What is it?
The Job Retention Scheme (JRS) will allow companies to keep employees on payroll during the COVID-19 pandemic.
Who is it for?
All UK businesses are eligible for this support.
Nigel Morris, tax director at MHA MacIntyre Hudson, explains that to access this support employers need to classify employees as furloughed workers.
“This means they should not undertake any work for the company while furloughed, including answering calls or emails,” Morris said. “In exchange, employers can claim a grant of up to 80% of each employee’s wage for all employment costs, up to a cap of £2,500 per month.
“The employee remains employed and their employer can choose to fund the difference between this payment and their usual salary, but it’s not compulsory.”
The JRS will not interrupt an employee’s continuity of service, and their annual leave will continue to accrue.
Morris advises employers to discuss the JRS with ‘at risk’ employees whether or not notice has been served to them already.
“Agree to either carry on with the redundancy process or agree to use the JRS as an alternative. Should the business decide at a later point that redundancies are still necessary, they should take legal advice at that stage on the associated risks.”
Morris said that it’s not yet clear whether or not employees can take on other work while receiving the JRS salary, but government advice is being updated daily.
How to access it
Once a business has designated any employees as ‘furloughed workers’ – and notified those employees – they must submit information to HMRC about the employees that have been furloughed and their earnings. This will be through a new online portal - HMRC will set out further details on the information required.
How long will it last?
JRS is intended to run for at least three months from 1 March 2020, but will be extended if necessary. The JRS will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April for workers who were in employment on 28 February.
What are the main issues?
As furloughed employees will be deemed as taking a leave of absence, they would strictly be unpaid.
“The government needs to structure the grant so it isn’t ‘pay’, and therefore no PAYE tax or national insurance contributions (NIC) are due, and no benefits driven from pay are applicable,” said Morris.
In the US, furloughed workers already have any of their work benefits including health and life cover set to continue while they are furloughed, but Morris says that any benefits must be implemented in a way that doesn’t impact on the flow of the 80% from the government via the employer to the employees.
It is also currently unclear how the JRS will apply to employees within personal service companies (PSCs).
“We anticipate that PSCs will be eligible in the same way as other businesses and subject to the same expected rules on the reference salary for the 80% calculation,” said Morris.
How businesses should prepare
Morris says that businesses looking to access the JRS should take the following steps:
Set up the payroll with a furloughed pay element to identify the amounts for reclaim
Identify ‘at risk’ employees and those earmarked for lay-off and calculate furloughed pay based on the 12 weeks up to the end of February. Establish base pay that qualifies for 80% furloughed grant, but not overtime or bonuses.
For employees off sick for the 12 weeks, calculate furloughed pay on the amounts excluding sick pay. Assume this is still pay and that PAYE tax and NIC deductions will be due, even though it is likely that payments to HMRC will be deferred.
For employees where £2,500 cap will apply, calculate additional pay required to get to ‘normal’ pay and model options to manage any top up outside of the grant
For employees required to remain in employment, model options to flex remuneration, including establishing new ‘base’ pay in line with national minimum wage and employment related loans
Communicate with all affected employees including illustrations of proposed payments
Obtain employee/union buy-in
Prepare application to HMRC
Register and log-on to new HMRC portal where you will submit these details.
When are employees entitled to statutory sick pay?
The following people should stay home and will be eligible for statutory sick pay for the whole 14 days and not from the fourth day onwards as is usually the case:
Employees displaying coronavirus symptoms
Employees in a vulnerable group
Employees returning from high-risk countries
Employees who have been in contact with a confirmed case or person displaying symptoms.
Employees in the same household as someone who is displaying symptoms
If the whole business is shutting temporarily, employees are entitled to full pay unless the employer has a short time working/lay off clause in their contracts, as this is a business decision the employer is making
The grant is a reimbursement by HMRC so businesses may face cash flow issues. A bank facility or loan may be required to fund these payments prior to reimbursement. Businesses can also use the government’s Coronavirus Business Interruption Loan.
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