The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers starting from March 1st 2020.
The wages must have been paid through a PAYE payroll scheme on or before February 28th 2020.
This scheme is designed to support employers whose operations have been dramatically affected by Covid-19. Employers can claim 80% funding from the UK Government to place their employees on furlough.
The term furlough essentially means putting employees on a temporary leave of absence where they do not work but are retained on your payroll to be brought back in when they are needed again.
Employers who do this will be able to obtain a grant from the government to cover 80% of furloughed employees’ wages, to a maximum of £2,500 per employee per month.
This scheme is intended to run for 3 months but may be extended by the Chancellor, if necessary.
To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and obtain a signed agreement or keep a record of this communication.
Employees hired after 28 February 2020 cannot be furloughed.
You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.
Question and Answer
Q. Who can claim?
A. Any UK organisation with employees can apply, including:
- recruitment agencies
- public authorities
Your company must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Q. What Employees can I claim for?
A. Any contract type including:
- Full-time employees
- Part-time employees
- Employees on agency contracts
- Employees on flexible or zero-hour contracts
The Job retention scheme also covers employees who have been made redundant since 28th February 2020 if they are rehired by their employer.
See our flow chart below.
Q. Can limited company directors be furloughed?
A. Yes, on Saturday morning HMRC confirmed that limited company directors can be furloughed even if they are the sole employee of the company.
Providing the director was paid via PAYE in the period to the 28th February 2020.
However, furloughed company directors can then no longer participate in any revenue work for the firm, but they can perform their statutory obligations as directors (filing accounts etc).
This is the only work that is allowed – they cannot arrange work or deal with customer queries.
The director’s salary will be taken as the average of the 12 months from February dating backwards so salaries cannot be increased in March to claim more under the 80% rule.
The director will not have to resign at Companies House so they can be kept on the company bank account.
Q. Can an employee work whilst being placed on furlough?
A. No, when an employee is placed on furlough, they cannot undertake work for the organisation.
The employee’s wage will be subject to the usual income tax and other deductions.
If an employee continues to work for the organisation they will not be eligible for the scheme and you will have to continue to pay for the employee through your payroll.
Q. How long is the furlough leave for?
A. At this moment in time, the Chancellor has said it is for a period of 3 months, however, this will be extended in necessary.
Even though the scheme is set to run for three months, your employees can be taken of furlough leave at any time.
If you have any concerns on how Covid-19 may affect you or if you have any questions on the above, call us on 0191 586 1615 or click here to contact us now.
Alternatively, click here to watch our CEO, Chris Bailey’s Q&A video where he answers some of your most asked Covid-19 questions from last week.