Furloughing: Everything you need to know as an employer
There’s no denying that the UK is facing one of the biggest peacetime economic shocks its ever faced and as a result, businesses of all sizes have been presented with sudden financial constraints.
But, in a bid to support businesses throughout the COVID-19 pandemic and reduce the impact on individual employees, the government has introduced a temporary Coronavirus Job Retention Scheme; providing funds to prevent businesses from making temporary redundancies.
Here we take a look at the ins and outs of the Coronavirus Job Retention Scheme (CJSR), answering your questions about furloughing staff.
What is the Coronavirus Job Retention Scheme (CJSR)?
The CJSR is a temporary scheme introduced by the governmentto prevent employees from being made redundant due to decreased workload, decreased revenue or business closure.
Under the scheme, UK employers – small or large, charitable or non-profit– are entitled to make a claim to receive reimbursementsfor 80% of any furloughed employees’ normal wages up to a maximum of £2,500 per employee.
Current guidance states that the scheme will be available for at least three months, and eligible employers may claim from March 1st, 2020 for a minimum of three weeks, to the maximum term of three months.
What does it mean to furlough my staff?
Furloughed employees are those whose employers cannot provide work or cover employee costs due to the devastating effect of COVID-19 and therefore have been asked to stop working temporarily, but not laid off.
Should you wish to furlough your staff, you should discuss this directly with them and make them aware of the rules of furloughing:
In line with usual contractual obligations and employment laws, all furloughed staff should receive an official notification in writing and agree to the furlough offer and rules.
Who can be furloughed?
According to the government, any employee with an active contract and who was on the company’s PAYE payroll prior to February 28th, 2020 can be furloughed, as long as they agree not to carry out any work for the company. Whilst full-time employees are eligible for up to 80% of their wages capped at £2,500, different payment rules apply for apprentices, part-time workers, and zero-hour contract employees.
You should continue to check the advice listed on the government website here, which is regularly updated.
What about employees who weren’t on the PAYE payroll before Feb 28, 2020?
Sadly, those employees who weren’t registered on the PAYE payroll before February 28, 2020 can’t be furloughed under the CJRS. However, depending on the relationship and whether they have a previous role, the employee can reach out to their last employer and ask whether they would consider furloughing them through their old PAYE payroll.
How do I make a claim?
The government has advised that applications for CJRS can be made via an online portal, however, is yet to release further details about the exact date.
More information will be added here https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme as and when it is available.
What we do know is that as an employer, you must have the following to make a claim:
In addition, you will need to calculate the claim amount using the amounts from your payroll. Your Payroll Manager or Accountant will be able to support you with the calculations.
When will I receive the funds?
The exact date of when you receive the funds has not yet been announced, however it’s important to note that payment date may depend on when you make a claim, and the date it is approved.
All payments will be made directly to you via BACS in the form of a grant once your claim is approved.
Do I have to pay my staff the remaining 20% of their wages?
No. Whilst you are free to top up employees’ wages, it is not a requirement to do so. This should be discussed with the employee at the point of furlough.
Who pays my staff, me or the government?
Wages should be paid to employees via the normal payroll methods. The government will pay the approved grant directly to you, not the employee.
You should also work with your payroll manager where possible to ensure you both understand the process.
Do my employees still have the same rights as though they were employed?
Yes. Furloughed employees are still employed, but under the new rules they are partaking in approved paid leave.
Employees are still entitled to:
How will this affect payroll?
In line with usual payroll practices, you will need to deduct tax, national insurance and minimum pension contributions from the employees’ wages, producing a pay slip for the company’s and employee’s records.
The payslip must reflect whether the employee is paid in full withan additional 20%, or paid 80% of their wages in line with government support. The net pay MUST match the amount that the employee is paid.
PAYE liabilities must be paid as and when they fall due.
Will the government reclaim the money from me at a later date?
The government will not reclaim the grants directly, however, it must be noted that these grants will be taxable.
The government states:
“Grants should be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.
Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.”
There’s a lot of information to process, and we adhere to keep sharing regular updates as and when they are available. However, if you have any queries that you’d like to discuss with us directly, please email hello@shenward.com.