• Jane Wu LLB ACA

Job Retention Scheme: Key Points

Updated: Jul 23, 2020

Updated: 13th May 2020

Employers can 'furlough' (stand down) employees and claim a grant to cover 80% of the wage cost (subject to cap of £2,500 per month per employee). The government will also cover the employers National Insurance and pension contributions (minimum automatic enrolment) of furloughed employees.

On 12th May the Chancellor announced:

  • The scheme would continue until the end of October

  • From August, there would be new flexibility - meaning employees could be on furlough on a part time basis allowing them to perform some work

  • The Chancellor also indicated that from August he would be looking to employers to 'share the cost' of the scheme. It is unclear at this time how this will work

Key points:

  • The JRS is open to all UK employers starting 1st March

  • The furloughed employee must have been on the PAYE payroll on or before 28th February 2020

  • If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme.

  • You cant claim for employees while they're receiving statutory sick pay (SSP). Once they stop receiving SSP they can be furloughed and a grant claimed.

  • You can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant.

  • Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children can be furloughed.

  • The employer needs to be enrolled for PAYE online (c. 10 days to enroll)

  • The employer needs to have a UK bank account which the grant can be paid into

  • The JRS covers any type of employment contract (full or part time, agency, fixed term contracts and zero hours)

  • The furlough and grant applies to each employment contract separately - this means that if your employee has more than one job they can be furloughed for one, some or all jobs depending on the decision of each employer

  • The JRS includes Apprentices, who can continue to train while furloughed but the employer must pay the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training (even if this means topping up the government grant)

  • Individuals can furlough employees such as nannies provided they pay them through PAYE and they were on their payroll on, or before, 28 February 2020.

  • The furloughed employee cannot undertake any work for the furloughing employer whilst furloughed (but can undertake volunteer work outside of their employment). This changes from August when new flexibilities will be introduced. Employees who are still working on reduced hours or reduced pay are not eligible. Furloughed employees can also engage in training as long as that does not provide services to or generate income for the furloughing employer. The employer must ensure the employee receives the national minimum wage for training time undertaken at the request of the employer.

  • The employee's wage whilst on furlough remains subject to income tax and other deductions

  • Employers must communicate the furlough decision to employees in writing

  • Employers don't need to place all employees on furlough

  • The relevant wage cost for the grant does not include fees, commissions or bonuses.

  • The furloughing employer must pay over the full gross cost value of the grant to the furloughed employee and can top this up voluntarily although there is no obligation to do so

  • The furlough must last a minimum of three weeks

  • Employees retain all employment rights whilst on furlough e.g. sick pay, maternity & paternity, rights against unfair dismissal and redundancy rights

  • Grants received under the JRS and the employment costs they offset are both shown on the tax businesses tax return for calculating taxable profits.

  • Company Owner Directors and Directors of own Personal Services Companies (PSCs) who receive a PAYE salary can be furloughed on the same rules as above. However the only duties they should perform whilst on furlough are "duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose" they absolutely cannot participate in income generating activities. Dividend income is not in scope.

  • Agency Workers (including those employed by umbrella companies) are eligible to be furloughed and receive support through this scheme where they are paid through PAYE.

#coronavirus #jobretentionscheme #furlough #COVID19 #smallbusiness

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