employers’ NIC + employers pension contributions paid), subject to the monthly cap of £2,500.
  2. We understand that the rules for the scheme are being designed with underlying reference to employment law. If the individual is still under contract, Mr A can expect to receive his salary in full. The £1,739 grant paid to X Ltd should not be taken as the new maximum cost of employment to the employer unless the contract has been redrafted.
  3. Subject to the employment contract and any amendment, the salary which the employer actually pays the employee during the furlough period may be different to the pay paid used as the reference period and upon which the grant figure is based.

Pubco – a scenario

In the following illustration, the business has already closed as instructed by the government. We have had a number of enquiries along similar lines and are seeking clarification of our understanding of the rules apply.

Mr & Mrs Fuller are the tenants of a pub. They have a substantial wet and food trade as the pub is in a coastal location and does good trade over the Summer. The pub is open all year round.

Mr & Mrs Fuller operate the pub through a limited company (Pubco). They take salaries of £8,600 each and withdraw profits of £30,000 each in the form of dividends. They live above the pub and work long hours being in the pub every day.

Pubco employs three permanent staff supplemented by extra seasonal staff in the Summer months and at Christmas.

The pub closed on 20 March as instructed by the Prime Minister. and following the Chancellor’s announcement on 20 March, Pubco has furloughed its staff other than Mr & Mrs Fuller who are still living above the pub and dealing with the company administration. The contracts of employment of the other staff have been varied to permit furloughing and the three permanent staff members have agreed to accept a pay reduction to 80% of the previous level. The seasonal staff for this year have not yet been hired.

Our understanding is that Pubco will be eligible to receive the government grant support under the Coronavirus Job Retention Scheme for the monthly wages of the 3 permanent staff members. No grant support is available to support the living costs of Mr & Mrs Fuller.

Mr & Mrs Fuller will need to look for alternative support while the pub remains closed.

 

The following paragraphs describe ICAEW’s understanding of the scheme and are their proposed guidance for members.

Which businesses are eligible?

1. Eligible businesses include charities and not-for-profit organisations and will include single director companies, although the same rules will apply as to other businesses. The grant applies to all UK based businesses.

Owner/managed companies

2. Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme.

How is payment going to work in practice?

3. We understand that the employer will pay the contractually agreed amounts as required by the employment contract in the usual way. This will involve paying the employee, and HMRC the PAYE and both primary and secondary National Insurance Contributions. The grant will be paid directly to the employer. We do not know how this will operate for employers which use a payroll agency.

4. Employers will claim the grant through a new separate portal to be built by HMRC.

What is the £2,500 maximum grant based on?

5. The £2,500 monthly grant covers all employment costs, ie, salary, employer pension contributions required by auto enrolment (if applicable), and employer NIC. 

6. The earnings period to be used to determine the maximum grant has yet to be clarified. For new employees in particular, options will be needed and also for seasonal staff. However, clearly there will need to be a base line and options being considered are likely to include:

a. Average for a prior period such as 12 months to 1 March  or perhaps the month of February alone for a new employee.

b. For seasonal workers, it might be possible to use the same period last year, such as three months March, April, May 2019.

c. For those working irregular hours or say, on reduced pay (eg, maternity or sick leave) a different previous period may be needed.

Will entitlement to other employment benefits continue during the period of furlough?

7. The rules for the grant will not displace the existing employment contract. So for example, we would expect the entitlement to holiday and sick pay would depend on the contract. 
Employees eligible.

Employees eligible

8. Eligible employees are those on the payroll on 28 February 2020. It has yet to be clarified whether or not those re-employed under a new contract will qualify, although the policy intent would seem to support this would be reasonable.

9. We have had many questions asking if workers can be moved in and out of being furloughed if work becomes available to an employer and then ceases again? This has yet to be clarified, but we consider it very likely that they will. The scheme is being designed to allow for flexibility so that furloughed staff can be brought back to work to replace those still working who later become sick. We anticipate that this will be seen as difficult to regulate an anticipate that a minimum period of furlough leave may be built in as a requirement before the person van return to work. So we anticipate that the rules will specifically make provision for:

a. Sickness cover where a continuing employee is now off sick and a furloughed worker can provide cover.

b. Where employees agree to share shifts to enable more of them to continue to be paid.

This will again depend on the employment contracts of those affected.

10. The matter of which employees an employer decides to furlough will be a matter for negotiation with staff and employment law. 

11. The impact on job sharing employees and the decision to furlough will be a matter for negotiation with staff and employment law. 

12. We presume that, subject to anything different stated in the employment contract, eligible employees would also include apprentices and agency workers.

13. We do not yet know whether the scheme will include deemed employees under the off payroll working rules.

14. An employee does not have to accept furlough if offered, but the employer could then make the employee redundant instead using the usual employment law procedure. 

15. We understand that staff can study while they are being furloughed.

16. It is a condition of the scheme that the employee must do no work at all during the furlough period. The intention of the scheme is to allow employers to pay staff who are without work.  HMRC will of course have visibility of pay records.

Employees with more than one employment

17. While we understand that an employee who is furloughed can do no work at all, our current understanding is that the employee can hold a separate employment with a different and unconnected employer which will be unaffected.

Purple HR Guidance

Mandy Fitzmaurice from purple HR provides us with an update on the latest guidance :- 

Job Retention Scheme Update – 23 April 2020 

 

Furlough FAQ’s

 

Q:        How long is Furlough?

A:        An employee must be on Furlough for blocks of 3 weeks at a time. Blocks of Furlough can run concurrently or have breaks in between of any amount – we’ve nick-named it Flip-Flop Furlough!  For example, after the first 3 weeks, an employee may be asked to come back to work for a period of time or continue on Furlough.

 

Q:        Do we need a written agreement in place to put someone on Furlough?

A:        Yes, as it is a change to their terms and conditions that is going to allow you to pay them 80% of their normal salary. Any documentation must be kept for 5 years. 

 

Q:        How do I get on the Furlough portal to make my claim?

A:        You can only access the Furlough Claim Portal through your Government Gateway.  If you haven’t set up your Gateway account, you will have to do this before you make a claim. This normally takes about 10 days – there is no short-cut!

 

Q:        Can employees take holiday whilst on Furlough?

A:        Yes, but on those days they must be paid 100% of their normal pay.   

 

You may ask them to take some of their holiday whilst on Furlough as you may need all hands on-deck when the lock-down is removed. If you want to do this, you must give twice as much notice as the amount of holiday you wish them to take. In other words, if you want employees to take 1 week of their holiday, you need to give them 2 weeks’ notice. 

 

Q:        Will employees still have to pay tax and national insurance on Furlough pay?

A:        Yes, normal deductions still apply, but will be based on the actual pay they receive. This includes any attachment of earnings, pensions, student loans etc.

 

Q:        How is pay calculated?

A:        For employees who are paid a standard monthly salary, it is 80% of their salary as showing on the RTI report with HMRC as at 19 March 2020.

 

For people whose earnings vary month to month, week to week, it will be 80% of either:

 

  • their average earnings for the 2019/20 tax year or
  • the same month last year ie April 2019

 

If they have been employed for less than 12 months, you will base the calculation on their average monthly earnings since they started work.

 

Q:        We have just started a new tax year, so we get the £4,000 employer allowance.  Can we claim this as well as claiming the NI cost through the Furlough Scheme?

A:        No, that would be double claiming, you can’t have both.

 

Q:        What do we include when calculating Furlough pay?

A:        You should include anything that makes up an employee’s normal pay, ie regular wages, overtime and any ‘contractual’ payments, eg a car allowance as this makes up normal salary each month.

 

You cannot include any values associated with any non-cash benefits, eg medical cover, company cars, tips etc.

 

Q:        Do I have to top up Furlough pay?

A:        Only if you want to and/or can afford to.

 

Q:        Can employees work somewhere else whilst on Furlough?

A:        Yes, they can, providing you are happy for them to do so. They will need to complete a HMRC Starter Checklist form with the other employer and will be taxed at basic rate tax on the second job. If they do take another job during Furlough, make it clear to them that their job with you must remain their priority and that they must be ready to return to work when asked.

 

Q:        Can employees do any training when on Furlough?

A:        Yes, Furloughed employees can engage in training, as long the training being done does not provide services to, or generate revenue for, or on behalf of the business.

The guidance is saying that Furloughed employees should be encouraged to undertake training, but that where training is undertaken, they are entitled to be paid at least their appropriate national minimum wage for any time spent training.

 

The guidance is now saying that in most cases, the Furlough payment of 80% of an employee’s regular wage, up to the value of £2,500, will provide sufficient monies to cover these training hours. However, where the time spent training attracts a minimum wage entitlement in excess of the Furlough payment, you would need to pay the additional wages.

 

Q:        Can employees volunteer whilst on Furlough?

A:        Yes, they can, but we recommend they keep you informed of what they are doing and that you remind them that their job with you must remain their priority and be ready to return to work when you need them to, which could be before the end of a 3 week period.

 

Q:        Can employees do any work whilst on Furlough (even a little bit)?

A:        No, absolutely nothing.

 

Q:        I’m a Director, can I Furlough myself?

A:        Yes you can, but be very clear, you MAY NOT do any work, other than undertake your fiduciary duties ie file annual accounts and basic Company Secretarial duties – definitely no social media, marketing, quotes, emails – NOTHING!

 

Q:        We may still have to let some of staff go.  Can we put people on notice of redundancy if they are on Furlough?

A:        Yes, all the normal rules of consultation and fair selection for redundancies still apply.  Guidance is still unclear as to whether notice pay can be paid at 80% or full pay.  We strongly recommend you pay any notice at 100% to avoid potential claims later down the line.   Statutory Redundancy Pay should be based on the contracted salary, not the Furlough pay.

 

Q:        Do we based redundancy figures on Furlough pay (80%) or the full contractual salary?

A:        On the contractual salary.

 

Q:        If we do have to make redundancies, do we still have to do the 30-day consultation period if we have more than 20 employees who we need to let go?

A:        Yes, and if the numbers exceed 100, then the consultation period will be 45 days.  We strongly recommend you take advice before embarking on any redundancy process or collective consultation.

 

Q:        I selected an employee to go on Furlough last week, but things have changed and I need them back, can I change my mind and bring them back?

A:        Yes of course you can.  Talk to them, bring them back and pay them full pay. You will not be able to claim any Furlough.

 

Q:        I have a lady on maternity leave and she has said that she would be better off if she could go on Furlough.  Can we do this?

A:        Technically yes.  She would be well within her rights to ‘curtail’ her maternity leave early and return to work, however, if you didn’t have any work for her to do at the moment, you would then place her on Furlough at 80% of her normal ‘contractual’ pay up to the cap of £2500. 

 

Normally the lady on maternity leave would have to give you 8 weeks’ notice to return, but you can waive this. 

 

Q:        I have an employee who is fit and well, has no symptoms and has no one at home with any symptoms and is not in a high-risk category, can I insist they have to come to work?

A:        Yes, but you must allow them to work from home if you can possibly do so.

 

 

Q:        Can we place sick employees on Furlough or do we keep paying them SSP?

A:        The guidance says that an employee on sick leave, or any other form of unpaid leave, will not qualify for Furlough.   If you just think – in other circumstances, if an employee is not fit for work, they would be on sick leave and receive the relevant company sick pay or SSP, therefore if an employee is unwell and unfit for work, they would not be eligible for Furlough.  However, once the employee is fit to return to work, they could be placed on Furlough leave if there is no work for them to do. 

 

Q:        I have an employee who has a young family and has to look after them, are they entitled to Furlough?  Do I have to agree to them being Furloughed?

            Yes, you do.

 

Q:        I have an employee who has been self-isolating for 2 weeks but is now well but wants to stay at home because they are worried. Do I have to agree to them being Furloughed?

            If neither they or any member of their household has any symptoms or has been notified by the NHS that they are in the high-risk category and you can’t give them any work to do at home, then they would be required to come into work (providing you are not a business that the government has deemed must close). 

 

If they refuse, then this would technically be unauthorised absence and any time off would be unpaid or they would have to take it from their holiday allowance.  Please note you may not discipline or dismiss any employee on these grounds, it will be an automatic unfair dismissal and be treated the same as a discriminatory claim, ie the 2 year service requirement does not apply and any award would be uncapped.

 

Q:        Does the £2500 cap include Employers National Insurance and pension contributions?

A:        No, employers NICs and basic auto enrolment employer contributions (3%) can be claimed ON TOP of the £2500 cap.

 

Q:        How often will we be able to claim the Furlough grant?

A:        Once every pay period. 

 

Q:        I have an employee who resigned and left us to work somewhere else after 28th February.  We’ve issued their P45 and they’ve had their final pay, do I have to take them back on?

A:        No.  They left voluntarily, it is unfortunate that the timing of their departure coincided with the COVID-19 pandemic, but you are under no obligation to reinstate them and place them on Furlough.  They are no longer your responsibility, rough as that may sound.

www.purplehr.co.ukhello@purplehr.co.uk  01202 801047 

ICAEW Guidance

The ICAEW have produced a summary of their understanding of the Furlough Scheme :-

 

Rules as outlined in official statements released at 23 March 2020

  1. Furloughed members of staff must not work for the employer during the period of furlough.
  2. Furlough is from 1 March 2020, so is to be backdated. It will last for at least 3 months and will be extended if necessary. Note that while the scheme is backdated to the beginning of March as it is intended to support all those employed then, a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. This will of course be subject to employment law in the usual way.
  3. It is available to employees on the payroll at 28 February 2020.
  4. All UK businesses are eligible, ‘any employer on the country, small or large, charitable or non-profit’ to use the Chancellor’s words.
  5. The scheme pays a grant (not a loan) to the employer.
  6. The grant will be paid to the employer through a new online system which is being built for this purpose.
  7. The employer will pay the employee through payroll, using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll will continue as normal.
  8. Scheme will be administered by HMRC:
    • Relevant employees must be designated as furloughed employees.
    • Employers will submit information to HMRC through a new online portal.
    • As this will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. The narrative used in the information released so far says ‘if your employer cannot cover staff costs due to COVID-19 they may be able to access support…’. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined, nor whether there is a bar of some description.
  9. Maximum grant will be calculated per employee and is the lower of:
    • 80% of ‘wages’. The notes published so far, use the phrase ‘wage for all employment costs up to a cap of £2,500 per month’. It is our understanding that this includes employers’ NIC and pension contributions. Wages will be determined by reference to a defined period (yet to be announced).
    • £2,500 per month.

Illustration

X Ltd employs Mr A at an annual salary of £24,000, so £2,000 per month. Mr A has opted out of auto enrolment.

Each month, Mr A currently receives net pay of £1,665 which is after deducting PAYE of £191 and employees NIC of £144. On this salary, the employer pays employers’ NIC of £174.

The available grant for the employer is the lower of

(a) 80% of (£2,000 + £174), and 

(b) £2,500

So a grant of £1,739.

The cash required by X Ltd to furlough based on maintaining the existing salary is £435 per month. It is a matter for employment law whether the employer is required to pay this top up. Discussions with employees may have agreed that the employee has agreed to a different arrangement during their furlough.

Notes to illustration based on an extended understanding of how the scheme will work

  1. If Mr A had not opted out of auto enrolment, X Ltd would also be making pension contributions on his behalf. If so, the available grant is based on 80% of (gross salary + Employers’ NIC + employers pension contributions paid), subject to the monthly cap of £2,500.
  2. We understand that the rules for the scheme are being designed with underlying reference to employment law. If the individual is still under contract, Mr A can expect to receive his salary in full. The £1,739 grant paid to X Ltd should not be taken as the new maximum cost of employment to the employer unless the contract has been redrafted.
  3. Subject to the employment contract and any amendment, the salary which the employer actually pays the employee during the furlough period may be different to the pay paid used as the reference period and upon which the grant figure is based.

Pubco – a scenario

In the following illustration, the business has already closed as instructed by the government. We have had a number of enquiries along similar lines and are seeking clarification of our understanding of the rules apply.

Mr & Mrs Fuller are the tenants of a pub. They have a substantial wet and food trade as the pub is in a coastal location and does good trade over the Summer. The pub is open all year round.

Mr & Mrs Fuller operate the pub through a limited company (Pubco). They take salaries of £8,600 each and withdraw profits of £30,000 each in the form of dividends. They live above the pub and work long hours being in the pub every day.

Pubco employs three permanent staff supplemented by extra seasonal staff in the Summer months and at Christmas.

The pub closed on 20 March as instructed by the Prime Minister. and following the Chancellor’s announcement on 20 March, Pubco has furloughed its staff other than Mr & Mrs Fuller who are still living above the pub and dealing with the company administration. The contracts of employment of the other staff have been varied to permit furloughing and the three permanent staff members have agreed to accept a pay reduction to 80% of the previous level. The seasonal staff for this year have not yet been hired.

Our understanding is that Pubco will be eligible to receive the government grant support under the Coronavirus Job Retention Scheme for the monthly wages of the 3 permanent staff members. No grant support is available to support the living costs of Mr & Mrs Fuller.

Mr & Mrs Fuller will need to look for alternative support while the pub remains closed.

 

The following paragraphs describe ICAEW’s understanding of the scheme and are their proposed guidance for members.

Which businesses are eligible?

1. Eligible businesses include charities and not-for-profit organisations and will include single director companies, although the same rules will apply as to other businesses. The grant applies to all UK based businesses.

Owner/managed companies

2. Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme.

How is payment going to work in practice?

3. We understand that the employer will pay the contractually agreed amounts as required by the employment contract in the usual way. This will involve paying the employee, and HMRC the PAYE and both primary and secondary National Insurance Contributions. The grant will be paid directly to the employer. We do not know how this will operate for employers which use a payroll agency.

4. Employers will claim the grant through a new separate portal to be built by HMRC.

What is the £2,500 maximum grant based on?

5. The £2,500 monthly grant covers all employment costs, ie, salary, employer pension contributions required by auto enrolment (if applicable), and employer NIC. 

6. The earnings period to be used to determine the maximum grant has yet to be clarified. For new employees in particular, options will be needed and also for seasonal staff. However, clearly there will need to be a base line and options being considered are likely to include:

a. Average for a prior period such as 12 months to 1 March  or perhaps the month of February alone for a new employee.

b. For seasonal workers, it might be possible to use the same period last year, such as three months March, April, May 2019.

c. For those working irregular hours or say, on reduced pay (eg, maternity or sick leave) a different previous period may be needed.

Will entitlement to other employment benefits continue during the period of furlough?

7. The rules for the grant will not displace the existing employment contract. So for example, we would expect the entitlement to holiday and sick pay would depend on the contract. 
Employees eligible.

Employees eligible

8. Eligible employees are those on the payroll on 28 February 2020. It has yet to be clarified whether or not those re-employed under a new contract will qualify, although the policy intent would seem to support this would be reasonable.

9. We have had many questions asking if workers can be moved in and out of being furloughed if work becomes available to an employer and then ceases again? This has yet to be clarified, but we consider it very likely that they will. The scheme is being designed to allow for flexibility so that furloughed staff can be brought back to work to replace those still working who later become sick. We anticipate that this will be seen as difficult to regulate an anticipate that a minimum period of furlough leave may be built in as a requirement before the person van return to work. So we anticipate that the rules will specifically make provision for:

a. Sickness cover where a continuing employee is now off sick and a furloughed worker can provide cover.

b. Where employees agree to share shifts to enable more of them to continue to be paid.

This will again depend on the employment contracts of those affected.

10. The matter of which employees an employer decides to furlough will be a matter for negotiation with staff and employment law. 

11. The impact on job sharing employees and the decision to furlough will be a matter for negotiation with staff and employment law. 

12. We presume that, subject to anything different stated in the employment contract, eligible employees would also include apprentices and agency workers.

13. We do not yet know whether the scheme will include deemed employees under the off payroll working rules.

14. An employee does not have to accept furlough if offered, but the employer could then make the employee redundant instead using the usual employment law procedure. 

15. We understand that staff can study while they are being furloughed.

16. It is a condition of the scheme that the employee must do no work at all during the furlough period. The intention of the scheme is to allow employers to pay staff who are without work.  HMRC will of course have visibility of pay records.

Employees with more than one employment

17. While we understand that an employee who is furloughed can do no work at all, our current understanding is that the employee can hold a separate employment with a different and unconnected employer which will be unaffected.

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