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Coronavirus Job Retention Scheme: latest information

 

New information has been released by the government in the last 24 hours. Here are the crucial points and how they’ll affect your business…

 

As outlined in a previous blog, if you cannot maintain your workforce because your business has been severely affected by coronavirus (COVID-19), you can furlough one or more of your employees and apply for a grant that covers 80% of their usual monthly wage costs. The day-to-day details of how this scheme will work are gradually becoming clear and we’ve outlined below the government’s latest advice, which has cleared up a few ambiguities. 

 

And while we’re still yet to see the online portal that will process this scheme (we’re expecting a few teething troubles as it’s such a huge undertaking) one crucial point has become clear: employers will be responsible for paying their employees’ wages while on furlough.

 

The intention seems to be that businesses will claim the money back at a later date, but as some of our Business Control clients – particularly those whose cashflow has been cut dramatically – are finding, an unspecified ‘later date’ isn’t much help. Individual businesses will be aware of their own financial situation and how long they can continue to keep making these staff payments for, but I would remind them that it is now possible to defer VAT payments for a period and to use this cash instead in the short term. 

 

In addition, the £10,000 business rates grant is now being processed by local authorities and if you’re eligible for this, this should also ease the pressure a little. 

 

A look at the details 

For a longer, more comprehensive explanation of the points covered below, take a look at this new government web page. 

Who you can claim for

You can only furlough employees that were on your PAYE payroll on or before 28 February 2020, and these employees can be on any type of contact including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed.

 

Interestingly, if these employees stopped working for you after 28 February, you can re-employ them, put them on furlough and claim for their wages through the scheme.

 

In addition, it’s become clear that employees with more than one employer can be furloughed for each job. Each job is separate, and the £2500 cap applies to each employer individually.

 

Directors

Salaried company directors are eligible to be furloughed and receive support through the scheme. If you decide to do this, it should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned. 

 

It’s worth noting that if these furloughed directors need to carry out particular duties to fulfil the statutory obligations, they’re “able to do so provided they do no more than would reasonably be judged necessary for that purpose”. In other words, they can help the company fulfil its tax or legal obligations, but they can’t extend these duties to include the kind of everyday, revenue generating (or sustaining) work that they would carry out in normal circumstances. An exception to this would be chasing money that is owed to the company from before 28 February. 

 

Employees whose pay varies

Another point that has been clarified this week is that employees whose wages include commission (and have been employed for 12 months or more) are able to claim the highest of either the:

  • same month’s earning from the previous year
  • or average monthly earnings for the 2019-2020 tax year

 

If the employee has been employed for less than 12 months, you can claim for 80% of their average monthly earnings since they started work. Similarly, if the employee only started in February 2020, work out a pro-rata for their earnings so far, and claim for 80%.

 

However, discretionary bonus (including tips) and commission payments and non-cash payments cannot be claimed for. 

 

At the end of the scheme

When the government ends the scheme, you’ll need to make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy). 

 

Please check back later this week for more information as we’ll be publishing a new blog with the very latest information about financial support for business owners.

Better still, you can access a whole host of resources including blogs, smart guides and infographics for free. Simply opt in here.

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