What employers need to know about the Coronavirus Job Retention Scheme
This page will be updated as more information becomes available. Last updated 26th March 2020
To safeguard against staff being made redundant in the economic climate created by COVID-19, the government have introduced the Coronavirus Job Retention Scheme.
To save you from the jargon, our guide talks you through the scheme.
Who is the Coronavirus Job Retention Scheme for?
The scheme is for employers of staff who would otherwise have been laid off due to the impact of COVID-19 in the UK.
Rather than laying off staff, employers can instead designate their employees as ‘furloughed workers’. In return, the government will reimburse up to 80% of each employee’s employment costs, up to a maximum of £2,500 per month.
Employers can choose to make up the difference between the 80% payment and employees’ normal salaries, but they don’t have to.
It’s also worth remembering that the grant is a reimbursement, not an up-front payment, which could mean cashflow issues for some employers.
What is a furloughed worker?
A ‘furloughed worker’ is an employee who has been temporarily laid off, asked to stop working, or given unpaid leave whilst remaining on the payroll. The words ‘temporarily’ and ‘unpaid’ are key to this.
Who is eligible for the Coronavirus Job Retention Scheme?
The scheme is available to any UK based employer with a PAYE scheme. This means that any employer, including those in the public sector, Local Authorities and charities are also eligible. It covers employees who were in employment from 28th February 2020.
The furlough period begins from 1st March 2020 (so it will be backdated) and will last for at least 3 months. If necessary, it will be extended further.
The grey area at the moment is directors who are employed by a company that they own. Typically, this scenario sees directors take a lower salary as an employee through payroll, and then take dividends.
As such, it’s uncertain as to how the 80% claim might work for directors. They should be able to claim on things processed through payroll like an employee would, but this might mean a significant drop in income.
Can staff still work whilst furloughed?
No, staff must not work whilst furloughed, which also means no phone calls or emails! Staff that are still able to work from home should do so whilst receiving their normal salary.
The Coronavirus Job Retention Scheme is for those employees currently unable to work due to the COVID-19 outbreak.
Do employees still accrue annual leave whilst furloughed?
Yes, staff who have been furloughed during the COVID-19 outbreak still accrue their annual leave as they normally would.
How do I access the Coronavirus Job Retention Scheme?
To access the Coronavirus Job Retention Scheme there are some steps that employers must follow.
- Designate affected employees as furloughed workers.
- Tell your employees about this change (formally, in writing, is the best method).
- Submit this information to HMRC, detailing which employees have been furloughed, and their earnings.
Because the scheme is so new, the portal doesn’t actually exist for users at the moment. HMRC have released a statement confirming that it is something they are working on as a priority, and hope to have available before the end of April 2020 with the expectation that the first grants will be paid within weeks.
This might mean that you need some short-term cash flow support in order to continue employing staff until the scheme is available. If that’s the case, you may wish to consider the Coronavirus Business Interruption Loan.