This is an edited Guidance on the Coronavirus Job Retention Scheme from the IMDA on 13/04/2020
If you require further guidance on any specific area please contact hello@theIMDA.co.uk alternatively visit the Gov.uk website https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme
Find out if you’re eligible, and how much your employer can claim if they put you on temporary leave ('furlough') because of coronavirus (COVID-19).
Published 26 March 2020
Last updated 9 April 2020 — see all updates
From:
Contents
- Check if you’re eligible
- How much you’ll get
- While you’re on furlough
- If you do not want to go on furlough
- Guidance for specific customers
If you and your employer both agree, your employer might be able to keep you on the payroll if they’re unable to operate or have no work for you to do because of coronavirus (COVID-19). This is known as being ‘on furlough’.
Your employer could pay 80% of your regular wages through the Coronavirus Job Retention Scheme, up to a monthly cap of £2,500.
You’ll still be paid by your employer and pay taxes from your income. You cannot undertake work for your employer while on furlough. We expect the scheme to be up and running by the end of April.
Check if you’re eligible
Your employer is responsible for claiming through the Job Retention Scheme on your behalf and for paying you what you are entitled to. You cannot apply for the scheme yourself.
Both you and your employer must agree to put you on furlough - so speak to your employer about whether they can claim. Once agreed your employer must confirm in writing that you have been furloughed to be eligible to claim. Contact your employer if you do not receive confirmation.
If you are concerned that your employer has claimed on your behalf but is not paying you what you are entitled to as described in this guidance you should raise this with your employer in the first instance, then with the Advisory, Conciliation and Arbitration Service (ACAS).
Any employer with a UK payroll and a UK bank account will be able to claim, but you must have been on your employer’s PAYE payroll before or on 28 February 2020. You can be on any type of contract, including a zero-hour contract or a temporary contract. You can be furloughed under the scheme if you are a foreign national.
This scheme does not apply if you are self-employed or to any income from self-employment. You may qualify for support under the Self-employment income support scheme.
If you’re on sick leave or self-isolating because of coronavirus (COVID-19), speak to your employer about whether you’re eligible to be furloughed – you should get Statutory Sick Pay (SSP) as a minimum while you are on sick leave or self isolating. Your employer can furlough you at any time- if they do, you will no longer receive sick pay, but should be treated as any other furloughed employee.
If you are shielding in line with public health guidance or required to stay home due to an individual in your household shielding and are unable to work from home, then you should speak to your employer about whether they plan to place staff on furlough.
If you are unable to work, including from home, due to caring responsibilities arising from coronarivus (COVID-19), such as caring for children who are at home as a result of school and childcare facilities closing, or caring for a vulnerable individual in your household, then you should speak to your employer about whether they plan to place staff on furlough. The grant will start on the day you were placed on furlough and this can be backdated to 1 March 2020.
If you were made redundant or stopped working for your employer after 28 February 2020
Your employer can agree to re-employ you and place you on furlough. They’ll still be able to claim a grant to cover 80% of your regular wages, up to a monthly cap of £2,500 if you were on your employer’s PAYE payroll on 28 February 2020.
If you currently have more than one employer
You can be put on furlough by one employer and continue to work for another. If you’re put on furlough by more than one employer, you’ll receive separate payments from each employer. The 80% of your regular wage up to a £2,500 monthly cap applies to each job.
If you have had multiple employers over the past year, have only worked for one of them at any one time, and are being furloughed by your current employer, you cannot be furloughed by your previous employer.
If you are on Universal Credit
If you’re earning less because you’re on furlough, your Universal Credit payment might change - find out how earnings affect your payments.
If you are on maternity leave, adoption leave, paternity leave or shared parental leave
The normal rules for maternity and other forms of parental leave and pay apply.
Your employer can claim through the scheme for enhanced (earnings related) contractual pay for employees who qualify for either:
- maternity pay
- adoption pay
- paternity pay
- shared parental pay
If you are pregnant and about to start maternity leave
You should start maternity leave as normal. If your earnings have reduced because you were put on furlough or off sick before your maternity leave started, this may affect your Statutory Maternity Pay. The same rules apply to adoption pay, paternity pay and shared parental pay.
If you’re employed by an individual
If you’re employed by an individual (for example, as a nanny) then your employer can furlough you under the scheme if you are paid through PAYE and were on their payroll on or before 28 February 2020.
If you’re on a fixed term contract
Your employer can choose to furlough you and claim a grant for 80% of your regular wages up to a cap of £2500 a month. Your employer can choose to renew or extend your contract during the furlough period.
If you’re an apprentice
Apprentices can be furloughed in the same way as other employees and continue to train.
You must be paid at least the Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage as appropriate for all of the time you spend training, even if this is more than 80% of your normal wages.
Other specific categories
You may be eligible to be furloughed, and receive a grant of 80% of your regular wages up to a monthly cap of £2500, if you are paid via PAYE and are in one of the following categories.
- You are an agency worker
- You are a company director
- You are a contractor with public sector engagements in scope of IR35 off-payroll working rules (IR35)
- You are a salaried member of a Limited Liability Partnership
- You are a Limb (b) worker
- You are an office holder
Detail on how this scheme can apply to you is set out at the end of this guidance.
How much you’ll get
Your employer will get a grant to cover 80% of your regular wages, up to a maximum of £2,500.
Firms will be eligible for the grant from the date you ceased work, from 1 March. Your employer:
- will pay you at least 80% of your regular monthly wages, up to a maximum of £2,500, as your wage
- can claim for a minimum of 3 consecutive weeks and for up to 3 months - but this may be extended
- can choose to pay you more than the grant - but they do not have to
- cannot choose to pay you less than the grant
You’ll still pay Income Tax, National Insurance contributions, Student Loan repayments and any other deductions (such as pension contributions) from your wage.
How your monthly wages are calculated
If you are a full-time or part-time employee on a salary, then your monthly wages are based on your salary as at 28 February 2020.
If your pay varies and you’ve been employed (or engaged by an employment business in the case of agency workers) for a full year, employers will claim for the higher of either:
- the amount you earned in the same month last year
- an average of your monthly earnings from the last year
If your pay varies and you’ve been employed for less than a year, employers will claim for an average of your regular monthly wages since you started work.
If you started work in February 2020, your employer will pro-rata your earnings from that month.
The grant paid to your employer will be calculated based on your regular, contractual pay, such as wages, compulsory commission and past overtime. The calculation will not include discretionary commission (including tips) payments or bonuses, non-cash payments or benefits in kind.
HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly. If you want to switch out of a salary sacrifice scheme as a result of COVID-19, you should speak to your employer.
Returning from statutory leave
Statutory leave includes maternity leave, paternity leave, shared parental leave, adoption leave, sick leave and parental bereavement leave.
In line with other employees, if you are a full or part time employee returning from statutory leave after 28 February 2020 your employer should calculate the grant against your salary, before tax, not the pay you received whilst on statutory leave.
If your pay varies, and you are furloughed on your return from statutory leave your employer should calculate the grant using either the:
- same month’s earning from the previous year
- average monthly earnings for the 2019-2020 tax year.
While you’re on furlough
Once you are on furlough you will not be able to work for your employer. You can undertake training or volunteer subject to public health guidance, as long as you’re not:
- making money for your employer or a company linked or associated to your employer
- providing services to your employer or a company linked or associated to your employer
If workers are required to, for example, complete training courses whilst they are furloughed, then they must be paid at least their appropriate minimum wage (NLW/NMW/AMW) for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
Whilst furloughed your employer cannot ask you to do work for another linked or associated company.
If your contract allows, you may undertake other employment while your current employer has placed you on furlough, and this will not affect the grant that they can claim under the scheme. You will need to be able to return to work for the employer that has placed you on furlough if they decide to stop furloughing you, and you must be able to undertake any training they require while on furlough. If you take on new employment, you should ensure you complete the starter checklist form with your new employer correctly. If you are furloughed from another employment, you should complete Statement C. Any activities undertaken while on furlough must be in line with the latest Public Health guidance during the COVID-19 outbreak.
Your employer can still make you redundant while you’re on furlough or afterwards.
Your rights as an employee are not affected by being on furlough, including redundancy rights.
If your employer chooses to place you on furlough, you will need to remain on furlough for a minimum of 3 consecutive weeks. However, your employer can place you on furlough more than once, and one period can follow straight after an existing furlough period, while the scheme is open. The scheme will be open for at least 3 months.
If you do not want to go on furlough
If your employer asks you to go on furlough and you refuse you may be at risk of redundancy or termination of employment, depending on the circumstances of your employer. However, this must be in line with normal redundancy rules and protections.
If you’re a company director
As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed.
Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would be judged reasonably necessary for the purposes, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
This also applies to salaried individuals who are directors of their own personal service company (PSC).
Published 26 March 2020
Last updated 9 April 2020 + show all updates
Related content
- Claim for your employees' wages through the Coronavirus Job Retention Scheme
- Claim a grant through the coronavirus (COVID-19) Self-employment Income Support Scheme
- COVID-19: guidance for employees, employers and businesses
- Personal tax account: sign in or set up
- COVID-19: track coronavirus cases
Applying for the grant
The grant is not automatically awarded. It must be applied for. HMRC will launch a new portal into which employers will be able to submit their claims. Claims can be backdated to 1 March 2020. The employer must calculate the amount they are claiming. It is not known whether this will be a global total or per furloughed employee so employers will need to have run calculations to facilitate both scenarios. Our payroll team can assist with this.
Only one claim can be submitted every three weeks which is the minimum furlough period. It has been confirmed that an employee can be furloughed multiple times, subject to each separate instance being for a minimum period of three weeks. This will afford employers some flexibility by allowing rotation and matching the resource with demand. The first claim will cover the period from the later of 1 March 2020 and date of furlough leave commencing.
The information needed for the portal will include:
- PAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of three weeks)
- company bank account number and sort code
- contact name
- phone number
We are seeking clarity on whether active HMRC online services accounts will be required. To prepare, employers should take steps now to ensure they have a valid online account with confirmed login details (you may know this as your Government Gateway account). You can register for an account on the Government's website.
It will likely be several weeks before payments are made by HMRC. HMRC will make BACS payments to the organisation’s bank account.
We are establishing a team to be able to assist clients with the preparation and submission of claims. Please note that if a login is required, we will need the these details from the employer.
Calculating the grant
The grant will be made up of two parts as follows:
- The lower of 80% of an employee’s regular pay or £2,500 per month; plus
- The associated Employer NIC and minimum automatic enrolment employer pension contributions on the subsidised wage per point1.
It has been clarified that the grant will be pro-rated if an employee is only furloughed for part of a pay period.
An example would be where an employee is furloughed from 16 March - the March grant (before employer NI and pension) will be the lower of:
- 80% of their salary for a 2 week period;
- £1,250.
The employee would be entitled to receive their salary in full for the first two weeks in March.
It has also been clarified that furlough leave can start from the date that the employee ceases work, not when the decision was made or when the employer wrote to them to confirm their furloughed status. This means that employees who ceased working in early March before the Chancellor’s announcement of the scheme, can be furloughed from the date they ceased working.
Basis of pay calculation – salaried employees
For full-time/part-time salaried employees, the employee’s actual salary before tax, as of 28 February 2020, should be used to calculate part 1. Fees, commission and bonuses should not be included for salaried employees.
Basis of pay calculation – where an employee’s pay varies
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:
- the same month’s earning from the previous year (i.e. March 2019 for March 2020, April 2019 for April 2020 and so on);average monthly earnings from the 2019-20 tax year
- If the employee has been employed for less than a year, you 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 for their earnings so far to claim
Basis of pay calculation - compulsory v discretionary payments
The updated guidance states that an employer can claim for any regular payments that they are obliged to pay their employees. This includes wages, past overtime, fees and compulsory commission payments. It then goes on to say that discretionary bonuses (including tips), commission payments and non-cash payments should be excluded. This means that troncmaster schemes will not be covered under the scheme.
Our reading of this is that ‘compulsory’ should be read as ‘contractual’. Given that some employees rely heavily on the commission part of their pay, we assume from the revised guidance that employees who are contractually entitled to commission can be treated as “Employees whose pay varies” and, as such, that their average pay can be used to calculate the amount due to be paid (and recoverable) under the Scheme, however, further clarification of this point from HMRC would be helpful.
We have included the following example based on our understanding:
Basis of pay calculation - benefits in kind and salary sacrifice schemes
The updated guidance makes it clear that the cost of non-monetary benefits cannot be included in the wage being claimed for. It also clarifies that the reference salary that is used should be after any salary sacrifice.
It then goes on to say that HMRC has agreed that the coronavirus crisis will count as a life event that could, depending on the terms of the salary sacrifice arrangement, warrant a change to a salary sacrifice arrangement. This would allow employees whose pay is reduced, to reduce their salary sacrificed so as to benefit from an improved take home pay. It will be important to take advice and fully document any change that is implemented.
Please note: we are aware the government employee guidance doesn't refer to the 2019-20 tax year for the purpose of the calculation and suggests a rolling twelve month period. We are seeking clarification on this.
Weekly and four weekly paid workers
The total maximum grant amount that can be claimed by an employer per employee will be £2,500 per month plus the associated Employers’ NIC and minimum automatic employer contributions (for weekly paid workers, this cap equates to £576.92 and for four-weekly paid workers, the cap equates to £2,307.69).
What are qualifying earnings?
Qualifying earnings is the name given to a band of earnings that you can use to calculate contributions for auto enrolment. For the 2019/20 tax year this is between £6,136 and £50,000 a year. The figures are reviewed every year by the government.
What do employees get paid?
As a minimum the employer must pay the element of the grant that is the subsidised salary to the employee as a salary. That will be the lower of 80% of their wage as per above or £2,500 per month. The Employer can choose to top-up but is not obliged to do so. As this will be a contractual change, the employee must agree to any change in their wages. If the subsidised salary is below National Living Wage (NLW)/National Minimum Wage (NMW), the employer is still not required to top-up because the employee is not working. However, if the employee is required to undertake an online training course whilst on furlough leave, they must be paid at least NLW/NMW for that.
The furloughed payment will be subject to the usual deductions as normal including income tax, national insurance, student loan, pension contributions and any wage arrestment’s in place.
The information is a guidance ONLY from the IMDA, we do accept any liability for information which may affect you or your business, please seek professional advice if you are unsure about any aspects. The Government may change some of these and encourage you keep an eye on the gov website.
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