23rd March 2020
We are understandably receiving many queries in relation to the announcement made on Friday that the Government will cover 80% of employees pay if they are categorised by their employers as ‘furloughed workers’.
Firstly, lets deal with the obvious question. What does ‘furloughed’ mean?
The definition is to ‘grant leave of absence to’.
So, as businesses become affected by staff either not being able to attend work due to childcare requirements or the workplace has no work to be completed, the employer can ‘furlough’ employees. This is to hopefully prevent mass unemployment.
Employers must identify employees who are to be ‘furloughed’ and advise them in writing of this change.
The employee then stays at home and undertakes NO work on behalf of their employer whilst ‘furloughed’.
The employer then makes HMRC aware of the employees who have been ‘furloughed’ (via a new portal currently being constructed) and the Government will reimburse to the employer 80% of the employees pay.
The employer then pays the employee either the 80% received from the Government OR the employees normal pay. This is at the discretion of the employer.
The 80% is to a maximum of £2,500 per employee per month. So, for an employee earning a salary of £24,000 (£2,000 per month), the employer can make a claim of £1,600 from the Government per month. For any employee earning over £37,500 (£3,125 per month) the maximum claim that the employer can make is £2,500.
Secondly, we do not yet know how to make these claims and whether we as Agents can make the claims on behalf of clients or whether it is the responsibility of the employer to make the claim. We will review once the portal is available as there may well be a legal declaration to be completed confirming that the employees ‘furloughed’ are not undertaking any work for the employer.
We will update this as soon as any further information is available.