Government support for employers as we face the coronavirus (covid-19) crisis

This page was last updated on 8/6/20

virus-4937553_640.jpgOn this page we'll keep you updated on the UK government schemes to support businesses who employ staff through the coronavirus crisis.  We'll try to keep this up to date with the latest information we have, and you may also like to check the HMRC web site which outlines the support available.  If you're looking for more general information about the Government schemes in this area, check out our page here.  If you are a self employed worker, we have a separate page to help you.

The New Furlough Scheme - Job Retention from 1st July to October

In summary:

  • 10 June – the last date employers can put people on furlough for the first time
  • 1 July – flexible furlough starts, where employers will be able to bring back furloughed employees part time if they need to
  • From 1 August, employers will need to start paying the employer's national insurance and pension contributions.
  • From 1 September: employers will continue paying the employer's national insurance and pension contributions
  • the government will pay 70% of wages
  • employers will need to top up to 80% or more, depending on what's been agreed with the employee
  • From 1 October: employers will continue paying the employer's national insurance and pension contributions
  • the government's contribution to wages will go down to 60%
  • employers will need to top up to 80% or more, depending on what's been agreed with the employee
  • The furlough scheme will close on 31 October 2020

On 29 May, the UK government announced the detail on the wind down of the furlough scheme by October.  Here's the main points;

Employers will be able to bring furloughed workers back part time from next month

From 1 July employers will be able to return furloughed workers on a part-time or reduced-hours basis while still claiming from the job retention scheme for the hours the employee isn’t working. This means, for example, if a worker is brought back for two days a week, the employer will pay these two days in full as usual, while continuing to claim 80 per cent of the employee’s wage cost through the furlough scheme for the other three days.

Employees need to be or have been on the scheme by 10 June

The flexible furlough scheme will be introduced as a new scheme, with the current system coming to a close on 30 June. However, claims will be restricted to employees already furloughed before this date. This means any business wanting to make use of the new scheme will need to have furloughed these staff for at least 3 weeks by the end of June, to allow them to complete the minimum three weeks required by the current scheme before it comes to an end. In summary;

  • The scheme will close to anyone who hasn’t been furloughed for 3 weeks by 30 June, so you will only be able to claim for employees after that if they have been furloughed for a full three-week period at any time before the end of June.
  • So, if you intend to furlough an employee who hasn’t been furloughed before, you will need to agree that with them and start their period of furlough on or before 10 June - this is the last day on which someone who has never been furloughed before can start a period of furlough and qualify for the scheme; this ensures the minimum three-week period is complete by 30 June.

There are no new provisions for new starters

To reduce fraudulent claims, the job retention scheme included a cut-off date after which employees starting at a company were not eligible. This latest start date was pushed forward, from 28 February to 19 March, ut there is no change to this date for new starters.

Employers will not have to contribute until August

The job retention scheme will continue operating as it has done since launch for the rest of June and throughout July, with the government paying 80 per cent of wages up to a maximum of £2,500 for furloughed staff. From August, the government will still cover the cost of wages, but employers will be asked to pay employer national insurance and pension contributions.

From September employers will contribute 10 per cent of wages

In the penultimate month of the scheme, the government will drop its contribution to 70 per cent of wages, with employers expected to contribute the other 10 per cent (if still paying staff 80 per cent of their wages rather than topping this up to 100 per cent), on top of national insurance and pension contributions. In October, the last month of the scheme, the government’s contribution will drop again to 60 per cent and employers will need to contribute 20 per cent of wages.

Statutory Sick Pay  (SSP)

THe UK Government have announced they intend to bring forward legislation to allow small-and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to covid-19. HMRC has updated its statutory payments manual to provide that employees do not qualify for SSP if they are on furlough.

Government provisions as they relate to SSP say that a person is deemed to be incapable of work if they are unable to work because they fall within the extremely vulnerable category and have been advised to shield. The Regulations came into force on 16 April and, on first reading, it does not appear they have retrospective effect (unlike some of the other changes to SSP). The eligibility criteria for the scheme are as follows:

  • this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of covid-19.  This includes people who are self isolating with someone in the house who has the virus.
  • employers with fewer than 250 employees will be eligible - the size of an employer will be determined by the number of people they employed as of 28 February 2020
  • employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
  • employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website
  • the eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force
  • the government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible

Q: When do I claim?

A: If your employee is on sick leave or self-isolating, they’ll be able to get Statutory Sick Pay.  You cannot claim for employees while they’re getting Statutory Sick Pay, but they can be furloughed and claimed for once they are no longer receiving Statutory Sick Pay.

Coronavirus (Covid-19) Job Retention Scheme

chemistry-4932607_640.jpgPlease note: HMRC have now issued more detailed guidance on this scheme - details are split into advice for employers and advice for employees.

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. The scheme will be in place for three months initially and all UK businesses are eligible.

The salary subsidy will be paid through a new HMRC system and will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month,  plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.

The Chancellor has announced it will be backdated to March 1.  The key things you need to know are;

  • You need to get agreement from your employees to designate them as furloughed workers and reduce their pay to 80%, capped at £2,500 per month.  HMRC have now clarified that without written agreement from the employee, they won't pay.
  • You can designate employees as a furloughed worker if they are PAYE and were on your books on 19th March 2020 (updated from 28th Feb.)
  • The scheme applies to all types of employee contract including full time, part time, zero hours and variable hours
  • Once people recover after being on sick leave or in self-isolation, they can be furloughed
  • Anyone made redundant from 28th February 2020 can agree to be brought back and placed on furlough
  • Furlough must be for a minimum three weeks, but employees can be placed on furlough more than once
  • Wages must be paid to employees first and then reclaimed through an online portal
  • Please note that HMRC have confirmed this covers salary only, not dividends. If you are paid a mix of salary and dividend income, we understand only the salaried earnings under PAYE will be eligible under the Job Retention Scheme.  In addition,if you pay yourself only in dividends then you are not eligible for support under either the Job Retention Scheme or the Self-Employed Income Support Scheme.

HMRC has created a new online portal for claims, which is now open (as of 20th April 2020).

Some of the most common questions we've been asked are answered below. The scheme is in development, however, so currently it's not clear what all aspects of the implementation will look like.  Please come back regularly for updated posts.  The HMRC web site which deals with these issues is also available.

Q. Who can access the Job Retention Scheme?

A. Any UK employer, large, small, charitable or non-profit, can access the scheme. If they cannot cover staff costs due to COVID-19, they may be able to access financial support to avoid making employees redundant.  In terms of which employees qualify, the following rules apply;

We now have clarity in relation to employees who qualify.;

  • Employees who were made redundant after 28th February can be re-employed and placed on Furlough
  • Employees who resigned and left after the 28th February can be re employed for the purposes of the scheme.  Be aware, howeever, that there is a risk that the HMRC may take the view that it falls as a fraudulent claim because there was no ‘real intention to re employ’ it just helped them get income.
  • Employees who are unable to work because they have caring responsibilities resulting from Covid-19 can be furloughed (for example employees that need to look after children can be furloughed)
  • Employees who are shielding (staying at home for 12 weeks following confirmation from the NHS) can be furloughed “if they are unable to work from home and you would otherwise have to make them redundant” .
  • If an Employee has 2 jobs they can be furloughed from each. The guidance says that each job is treated separately which means that the Employee can enjoy a ‘windfall of income’. The Government may catch up with this in due course though.
  • An Employee who has been placed on Furlough leave can work for another - the implication of this is that the employee can earn through the Job Retention Scheme as well as the full contractual earnings of the second job. You will need check their contract of employment and see whether there's a prohibitive condition that they cannot work for another, in which case you should write to them and warn them of the fact. However, we believe that there was a genuine intention of the Government to allow people to work for the emergency services therefore your permission cannot be ‘unreasonably witheld’ in these unusual circumstances. If the employee is working for another company within your business area you can say no, but if they were working for a ‘food bank’ or harvesting food then more likely than not you would be found to be acting unreasonably.
  • If an Employee is on SSP because of a qualifying event they cannot be furloughed - they must finish the isolation period or sick period. If an employee claims to be fit to work but isn't, HMRC may well pick this up when they carry out retrospective audits.

Q. I've heard some employees may receive 100% of salary. Is this correct?

A. An employer can claim 80% of the employee's salary from HMRC, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.  Individual businesses can decide to top this up to 100% with their own money, if they wish.  Details of what can be paid have now come from HMRC;

  • You can claim for any regular payments you are obliged to pay employees including past overtime (which we believe to mean compulsory guaranteed overtime where the employer has to pay whether it’s done or not); fees and compulsory or contractual commission. New clarification says "the amount of salary for the employee must disregard anything which is not "regular salary or wages".  That includes disregarding any performance related bonus or discretionary payments (including tips), any conditional payments (eg where a threshhold must be met) and any non-financial benefits. The employer can claim for earnings which it "reasonably expects to be paid" to the employee (para 8.1(a)) - that seems to include deferred earnings, deferred until the Scheme pays out (provided they are not conditional on the Scheme paying out). "

  • If an Employee gets contractual commission ie: Estate Agents or second hand car salesmen; your claim can include such a payment up to the cap of £2,500.
  • HMRC agrees Covid-19 counts as a life event that could warrant changes to salary sacrifice arrangements of the relevant employment contract is updated accordingly
  • Apprentice levy and student loans are not covered under the scheme
  • For full time or part time salaried employees; claim for their salary as at 28th February 2020. If their salary varies from week to week or month to month then you can use the higher salary for the period 2019 or 2020
  • If commission is a regular payment can you pay up to the cap £2500? The contracts say that if it’s contractual then yes they can receive it and you look at the earnings last year of the average over the last 12 months.
  • What of the risk for Employers in relation to High Earners if their salary is dropped ? No employer has the right to unilaterally reduce the salary but they have the right to make them redundant because the business has a need for fewer staff to do the work and if they don’t have the work they can make staff redundant.

Q. How does an employer provide proof that an employee is classified as furloughed?

A. The process has now been clarified by HMRC;

  • An Employer must have enrolled with PAYE online
  • Office holders (including Company Directors) and salaried members of LLPs can be placed on furlough so long as the decision is formally adopted by the Company or LLP, noted and recorded. Directors can also carry out duties to fulfil the statutory obligations they owe to the company (but cannot do more than would reasonably be judged necessary for that purpose). Claification now received states: " a director who is furloughed can only undertake work to fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of company's accounts or provision of other information relating to the administration of the director's company (para 6.6).  This is a very narrow interpretation of directors' duties "

  • Staff whom you have designated as being ‘Furloughed’ need to be notified in writing, and to agree, and that record of communication kept for 5 years.
  • Furlough claims under the Job Retention Scheme start from the first date they are placed on Furlough leave.

Q. Are company directors eligible for the Job Retention Scheme?

A. Directors can make a claim if they are paid their salary through payroll. The claim can be made on salary only, not dividends.

Q. How does an employer access the scheme to make a claim?

A. Information on furloughed employees' earnings will need to be submitted to HMRC through a new online portal (currently in development).  But if you have agreed a furlough period, got a letter or email confirmation of this, and have a date documented then you've got everything in place for when HMRC get their system up and running

Q. How long will I be able to claim the salary support?

A. On May 12th the government announced the scheme will be extended 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.

Q. How long does furlough have to last?  Is it a once-only thing?

A. Employees can be Furloughed multiple times subject to each Furloughed period being a minimum of 3 weeks (please note: you will need to agree it in writing each time)

Q. What do I need to do now?

A. You will need to discuss with the worker that they are being classified as a "furloughed worker", which means they are kept on payroll rather than being laid off.  Give them a letter or email confirming this, and the date on which they are being furloughed from.  Get them to formally agree to this change in status, in writing. To qualify for the scheme, the employee must not do any work for you whilst they are furloughed.

Q. What about reduced hours working, or staff who have agreed a pay cut?

A. Furlough leave is recommended for anyone that would have otherwise been laid off or made redundant due to the impact of coronavirus on the employer’s business.

It does not help with any situations where employees had agreed to reduce their hours, or to a pay cut but where they are still required to work. There is currently no option to do a mixture of reduced hours and furlough leave.

Q. What about Annual Leave during furlough?

A. HMRC has now provided (albeit only some) clarity on the question of whether or not employees can be asked to take annual leave during a period of Furlough leave.  The Employee’s Guidance now states that it is  possible to take annual leave whilst on furlough leave.  Annual leave does require the employee to receive full pay but you can claim under the JRS (job retention scheme) your 80% provided you top up the rest. 

HMRC are silent on whether an employer can compel  an employee to take annual leave whilst on furlough, thus depleting their holiday entitlement at the government’s expense.  Advice is that employers can ask employees to take annual leave, however it is a moot point and we can only watch this space.  If you do decide to do this, please ensure that you have proof (in writing) from the employee that they are happy to comply with the request.  Please remember that any industrial tribunal will always ask whether the request of the employer was reasonable in all the circumstances. HMRC have also said "during this unprecedented  time, we are keeping the policy on holiday pay during furlough under review".

IR35 Changes deferred

Medium and large private sector clients will soon be responsible for deciding the employment status of workers and whether a contract is within IR35. Previously, this was the responsibility of the intermediary (e.g. the contractor’s PSC).   However, this change has now been postponed until April 2021.