Employers’ guide to COVID-19 Job Retention Scheme

12 May 2020

HM Revenue & Customs (HMRC) has issued detailed guidance with regard to the Coronavirus Job Retention Scheme recently announced by Chancellor Rishi Sunak.

It explains, at https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme, that this is a temporary scheme open to all UK employers from 1 March 2020 to the end of June. On 12 May 2020, an extension to the end of October was confirmed. From August, the Scheme is likely to run slightly differently to allow the sharing of costs between the employer and the employee. Furthermore, staff will be able to return on a part-time basis.

It is now open to all UK employers that had created and started a PAYE payroll scheme provided they have a UK bank account. The Government guidance for employers on the Job Retention Scheme has been updated as of 15 April 2020. The eligibility for the Scheme has changed and the key date for eligibility is now 19 March 2020 instead of 28 February 2020.

At any time during the three-month period, employers will be able to use a portal to claim for 80% of the usual monthly wage costs of what the Chancellor referred to as “furloughed employees” (those on a leave of absence). This is going to be in place until the end of July, from which point it is currently expected that the 80% payment will remain in place but will need to be funded, in part, by the employer.

This will be up to a maximum of £2500 a month, plus the associated Employer National Insurance contributions (NICs) and minimum automatic enrolment employer pension contributions on that wage.

At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.

Employers with full-time or part-time employees on a set salary, will need to work out the total amount being paid to furloughed employees, employer National Insurance contributions and employer pension contributions.

Who can employers claim for?

Employees on any type of contract, including:

  • full-time employees

  • part-time employees

  • employees on agency contracts

  • employees on flexible or zero-hour contracts.

It is important to note that, to be eligible for the subsidy, when on furlough, an employee cannot undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

”If an employee is working, but on reduced hours, or for reduced pay,” the guide explains, “they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.”

Employers should write to their employee confirming that they have been furloughed and keep a record of this communication.

The guide goes into considerable detail about how the scheme will work and should be read by any employer looking to make use of it. As well as the points highlighted above, the issues covered in the guide include:

  • employees on maternity leave, contractual adoption pay, paternity pay or shared parental pay

  • employees doing volunteer work or training

  • employees with more than one job

  • the tax treatment of the Coronavirus Job Retention Grant

  • employees whose pay varies

  • the impact of National Living Wage/National Minimum Wage.