To all employee clients,
We are still trying to ascertain the way in which the 80% Job Retention Scheme (JRS) is going to operate. HMRC have still not rolled out the scheme or even the basics. It is unclear if it is a grant to the employer or to the employee. If to the employer then PAYE/NIC will still be deducted from the employers pay. If it is a grant to the employee then this wouldn’t apply.
What we do know is the following, which has been extracted from information that is generally available. Where it is unclear we have given the alternative in CAPITALS.
We appreciate that you are all worried but please do not contact us with your questions - we shall provide updates as we receive further guidance. We are trying to continue to provide the usual full service at a time when we have to undertake the end of year payroll returns, roll forward the tax year and now undertake work on registering Furlough employees, working out their 80% and assisting clients at financial risk or threatened closure. If you do need to speak with us please send us an e-mail and someone shall either ring you or e-mail you back as soon as possible. Please specify what your questions or concerns are.
What is it?
The Job Retention Scheme (JRS) will allow companies to keep employees on payroll during the COVID-19 pandemic.
Who is it for?
All UK businesses are eligible for this support.
In order to access this support employers need to classify employees as furloughed workers.
This means they should not undertake any work for the company while furloughed, including answering calls or emails. In exchange, employers can claim a grant of up to 80% of each employee’s wage for all employment costs, up to a cap of £2,500 per month.
The employee remains employed and their employer can choose to fund the difference between this payment and their usual salary, but it’s not compulsory. WE HAVE RECEIVED CONTRADICTORY INFO SUGGESTING THAT HMRC WILL PAY THE EMPLOYER 80% OF WHAT IS FILED ON THE RTI. THIS WOULD INDICATE THAT THE OTHER 20% SHOULD BE PAID. HOWEVER, WE BELIEVE THAT THE OTHER 20% IS NOT MANDATORY.
The JRS will not interrupt an employee’s continuity of service, and their annual leave will continue to accrue.
It is not yet clear whether or not employees can take on other work while receiving the JRS salary, but government advice is being updated daily.
How to access it
Once a business has designated any employees as ‘furloughed workers’ – and notified those employees – they must submit information to HMRC about the employees that have been furloughed and their earnings. This will be through a new online portal - HMRC will set out further details on the information required.
How long will it last?
JRS is intended to run for at least three months from 1 March 2020, but will be extended if necessary. The JRS will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April for workers who were in employment on 28 February.
What are the main issues?
As furloughed employees will be deemed as taking a leave of absence, they would strictly be unpaid.
The government needs to structure the grant so it isn’t ‘pay’, and therefore no PAYE tax or national insurance contributions (NIC) are due, and no benefits driven from pay are applicable. THIS IS NOT CLEAR, AS STATED IN OUR PREAMBLE. I WOULD ASSUME THAT PAYE/NIC IS DEDUCTED UNTIL WE ARE TOLD OTHERWISE.
It is also currently unclear how the JRS will apply to employees within personal service companies (PSCs).
We anticipate that PSCs will be eligible in the same way as other businesses and subject to the same expected rules on the reference salary for the 80% calculation.
How businesses should prepare
Businesses looking to access the JRS should take the following steps:
• Set up the payroll with a furloughed pay element to identify the amounts for reclaim
• Identify ‘at risk’ employees and those earmarked for lay-off and calculate furloughed pay based on the 12 weeks up to the end of February. Establish base pay that qualifies for 80% furloughed grant, but not overtime or bonuses.
• For employees off sick for the 12 weeks, calculate furloughed pay on the amounts excluding sick pay. Assume this is still pay and that PAYE tax and NIC deductions will be due, even though it is likely that payments to HMRC will be deferred.
• For employees where £2,500 cap will apply, calculate additional pay required to get to ‘normal’ pay and model options to manage any top up outside of the grant
• For employees required to remain in employment, model options to flex remuneration, including establishing new ‘base’ pay in line with national minimum wage and employment related loans
• Communicate with all affected employees including illustrations of proposed payments
• Prepare application to HMRC – WHEN WE HAVE BEEN MADE AWARE OF THE PROCESS
• Register and log-on to new HMRC portal where you will submit these details. WHEN THE PROCESS IS RELEASED
When are employees entitled to statutory sick pay?
The following people should stay home and will be eligible for statutory sick pay for the whole 14 days and not from the fourth day onwards as is usually the case:
• Employees displaying coronavirus symptoms
• Employees in a vulnerable group
• Employees returning from high-risk countries
• Employees who have been in contact with a confirmed case or person displaying symptoms.
• Employees in the same household as someone who is displaying symptoms
• If the whole business is shutting temporarily, employees are entitled to full pay unless the employer has a short time working/lay off clause in their contracts, as this is a business decision the employer is making
The grant is a reimbursement by HMRC so businesses may face cash flow issues. A bank facility or loan may be required to fund these payments prior to reimbursement. Businesses can also use the government’s Coronavirus Business Interruption Loan.
APOLOGIES IF THIS IS COMPLICATED BUT IT WILL BECOME CLEARER ONCE HMRC RELEASE THE SCHEME AND HOW IT WILL OPERATE.