Coronavirus Job Retention Scheme

DO YOU NEED TO FURLOUGH STAFF? How to apply for the Coronavirus Job Retention Scheme.

HMRC have now issued their guidance on how you can claim for the staff that you have had to furlough.  The full guidance can be found here https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Now we all know that HMRC like to make things complicated, so here are the basics of how to claim for the Coronavirus Job Retention Scheme and answers to the FAQ’s I have received.

Are you entitled to claim?

If you cannot maintain your current workforce due to COVID 19 affecting your business, then you can furlough employees and apply for a grant that covers 80% of their usual salary, up to £2,500 per month PLUS the associated employers National Insurance and auto enrollment employers pension contributions.

While furloughed an employee cannot do any work at all for the company, though they are allowed to do training and volunteer (this must not generate income).

Employee must have been paid by you before 28 February 2020 to qualify for the scheme.

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What do YOU have to do?

1. You need to speak to you employee and let them know that they will be furloughed
2. You need to tell them how much they will get – the minimum is 80% but the company can top up to 100%
3. You need to put it in writing to the employee – there are example letters here   https://www.acas.org.uk/furlough-letter-template
4. You need to let your payroll provider and HMRC (once the portal is set up)
5. You need to make sure you have a PAYE online account for the company https://www.gov.uk/paye-online/enrol

How to calculate your grant

Example.  Let’s say Bob has base pay of £3,125 per month.  80% of his pay is £2,500 – this is the maximum you can claim.

Employers National Insurance on £2,500 is £244*

Employers Pension Contribution on £2,500 is £59*

So the total claim would be £2,500 + £244 + £59 = £2,803 per month

(* This is based on the 2020/2021 tax rates)

How to run the payroll

You run the payroll as normal.  It is a good idea to show the furloughed pay on a separate line.

Using our example above.  Bob is going to get 80% of his salary, his employer will not top it up

Salary is run as £2,500 – this is subject to tax, national insurance and pension as normal

You pay the net salary to your employee

You pay the employers National Insurance, the employees National insurance and the income tax to HMRC as normal

You pay the employees plus the employers pension contributions to the pension provider as normal

When can you claim?

HMRC have said that the portal will be available on 20 April 2020.

When will you get the grant?

HMRC have said that the first payments will be made on 30 April 2020, however, I suspect there will be some delays as the system will be overwhelmed with claims.

What happens if you cannot afford to pay?

Employees

If you cannot afford to pay your employees until you received your grant from HMRC – manage their expectations. Let them know ASAP that their pay will not be on their normal pay date so that they can be prepared.

PAYE

If you cannot afford to pay the PAYE, call HMRC on their dedicated helpline and ask for a ‘time to pay arrangement

Helpline Number: 0800 024 1222

Whatever you do, don’t panic, ask for help  wendy@zebraaccountants.com

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And please remember – whilst I am trying to provide the correct up to date details to you, I am not an HR specialist. It is always advisable to speak to an employment lawyer or HR specialist in these circumstances as every company’s circumstances are different.

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