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Covid-19 – A Definitive Guide to the Coronavirus Job Retention Scheme – 16th April 2020 - Click for larger version Covid-19 – A Definitive Guide to the Coronavirus Job Retention Scheme – 16th April 2020

On 20th March 2020 the government announced a support scheme for employers to temporarily assist with salary costs – the Coronavirus Job Retention Scheme (“the Scheme”). Since that date, ongoing guidance has been released and we have set out below an overview to the Scheme.

1. What is Furlough?

The term ‘furlough’ does not have a legal definition and it has not been commonly used in employment law until recently. However, the definition is essentially ‘a leave of absence’ and ‘furlough’ is the terminology the government are using in relation the Scheme.

The basic principle of the Scheme is that employers will be able to apply and access support in order to continue paying those employees on ‘furlough’ in an alternative to a lay off or redundancy. The government guidance tells us that the Scheme should be used by those employers who have been severely affected by the coronavirus outbreak to retain employees and protect the UK economy.

2. Basics of the Scheme

The Scheme is open to all employers who are enrolled for PAYE online.

The Scheme can only be used where you have employees on your PAYE payroll on or before 19th March 2020 (please note that this date has been recently been amended from 28th February 2020).

It is temporary – 3 months is the noted time, however it appears very likely that this time limit will be extended.

You can claim for the lower of 80% of an employee’s basic salary or £2,500 per month. An employer can also claim for national insurance contributions and minimum automatic employer pension contributions (3% on qualifying earnings) that are paid on the subsidised furlough pay.

Claims should be made from the date an employee ceases work and is placed on furlough.

3. Employees who are Furloughed

Employers should discuss furlough with their employees and in order to be eligible for the Scheme you require to notify employees of this furloughed status in writing. A record of all notifications must be kept for five years.

Further to this you will require employee agreement if you are reducing their pay to 80% as this will be a change to the terms of their contract of employment. You are however free to ‘top-up’ an employees pay without affecting your claim under the Scheme.

An employee cannot carry out any work for you during any period of furlough.

Employees can be furloughed multiple times (subject to each period of furlough being at least 3 consecutive weeks). Therefore an employee can be furloughed, brought back to work (on normal pay) then re-furloughed.

4. Making your claim to the Scheme

Claims will be made via a HMRC online portal which is anticipated to be up and running on 20th April 2020. You will require the following information to make a claim:

• your employer PAYE reference number.
• the number of employees being furloughed.
• The names, payroll number and national insurance numbers for the employees you want to furlough.
• the claim period (start and end date).
• amount claimed (per the minimum length of furloughing of 3 consecutive weeks). You will be required to calculate this.
• your contact name, phone number and bank account number and sort code.

HMRC are anticipating a large volume of claims, however are confident that the portal will be able to cope with 450,000 claims an hour.

The first payments to businesses under the Scheme are thought to be made from 30th April 2020.

5. Keep in touch with employees

As you do not need to place all your employees on furlough it may be the case that some employees will continue to work for you. Team morale will be key during this time. It is recommended to keep in touch with furloughed workers regularly.

As an important note, when operating the Scheme employers will continue to have an ​obligation to comply with all UK employment laws.

6. Keep matters under review

Cash flow will be key for all businesses at this time and some employers may have difficulty in maintaining an employees pay until such time a grant under the Scheme is received.

If there is not sufficient cash flow then alternatives to furlough that may require to be considered, for example, voluntary unpaid periods, lay-offs or reduced hours/days. Employment law advices should be obtained when considering the future requirements of your business.

The government guidance is continually being updated in relation to the Scheme. Should you require any specific advices on this topic please contact Laura McKnight: laura@macdonaldhenderson.co.uk.

We sincerely hope that you, family and colleagues are staying safe and well.

Last updated: 7.44pm, Wednesday 15th April 2020

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