Government provides further clarification of Job Retention Scheme
Nick Jones, Head of Gregg Latchams’ team of Bristol Employment Layers reports on new guidance on the Job Retention Scheme. It is very important that employers take these additional details into account as part of their current planning.
The government has overnight published further guidance on the furlough scheme. There are some new points and clarifications:
- Employers can reclaim up to 80% of wages costs up to the cap of £2,500 pcm, PLUS associated employer NIC’s and auto enrolment pension contributions on that wage. Previously we thought the £2,500 cap was total and would include the employer NIC/pension payments. For those furloughed on higher levels, they will therefore receive the £2,500 pcm as a gross payment in their pay packets. They will pay employee PAYE and NICs on that sum.
- To be eligible, employees must have been on the payroll on 28th February.
- Furlough must be taken in blocks of three weeks.
- There is nothing to prohibit rotating employees on furlough, provided leave is taken in minimum blocks of three weeks.
- We know that staff cannot work at all. There is clarification that if they work for an hour they will not be eligible. They can volunteer or do training, BUT, if doing training they must be paid National Minimum Wage (£8.72 after 1st April) for each hour spent training.
- The government will issue further guidance on how employers will calculate claims for employer NICs and minimum auto-enrolment employer pension contributions (3%).
- To claim employers will need:
- Their ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 weeks)
- their bank account number and sort code
- contact name
- phone number
- Employers are responsible for calculating the amount they are claiming. HMRC will retain the right to retrospectively audit all aspects of the claim. Once HMRC have received the employer’s claim they will pay it via BACS payment to a UK bank account.
- Employers should make their claim in accordance with actual payroll amounts at the point at which they run their payroll or in advance of an imminent payroll.
- When the government ends the scheme, employers must make a decision, depending on their circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
- Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore 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.
- Employers should take care when selecting which employees are placed on furlough. Normal protections against discriminatory and unfair selection will apply, and employers are advised to obtain detailed legal advice.