Coronavirus and Employees

The Government have published more details about the Coronavirus Job Retention Scheme will operate. It is a very detailed set of guidelines enabling employers and employees to have a clear understanding of the way forward.

There are some oddities and there are certain contrasts to those self-employed that may well need a little more clarification in due course.

Is an employee covered by the scheme?

The full details are set out in the attached link.

Check if you could be covered by the Coronavirus Job Retention Scheme

• An employer and employee must agree for the employee to be furloughed

• To be eligible the employee must have been on the employer’s payroll on 28 February 2020

• Normal sick leave and maternity leave rules apply

• If an employee was made redundant after 28 February, the employer can reinstate the employee and furlough the employee instead

• If you have more than one employment, the employee is eligible to receive separate payments from each employer

Payments

Payments are made subject to the following details;

• Employees will receive up to 80% of usual monthly earnings or £2,500 whichever is the lower

• Earnings will be subject to Income Tax and Employees NIC and to any pension deductions required under auto enrolment

• Earnings are the amount you earned last month or the average over the last year, whichever is higher – this is important for employees who receive the majority of their income from bonuses (e.g. sales executives)

• For those who have less than 12 months service, the average is of earnings since employment commenced

• Annual bonuses, commissions or fees are not part of monthly earnings, but monthly commissions are

Can employees work during Furlough?

The definition of Furlough has been made clear. Once on furlough an employee can’t work for the company.

This scheme therefore does not apply to employees working on reduced hours or for reduced pay. Once an employee is no longer able to work for an employer, they can continue training but must not make money for the employer or provide a service for the employer.

Employee rights are not affected by being on furlough.

Employees can reject being put on furlough but should they do so the employee may be at risk of being made redundant which must be carried out in line with normal redundancy rules and protections (statutory redundancy and notice periods).

Employer Claims

Any business is eligible who has employees.

Most importantly:

• If an employee continues to work, even on reduced hours, they cannot be furloughed

• Employees on unpaid leave cannot be furloughed

• Employers can choose to top up wages but there is no obligation to do so

Employers will be eligible to claim the furloughed employee’s wages and the cost of the employers NIC and the auto enrolment pension cost of 3% associated with paying the furloughed wages. Any additional pension contribution that the employer chooses to make must be made by the employer and cannot be claimed.

In order to make a claim, an employer must;

• Provide HMRC with the employer ePAYE reference number

• The number of employees furloughed

• The specific claim period

• The amount to be claimed

• The employer bank account details

• Contact name and phone number

Claims can be submitted every three weeks and make the claim in accordance with actual payroll amounts at the time when the payroll is run or is imminent

Employers must pay the employee the entire grant received subject to the PAYE and pension deductions.

HMRC will retain full rights to retrospectively audit all aspects of a claim.

Finally, Coronavirus Job Retention Payments are a grant, not a loan. They should be recorded as additional income of the accounts and CT 600 of the business.

ASE Commentary

The scheme is unbelievable, in terms of its scope, in terms of its aim to support businesses and employees and in terms of the funding levels. It would harsh to be critical but there are some areas that do need to be tweaked;

1. The 28 February employment date may cause difficulties for employees who are changing jobs now – could the scheme be adjusted to include employees as furloughed by the new employer provided the previous employer employed them on 28 February?
   
   

2. The idea that a person with several employments (the company director with several employments) is eligible for more than one £2,500 payment seems grossly unfair (especially when compared to self employed provisions)
   
   

3. The self-employed are not as fortunate as employees.
   The Government have had it in for “contractors” under IR35 for some time and the self-employed provisions may more 

           reflect the way in which Government wishes to manage these types of workers in future.

4. This scheme is going to be vital for automotive retail, with most businesses having placed their staff on furlough, in advance of fully knowing the rules

 

 In case of any questions please contact at Chris.Cummings@ase-global.com 
Tel: +44 (0)161 493 1930