Furlough – Guide
Further to the Government’s announcements since Friday 20 March, you may now be considering having to furlough some or all of your employees in order to protect the ongoing viability of your business, and ultimately your employees’ jobs.
HMRC have released further information regarding what staff qualify, how to calculate amounts and how the scheme will work. They have also confirmed that Employer’s NI and minimum automatic enrolment pension contributions that will be due on the 80% pay will be covered.
The scheme is still not live so you will need to keep detailed records to be able to submit the claim once it is launched. We will let you know when the scheme is live.
The full HMRC guidance for employers can be found here and we would recommend you read it closely as it covers various employee situations and goes into detail regarding calculating amounts and how the claims process will work.
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
We have however provided a quick summary of the main points of the scheme here:
- The earliest start day of a furlough is 1st March 2020
- The furloughed employee must have been employed on 28th February 2020
- Employers can claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
- Employees on reduced hours are not eligible – they cannot be doing any work for you to be classed as furloughed
- Employees on flexible or zero-hour contracts are covered by the scheme
- The employer must write to the employee to confirm they are furloughed
- Furloughed workers must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this could be below NLW/NMW as they are not actually working (there are some exceptions).
- Employees cannot be both furloughed and on SSP, they are one or the other, but they can be furloughed after SSP ends
- Furlough lasts a minimum of 3 weeks (if it is less then you cannot claim the costs under the scheme)
- For employees whose pay varies, earnings are based on the higher of the earnings in the same period last year and the average of the last 12 months
- Bonuses, commissions and fees are not included in the earnings calculation
- The employer does not have to pay more than the 80% figure but can if they wish to (if they do the balance cannot be claimed under the scheme)
- The payments are still subject to all the normal wages deductions, e.g. tax, NI, automatic enrolment
- You report the payments made in the usual way under RTI/HMRC basic tools
How to furlough staff and information sheets
In order to undertake this process, you will need to gain agreement from your employees to go on furlough. There is no specified notice period you are required to give as long as you have written agreement (this can include via email), from the employees. Employees on furlough will be paid 80% of their normal monthly wage up to a maximum of £2500 per month and it is up to you whether you pay the remaining 20%. If you choose to top up to 100%, Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through the scheme.
You will need to pay the 80% wage and then this will be reimbursed by HMRC via an online system (still to be set up). The furlough must be for a minimum of 3 weeks to qualify for the Coronavirus Job Retention Scheme but employees can be placed on furlough for any length of time and it is always up for review – in the attached letter wehave stated 3 months but you can amend this if you like.
We have created an information sheet for you which should answer the main questions, as well as an employee information sheet which I suggest you provide to all employees.
Furlough – Employee information sheet
Furlough – Letter template seeking agreement
Therefore, if you plan on furloughing any employees your next steps are:
- Advise employees that you are planning on furloughing them and the reasons for this
- Provide in person or send the attached letter to the employee along with a copy of the employee information sheet (this can be sent via email)
- Keep a record of all employee responses to furlough
- Report the wages paid to HMRC as normal – if you are paying reduced wages you report the reduced amount
Keep records of the following information ready for when the system goes live
- Your 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 3 weeks)
- Your bank account number and sort code
- Your contact name
- Your phone number
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
The claims will be made via a portal and HMRC expect the scheme to be up and running by the end of April. There is more information about how the claims will be processed in their guide and we will let you know when the HMRC portal is live.
Employees who have been advised to shield or are self-isolating
On a separate note, if you have any employees that have been advised to shield by the NHS for the 12-16 weeks they will be entitled to statutory sick pay or they can be furloughed. Care needs to however be taken and communication with employees is key, as forcing such employees on to 80% wages, may result in discrimination claims from those who allege they were made to do it because of their age, disability or pregnancy.
Employees on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this.
If an employee chooses to shield themselves when they have not been advised by the NHS to do so and you require them to work, then their absence will be unpaid and they may be liable to disciplinary action.
Ellis Lloyd Jones’ payroll submission spreadsheet can be found here: Furlough information request