Group 40 Created with Sketch.

All the detail you need on the Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme is a great opportunity for British businesses to protect staff numbers, but how and when can employers actually use it? Be the Business has the answers.

Announced by chancellor Rishi Sunak on 20 March 2020, the Coronavirus Job Retention Scheme represents an unprecedented business support package designed to prevent the extensive redundancy measures many firms were facing.

The government will continue to publish additional detail relating to the scheme, such as definitive dates on when grants will be paid to businesses, so we will regularly update this page.

Sample furlough letter for staff

If you're considering furloughing staff through the Coronavirus Job Retention Scheme then have a look at our template letter.

Download template letter

Support specifically for SMEs

Don't forget to check out our dedicated coronavirus business response resource hub. It's got the latest on government support and stories of how businesses like yours are reacting.

Visit the hub

Coronavirus Job Retention Scheme key questions and answers

What is it?

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.

On 26 March, further detail was announced. The updated scheme differs from what was originally announced, in that there is no longer an express requirement that in order to qualify the employee would otherwise have been made redundant. However, the eligibility criteria may change with little or no notice.

Who is eligible?

UK employees paid by a UK employer who were on the payroll on 28 February 2020 and who have been asked to stop working but who remain in employment. This includes part-time staff, apprentices, and employees with zero hour or flexible contracts. Employees on agency contracts can only be included if they are not working.

How much support is on offer?

HMRC will reimburse 80 per cent of wages up to £2,500 per month, plus associated employers’ national insurance and minimum automatic enrolment employer pension contributions. This means that the grant maxes out for employees who earn more than £37,500 base salary per annum.

From 1 August, the employer will be asked to cover pension and national insurance contributions for furloughed staff. The government will continue to pay 80% of furloughed workers’ wages, up to the £2500/month cap.

How long will the scheme run for?

The scheme will from 1 March 2020, and was extended on 15 May until at least 31 October. However, from 1 August, employers will be required to cover pension and national insurance contributions for furloughed employees. The government will continue to cover 80% of furloughed employee’s wages, up to the £2,500/month cap.

Further to this, from 1 September, the employer will be required to contribute 10% of the furloughed workers’ wages, alongside pension and national insurance contributions, with this rising to 20% in October. People Management have published helpful information on recent updates.

What do I need to do as an employer to use the scheme?

You will need to officially notify employees in writing that they have been furloughed. After that, businesses must pay employees as per the usual payroll practices and then submit information to HMRC. More information on the processes for submitting this information is available on gov.uk.

Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

Note that employers cannot claim for employees who continue to work on reduced hours or for reduced pay.

 

When will I receive my payment grant from the government?

According to Government guidance, the online service employers will use to claim will be available “by the end of April”. While you can seek reimbursement for March and April at that point, employers will need to decide how or whether they fund salaries in the meantime

Can an employee work during furlough?

The latest government guidance is that a furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your business.

The guidance also says that if workers are required to complete online training courses whilst they are furloughed, then they must be paid at least the minimum wage for the time spent training, even if this is more than the 80 per cent of their wage that will be subsidised.

Following guidance published on 29 May, employees may return to work from 1 July on a part time basis without revoking furlough. It is up to the employer to decide the hours and patterns for this work, and the employer must also pay the wages of all workers working on a part-time basis.

Further guidance on this issue is available to view here.

What payments to employees does the scheme cover?

For full time and part time salaried employees, the scheme covers their basic annual salary as at 28 February 2020, excluding bonus, commission or other variable pay, and up to a cap of £2,500/month.

From 1 August, employers will be required to cover pension and national insurance contributions for furloughed employees, and from 1 September and 1 October will be required to contribute 10% and 20% of furloughed workers’ wages respectively.

What about pension, holiday and other benefits?

Employers have a statutory obligation to automatically enrol employees in a workplace pension and there are no powers in place to vary that obligation. However, the government has announced it will cover employers’ pensions contributions for furloughed workers. Employers will continue to have to make these payments, but they will be calculated by reference to the salary paid whilst furloughed and a grant can be obtained for this sum.

The government has also announced that workers who have not taken all of their statutory annual leave entitlement due to coronavirus will be able to carry it over into the next two years.

If employees are furloughed, they will continue to be entitled to all their rights under their employment contracts unless they are varied, including Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments etc.

From 1 August, employers will be required to cover pension and national insurance contributions for furloughed employees.

What about tax and national insurance?

Payments made by the employer will be subject to the usual deductions for income tax and national insurance. However, the Coronavirus Job Retention Scheme also covers employer National Insurance contributions. The government has to issued further guidance on how employers should calculate their claims for employer National Insurance Contributions.

From 1 August, employers will be required to cover pension and national insurance contributions for furloughed employees.

Further guidance on this issue is available to view here.

 

Do I have to pay employees who are not able to work at the moment?

Employees who cannot work because they are self-isolating, or looking after a family member who is isolating, are eligible for statutory sick pay (SSP). The government has setup a rebate for SSP to allow small and medium sized businesses to recoup this cost for a 2-week period per employee.

Further guidance on this issue is available to view here.

What is the position of employees who have already been made redundant?

Employees made redundant since 28 February 2020 are eligible if they are re-employed and placed on furlough instead.

What is the position of employees with whom we have already agreed reduced hours or reduced salaries?

The current guidance issued on 26 March 2020, states that these employees will not be eligible for the Coronavirus Job Retention Scheme.

What is the position of employees who are serving notice of termination?

There is no requirement for an employer to rescind notices of termination.

What is the position of employees who are contracted to join us but have not done so?

The scheme only covers employees who were on the payroll on 28 February 2020. Guidance indicates that this means a payroll record has been set up and submitted under HMRC’s real time information system.

Can an employee who is furloughed return to work?

Yes, although there is a minimum furlough period of three weeks. There are no limitations on re-joining the scheme if an employee returns to work and is then required to be furloughed again.

Following guidance published on 29 May, employees may return to work on a part-time basis from  1 July. Their hours and working patterns must be agreed with their employer, and the employer will be responsible for their remuneration for the hours worked.

Are directors eligible?

As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

This also applies to salaried individuals who are directors of their own personal service company (PSC).

Are zero hours employees eligible?

Yes. For employees whose pay varies each month and who have been employed for a full 12 months prior to the date of the claim, their wages should be considered as either average monthly earnings from the 2019-20 tax year or the same month’s earnings from the previous year, whichever is higher.

If the employee has been employed for less than 12 months, you can claim for an average of their monthly earnings since they started work.

Can employees who are currently absent on sick leave (including those self-isolating in accordance with Government advice) instead be furloughed?

Employees who are on sick leave or self-isolating cannot be furloughed and should get statutory sick pay (£94.25 per week) or any higher contractual sick pay entitlement. However, once they are able to return to work, they are eligible for furlough. Vulnerable individuals who are being shielded at home can be placed on furlough.

Can employees who are at home looking after children be furloughed?

Yes.

Do we have to follow redundancy process or any other process before designating employees as furloughed workers?

There is no mandatory process for deciding which employees will be furloughed. Employers will wish to ensure there is nevertheless a clear business rationale for decisions about who to furlough in order to avoid allegations of discrimination and further arguments around the unfairness of any subsequent redundancies. This is especially important where there are a number of employees carrying out a similar role and only some of those employees are to be furloughed.

You will need to officially notify employees in writing that they have been furloughed. After that, businesses must pay employees as per the usual payroll practices and then submit information to HMRC through a new portal that is not yet live.

Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

 

How will the Coronavirus Job Retention Scheme be policed?

HMRC, which runs the scheme, has launched a portal for employees to report fraudulent practices.

Got a question?

If you have a question that we haven't covered then please let us know and we'll do our best to have it answered.

Submit your question

Access other Be the Business coronavirus business resources

On a scale of 1-5, how useful have you found our content?

Not so useful
Very useful