27th March 2020
HMRC last night published their guidance on furloughing workers, which can be found here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Here is a summary of the information contained but we advise all clients to read the full information on the link above to ensure it applies to you. Please note there is a separate post regarding furloughing Directors.
- Any UK business can use it BUT the Government do not expect any public body or business that receives public funding to use it. They are not expected to furlough staff.
- Your employment contract must contain a clause for furloughing for you to be automatically able to do this.
- If you do not have the clause or do not even have contracts, then your employees must agree to this. We suggest that if you do not have contracts you seek legal advice. We cannot give you legal advice.
- You must tell your employees in writing.
- You can claim for any employee on the payroll at 28th February 2020. This includes ad hoc workers and those on zero hour contract, in fact the Government would very much like you to furlough these and base the pay on a 12 month average.
- Once an employee is furloughed they cannot and must not undertake any work for or on behalf of the business, this includes sending emails, making phone calls etc.
- Employees on reduced hours but still working do not qualify.
- Employees on leave or unpaid leave do not qualify.
- Employees on SSP, SMP or SMP cannot be furloughed, there are special rules for people on SMP, please see the guidance.
- Furloughing is for a minimum of 3 weeks. If an employee does any work (even just an email) you lose the whole period up to that date and cannot claim. Be very careful what you do.
- Saying an employee is furloughed when they are still working is fraud and falls under the usual Money Laundering Regulations. (This isn’t in the guidance but worth remembering)
- Pay is based on usual salary before tax, not including bonuses etc.
- For employees whose pay varies you take a 12 month average (or average of however long they have worked for you). Excluding bonuses and commission.
- You will get back 80% of the employee’s normal pay (as calculated above) or £2,500pm whichever is lower, plus the associated employers NIC and workplace pension contribution.
- The portal is still being built so please be patient. The earliest we expect you to get any money is at the end of April.
- This is not tax free pay for the employee; tax, NIC and workplace pension deductions still apply.
- We do not know if we can make the claim for you yet. We will let you know when we do.
- This grant is taxable income for personal and corporation tax.