What you need to know about the Job Retention Scheme

What you need to know about the Job Retention Scheme. Vanessa Sanders gives an update (27 March).

  • The scheme will be up and running by the end of April.
  • Employers will be able to claim the associated employers’ National Insurance contributions and minimum automatic enrolment employer pension contributions.
  • The scheme is open to all UK employers that had a PAYE payroll scheme running on 28 February 2020.
  • Furloughed employees must have been on the payroll on 28 February 2020.
  • The scheme includes full-time employees, part-time employees, employees on agency contracts and employees on flexible zero-hour contracts.
  • Redundancies after 28 February 2020 can be negated if the employee is re-hired.
  • There is no need to place all employees on furlough unless there is no work. It may be a chance to rationalise employees’ working and provide more work for some to keep your business going and to offer greater health protection with a reduced workforce.
  • Statutory Sick Pay (SSP) due to sick leave of self-isolating overrides being on furlough. You will need to keep evidence of employees’ sick claims and ensure there is no fraudulent behaviour as part of your normal contractual obligations. They may be re-furloughed after illness, or return to work if possible.
  • If an employee has multiple employers, they are able to be furloughed for each job. This will depend on the circumstances of each employment not the employee.
  • A furloughed employee can take part in volunteer work or training, provided these do not generate revenue or provide services for or on behalf of your business.
  • National Living Wage and National Minimum Wage (NLW/NMW) is not applicable for furloughed employees. If they do any training while they are furloughed, they must be paid the equivalent of NLW/NMW.
  • Occupational maternity, adoption, paternity or shared parental pay is treated in the same way as claiming 80% for furloughed earnings.
  • The furloughed earnings are calculated using the lower of 80% of an employee’s normal salary or wage or £2,500 per month, plus the associated employers’ NI contributions and minimum automatic enrolment employer pension contributions.
  • Fees, commission and bonuses should not be included.
  • Furloughed earnings are subject to Income Tax, National Insurance and pension contributions (if applicable) in the normal way.
  • The employee’s actual salary, as of 28 February, should be used to calculate the 80%
  • The minimum term of furlough is three weeks. This is relevant where employers are considering ‘roll-on/roll-off’ furlough to avoid resentment building for those in and out of work.

Employees whose pay varies:

If an employee has been employed for a full 112 months prior to the claim, the employer can claim for the higher of either: 

 The same month’s earnings from the previous year

 Average monthly earnings from the 2020 fiscal year

  • If the employee has been employed for less than a year, the employer can claim for an average of their monthly earnings since they started work.
  • If the employee only started in February 2020, use a pro-rata of their earnings so far to claim.
  • It is the employer’s responsibility to make the claim. 
  • The information HMRC will require includes: 
    • PAYE reference number;
    • The number of employees being furloughed;
    • The claim period (start and end date);
    • Amount claimed; 
    • Bank account number and sort code;
    • Contact name;
    • Telephone number;
    • Calculated furloughed earnings, employers’ NI, and employer pension contribution.
  • HMRC will review the claim and if eligible, pay it via BACS payment to your UK bank account.

Vanessa Sanders is a partner with accountancy, finance and tax advisory medical specialists, Stanbridge Associates