Coronavirus Job Retention Scheme update

27 Mar Coronavirus Job Retention Scheme update

As the Government release further information regarding the Coronovirus Job Retention Scheme Team Stafford Brunch advocate Aaron Taft shares a summary of the areas you may want to know about.

Coronavirus Job Retention Scheme – entitlement

All employers can utilise the scheme providing their PAYE scheme has been operational since 28 February 2020.

Employers who would have had to make a member of staff redundant, they now have an option to make them a furloughed worker instead.

The member of staff would need to have been employed on 28 February to be entitled to become a furloughed worker.

It is for any type of contract, be that full-time, part-time, agency, or flexible/zero-hour contracts.

The furloughed staff member cannot work for the employer for the period of their furloughed status.

The minimum period for a furloughed worker is 3 weeks.

When a member of staff is furloughed the Government will reimburse 80% of the employment cost (so Employees Gross Pay, Employer National Insurance and Employer Pension contribution for the legal minimum requirement).

As an employer you can chose whether to top up their pay to the full 100%, but it is not a legal requirement.

If you are making a member of staff furloughed and choosing to pay the 80% of their salary, you need to do a variation to their contract in order to legally reduce their salary.

Coronavirus Job Retention Scheme – Calculation

The calculation is based on an employee’s basic earnings. It CANNOT include any fees, commissions or bonuses paid to them.

For salaried staff it is a simple calculation of 80% of their basic salary from February 2020.

If the salaried staff started part way through February then a pro-rata calculation can be calculated to work out the full monthly equivalent.

For varied hours employees (including zero hours contracts), it is based on their average wages over the 19/20 tax year. If they started part way through the tax year then it is the average earnings over that period of employment.

The amount reimbursed by the Government will include the 80% gross salary, employer’s National Insurance and the minimum mandatory employer contribution (3%) to their pension scheme. If as an employer you pay more than 3% you will only be reimbursed the 3%.

The 80% calculation may take your employee below the National Minimum Wage/National Living Wage for their usual hours. It has deemed this is allowable.

Furloughed workers can complete training whilst working. If this occurs then they need to be paid National Minimum Wage for the hours worked. If this takes them above the 80% funding the employer will need to make up the shortfall.

Coronavirus Job Retention Scheme – Directors

At present only employees who cannot work can be furloughed. Based on this – Directors will not be able to become furloughed as they are office holders so would be maintaining the business in the background.

If they are able to be furloughed, then it will only be the salary element which has been put through their PAYE, ie not any dividends paid to them.

This seems to be an area of a disparity between the rest of the self-employed and employed communities and this unbalanced approach has been brought into query. We are hoping that further clarification will be given – much like they did for those self-employed.

In the meantime, it will be a case of applying for Universal Credits.

The team at Carthy Accountants are happy to discuss these areas with you individually if you contact the team on [email protected] 01785 248939.