The Coronavirus Job Retention Scheme is now live, where 80 per cent of staff’s wages that have been furloughed will be paid by the Government.
An estimated 11 million people in the UK have been furloughed before the scheme officially opened and Jim Harra, chief executive of the HM Revenue and Customs (HMRC) said that 67,000 claims from employers were made in the first 30 minutes of the scheme becoming active.
Sage, the cloud business management solutions business that has worked with the HMRC to develop new and automated in-product payroll functionality based on a number of identified specs has offered tips for applying to the scheme.
1. Do research on government offerings
“First and foremost, we recommend that you do your desk research on what the government is providing businesses. If you’re unable to pay salaries because of cash flow issues caused by coronavirus disruption, you might benefit from one of the other government-funded coronavirus schemes: a Coronavirus Business Interruption Loan, a business rates holiday, or one of the coronavirus business grant schemes (depending on eligibility).”
2. Check employee criteria fits the bill.
“Ensure that your employees are eligible for benefits from the scheme. It is likely they are however it is worth checking the criteria list:
- “The employee must have been paid through your PAYE payroll on or before 19 March 2020 (the previous date was 28 February 2020). Those who you employed after this date are not eligible.
- “All types of employment and employment contracts are included, including full time, part-time, agency workers, flexible workers, and zero-hour contracted workers.
- “Foreign nationals who work for you are eligible too.
“If you made employees redundant after 19 March 2020, or they resigned, they are also eligible for the scheme. You can re-employ them, furlough them, and claim their wages.
“Employees on fixed-term contracts are also eligible. If their contract ends during the furlough period you can either extend it, as you might in any other circumstance, or end it, at which point you will not be able to furlough and claim for them.”
3. Communicate with employees about changes
“Keep employees in the loop about what’s offered under the scheme, especially when it comes to their pension.
“In addition to the 80 per cent, employers can claim their employer National Insurance contributions and their minimum (mandatory) automatic enrolment employer pension contribution.
“Make sure to let your employees know of any tweaks they may incur in additional pension contributions that you cannot claim for through the scheme.
“Whether the employee continues to make pension contributions while furloughed is their choice. Do note however that if the individual opts-out of pension payments then you will not be able to claim the corresponding minimum automatic enrolment contribution under the scheme.”
4. Log all employee communications
“Write to each employee with the dates of the furlough period and inform them what their salary will be during the period. You may need to adjust their employment contract to take the furlough into account, along with the adjustment in salary.
“It is important to let employees know that their furlough will be on record for five years if there is no lay-off clause included in their employment contract.”
5. Remember to check on taxes
“Check what needs to be claimed and deducted under the scheme for your books. There are two sides to this question, relating to the employer and the employee.
“Employer: Money you claim under the Coronavirus Job Retention Scheme must be included as income in your calculation for Income Tax and Corporation Tax, in accordance with normal principles. You can deduct employment costs as normal from your taxable profits.”
“Employee: You must deduct employee tax and NICs as usual via the payroll on the salary you pay them under the Coronavirus Job Retention Scheme. You should pay employer NICs too, and the minimum mandatory pension contributions, although you can claim these back under the scheme along with the salary.”
6. Look at the small print
“It’s easy to go into applying for the Job Retention Scheme and forget the specifics about who can claim what. It is worth noting the following:
- “Agency staff can be furloughed if they’re on your payroll
- “If they’re employed by an umbrella company, then they have to furlough them
- “If limb workers, also known as dependent contractors, are on your payroll then you can furlough them and then claim
- “Self-employed can seek assistance through the COVID-19 Self-Employed Income Support Scheme (SEISS)”
7. Play by the rules
“If you furlough an employee then they are not allowed to undertake work for, or on behalf, of your organisation.
“Do make sure to let them know as soon as they are furloughed and don’t try to find loopholes by reassigning different types of work tasks to them during this time.”