Coronavirus Job Retention Scheme

Mar, 2020

Updated 27th March 2020

Additional support for all UK businesses during COVID-19 outbreak

The government’s Coronavirus Job Retention Scheme has been designed to allow all UK employers access to financial support allowing them to continue paying part of an employee’s salary for those who would othewise have been made unemployed during the COVID-19 crisis.

All UK businesses are eligible for this scheme and will need to designate affected employees as ‘furloughed workers’ (subject to existing employment law and the employment contract). They will then need to notify HMRC of ‘furloughed workers’ and their earnings through a new online portal.

HMRC will reimburse 80% (up to cap of £2,500 per month) of furloughed workers wage costs and are currently working on a system for reimbursement, which as of the time of writing does not exist.

How will it work?

Businesses, charities, recruitment agencies and public authorities that have created and started a PAYE scheme on or before 19th March 2020 and have a UK bank account can utilise the scheme. These employers will be able to ‘furlough’ any employees who are on their PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020 The type of employees include:

  • Full-time employees
  • Part-time employees
  • Employees on agency contracts
  • Employees on flexible or zero hours contracts

To be eligible for the subsidy, while on furlough, the employee must not perform work for the business or provide services that would generate revenue.

What you can claim.

Businesses will receive a grant for the lower of 80% or £2,500 of a furloughed worker’s regular wage, plus associated Employer’s NICs and minimum automatic enrolment employer pension contributions; all employers remain liable for these contributions.

Fees, commission and bonuses should not be included.

Full and part-time employees’ salary on 28th February 2020 should be used to calculate the 80% value.

For employee’s who work variable hours and were employed for a full 12 months prior to the claim, an average for the year OR the same month last year can be used. Otherwise an average for the months that they have worked to date will suffice.

An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme. Any voluntary pension contributions above the legal minimum will not be included in the funding.

If a worker paid the National Minimum Wage (NMW) is furloughed and they undertake an activity, such as training, for the business, then they should be paid at the NMW rate regardless of whether this exceeds the 80%.

More guidance on how this will be calculated will be released before the scheme is live.

Key points

  • HMRC will reimburse 80% of the wages of furloughed workers.
  • Cap of £2,500 per month, per worker.
  • Employees must have been on the payroll on 28th February 2020.
  • Regular salary used for calculation, or average for flexible / zero hours contracts.
  • Any additional voluntary payments not included in funding.
  • Only legal minimum automatic enrolment pension contributions funded.
  • Employees on unpaid leave cannot be furloughed.
  • Employees who are sick or self-isolating should be paid Statutory Sick Pay.
  • Employees with more than one job can be furloughed for each employment.
  • For employees on or planning to take Statutory Maternity, Paternity, Adoption or Shared Parental Leave, normal rules apply.

Further information

Further details on the scheme, including how to report a claim can be found here: Claim for wage costs through the Coronavirus Job Retention Scheme.

Those businesses requiring short term cash flow support should see if they are eligible for a Coronavirus Business Interuption Loan.

For further information on all of the support that is currently provided to businesses during the COVID-19 crisis, we recommend that employers view the government’s web page: COVID-19 Support for Businesses