Due to the COVID-19 pandemic, many UK businesses have had to reduce their employee's hours, put them on sick leave or furlough, or make them redundant. In an effort to help businesses keep on their employees, the UK government has made available their Job Retention Scheme.
What is the Job Retention Scheme?
The Job Retention Scheme is a temporary employee retention plan designed to help UK business owners whose operations have been severely impacted by COVID-19. With the Job Retention Scheme, employers can continue to pay part of the salaries for those employees who would have otherwise been made redundant during the COVID-19 pandemic.
Employers can furlough employees for whom there is currently no work available and can then claim up to 80% of the furloughed employees' monthly wage cost, with a cap of £2,500 a month, as well as the associated Employer National Insurance contributions and the minimum automatic employer pension contributions on that wage.
Who can claim from the Job Retention Scheme?
The Job Retention Scheme will be open to all UK employers who employ workers, have created and started a PAYE payroll scheme on or before February 28, 2020, and have a UK bank account. This includes:
- Recruitment agencies.
- Public authorities.
If a company is under the management of an administrator, the administrator can claim from the scheme.
Public and non-public sector organizations that continue to receive public funding for staff costs are expected to continue paying their employees as usual and, as such, will not furlough employees or make use of the Job Retention Scheme.
However, the minority of public sector organizations that are not primarily funded by the government and whose employees cannot be redeployed to assist with the COVID-19 outbreak may be eligible to apply for the Job Retention Scheme.
Use this link to check if both you are your employees are eligible for the Job Retention Scheme.
Which employees can be claimed for?
UK employers can claim for furloughed employees who have been on their PAYE payroll scheme on or before February 28, 2020. Furloughed employees can be on any type of contract, including:
- Full-time employees.
- Part-time employees.
- Employees on agency contracts.
- Employees on flexible or zero-hour contracts.
- Employees who were made redundant since February 28, 2020, provided they are rehired by their previous employer.
- Office holders.
- Company directors.
- Salaried members of LLPs.
- Agency workers (including those employed by umbrella companies).
- Limb (b) workers (paid through PAYE).
- Contractors with public sector engagements in the scope of IR35 off-payroll working rules.
Eligibility requirements to claim for employees:
- Employers should rehire any employees who have made redundant since February 28, 2020, in order to claim for them.
- Employees on furlough should not undertake work for or on behalf of the organization, including providing services or generating revenue.
- Only employees on agency contracts that are not currently working are eligible.
- Employers should write to their employees to confirm that they have been furloughed and keep a record of this letter.
- Employees working on reduced hours or for reduced pay are not eligible and should be paid as normal through an employer's payroll.
- While on furlough, an employee's wages will still be subject to the usual income taxes and deductions.
- Employers should stick to the terms of the employment contract agreed upon between the employer and the employee to be in line with UK labor legislation.
- Any changes to the employment contracts should be discussed with and agreed to by the employees.
- All equality and discrimination laws will apply to the decision of which employees to furlough.
- Employees that were hired after February 28, 2020, cannot be furloughed or claimed for on this scheme.
- Employers do not have to put all of their employees on furlough.
- Employees on unpaid leave cannot be furloughed unless they were placed on unpaid leave after February 28, 2020.
- Employees on sick leave or who are self-isolating should be placed on Statutory Sick Pay but can be furloughed after this.
- Employees with more than one job can be furloughed for each job with the cap applying to each employer individually.
- Furloughed employees can take part in volunteer work or training as long as it does not provide a service or generate revenue on behalf of your organization.
- Furloughed employees required to complete online training courses must be paid at least the NLW/NMW for the time spent in training, even if it is more than the 80% of their wages that will be subsidized.
- Employees on or planning to take maternity leave must take off at least 2 weeks immediately following the birth of their baby and eligible employees can claim up to 39 weeks of Statutory Maternity Pay or Maternity Allowance, as normal (the statutory flat rate will rise to £151.20 a week from April 2020).
- Employers who offer enhanced contractual pay to women on Maternity Leave can claim through the Job Retention Scheme.
- Employers who offer contractual adoption, paternity, or shared parental pay can claim though the Job Retention Scheme.
How much can be claimed through the Job Retention Scheme?
Employers can apply to the HMCR for a grant to cover up to 80% of an employee's regular wage, or up to £2,500 a month, together with the associated Employer National Insurance contributions and the minimum automatic enrollment employer pension contributions on the subsidized wage.
Coverage for fees, commissions, and bonuses is not included. Employers may choose to add to an employee's salary on top of the subsidy but it is not obliged or covered by this scheme.
For full and part-time employees, the actual salary before tax, as of February 28, 2020, should be used to calculate the 80%.
If an employee's pay varies and they have been employed for a full 12 months prior to claiming from the scheme, the employer can use the same month's wage from the previous year or the average monthly earnings from the 2019-2020 tax year to calculate the 80%.
For employees that have been employed for less than a year, the employer can use the average monthly earnings since they started working to calculate the 80%.
For employees who started working in February 2020, employers can use a pro-rata for the earnings to calculate the 80%.
You can use this link to work out how much you can claim for.
Employer National Insurance and Pension Contributions:
Once an employer has calculated the amount they can claim for, they will need to calculate the amount of Employer National Insurance contributions and minimum automatic enrollment employer pension contributions they are entitled to claim. All employers will still be liable for these contributions on behalf of furloughed employees.
The employer will need to deduct the income tax and National Insurance contributions from the full amount paid to employees and must then pay these contributions directly to the HMRC. Payments must be reported via a Full Payment Submission to the HMRC on or before the payday.
Only the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings can be claimed through the Job Retention Scheme. The lower limit of qualifying earnings is set at £512 per month until April 5, 2020, after which it will increase to £520 per month.
Employees on furlough can still continue to accrue leave according to their employment contract and are entitled to at least 5.6 weeks of statutory paid annual leave. Employees can take their holiday leave while on furlough, but they should not be placed on furlough for a time simply because they are on holiday for that period. They are entitled to their normal holiday pay rate.
Employers must pay employees who are on holiday any additional amounts over the grant that they are entitled to.
National Living Wage/National Minimum Wage:
Employees are only entitled to the NLW/NMW for the hours they are working, so furloughed workers (who are not working) must be paid the lower of 80% of their salary, or £2,500, even if this would be below the NLW/NMW based on their usual working hours.
However, those workers required to complete online training while on furlough must be paid the NLW/NMW, even if it is more than the 80% of their wage that will be subsidized.
What is needed to make a claim?
- Be registered for PAYE online.
- ePAYE reference number.
- The number of employees being furloughed.
- Each employee's National Insurance number.
- Each employee's payroll or employee number (optional).
- The claim period (start and end date).
- The full amount to be claimed (per the minimum 3-week length of furloughing) including the National Insurance contributions and employer minimum pension contributions.
- Employer's bank account number and sort code.
- Employer's contact name.
- Employer's phone number.
You should also provide either:
- Your name (or the employer's name if you are an agent).
- Your Corporation Tax unique taxpayer reference.
- Your Self Assessment unique taxpayer reference.
- Your company registration number.
You will need to calculate the amount you will be claiming. HMRC may retrospectively audit all aspects of your claim.
If you are putting 100 or more employees on furlough, you'll need to upload a .xls, .xlsx, .csv, or .ods file containing each employee's:
- full name,
- National Insurance number,
- payroll number (optional),
- furlough start date,
- furlough end date (if known), and
- full amount claimed.
How can claims be made?
At present, the Job Retention Scheme will be available from March 1, 2020, for at least 3 months and employers will be able to use this scheme at any time during this period.
The online service is now available here. You will need the Government Gateway user ID and password that you received when you registered for PAYE online. Claims must be made in one session and cannot be saved and returned to later. Your session will time-out after 15 minutes of inactivity.
Only one claim can be submitted every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated to March 1, 2020, if applicable.
Remember to keep a copy of all records for a period of 6 years. You must also pay your employees the full amount you are claiming for, or you will have to repay the HMRC. You will not be able to enter into any agreement or transaction with an employee that reduces their wages below the amount you have claimed for.
What happens after claiming?
If you are eligible for the grant, the HMRC will pay via BACS payment to a UK bank account. You must then pay your employees the full amount of the grant, without deducting any fees. You can choose to top up your employees' salaries, but it is not a requirement.
Once the government has ended the scheme, employers will need to decide if their employees can return to work. If not, these employees may need to be made redundant. The HMRC will continue to process any remaining claims before closing the scheme.
All payments made under the Job Retention Scheme should be treated as normal income and be included in the business's calculation of taxable profits for Income Tax and Corporation Tax purposes. Therefore, employee costs can be deducted as normal.
Bringing Employees Back to Work:
From July 1, 2020, employers will be able to bring previously furloughed workers back to work for any amount of time and for any shift pattern. Employers will still be able to claim from the Job Retention Scheme for their normal hours that are not worked but will need to claim furloughed hours for a minimum period of a week.
The Job Retention Scheme will close to new entrants from June 30, 2020, but the final date on which an employee can be furloughed for the first time will be June 10, 2020. This is in order to complete the current 3 week furlough period before June 30. Employers will then have until July 31, 2020, to make any claims for the furlough period in June.
Claiming from July 1, 2020:
From the 1st of July, only those employees for whom employers successfully claimed a previous grant from the Job Retention Scheme will be eligible for any further grants. In other words, employees must have previously been placed on furlough for 3 successive weeks between March 1 and June 30 in order to receive any further grants. The last day that employees could have been placed on furlough for the first time was June 10, 2020.
Claims made from July 1, 2020, for a number of employees cannot exceed the maximum number of employees claimed for under any claim made before June 30, 2020, unless an employee is returning from statutory parental leave. Employers will have until July 31 to make a claim for any claim period up to June 30.
The UK government has also release a downloadable template, available on their website, in XLS, CSV, ODS, and XLSX formats. This template is for employers who wish to claim for 100 or more employees. Employers must fill in the details of all the employees they wish to claim for and upload the template when making a claim on or after July 1, 2020.
When does the Job Retention Scheme end?
The Job Retention Scheme will close on October 31, 2020. From August 1, grant levels will decrease each month, meaning that:
- For August, 80% of wages up to £2,500 will be paid by the government for the hours an employee is on furlough but the employer will be responsible for the National Insurance Contributions (ER NICS) and the pension contributions.
- For September, 70% of wages up to £2,187.50 will be paid by the government but the employer will be responsible for the ER NICS and the pension contributions as well as topping up employees wages to the 80% mark (with a cap of £2,500) for the hours they are on furlough.
- For October, 60% of wages up to £1,875 will be paid by the government but the employer will be responsible for the ER NICS and the pension contributions as well as topping up employees wages to the 80% mark (with a cap of £2,500) for the hours they are on furlough.
How to Pay Back Your Grant if You've Overclaimed:
Errors in claiming from the Job Retention Scheme that result in an overclaimed amount must be paid back to the HMRC. You can correct this overclaim in two ways:
- Correct it in your next claim by reducing the amount.
- Make a payment to HMRC if you are not going to make another claim.
If you choose to pay back the overclaimed amount, you should contact HMRC to get a 14 or 15 digit payment reference number beginning with "X."
Payments can be made to HMRC's account by Faster Payments (paid on the same or next day), CHAPS (paid on the same working day), or Bacs (paid within 3 working days). Payments will be delayed if the wrong reference number is used.
Errors in claiming that result in an underclaimed amount should be amended by contacting HMRC. They will then conduct additional checks.
HMRC's Account Details:
08 32 10
What is the Job Retention Scheme?
The Job Retention Scheme is a temporary employee retention plan designed to help UK business owners whose operations have been severely impacted by COVID-19. Employers can furlough employees for whom there is currently no work available and can then claim up to 80% of the furloughed employees' monthly wage cost.
Who can claim from the Job Retention Scheme?
The Job Retention Scheme will be open to all UK employers who employ workers, have created and started a PAYE payroll scheme on or before February 28, 2020, and have a UK bank account.
Which employees are eligible under the Job Retention Scheme?
Under the Job Retention Scheme, UK employers can claim for furloughed employees who have been on their PAYE payroll scheme on or before February 28, 2020. Employees who were made redundant since February 28, 2020 are also eligible, provided they are rehired by their previous employer.
When will the Job Retention Scheme be available?
The online service that will be used to claim from the Job Retention Scheme is now available. However, the scheme itself will be available from March 1, 2020 for at least 3 months.
Can I deduct payments from the Job Retention Scheme as Income Tax?
Yes. All payments made under the Job Retention Scheme should be treated as normal income and should be included in the business's calculation of taxable profits for Income Tax and Corporation Tax purposes.
When does the Job Retention Scheme end?
The Job Retention Scheme will officially close on October 31, 2020. However, from August 1, the amounts that can be claimed from the scheme will decrease by 10% each month until the official end date.
How can I claim for more than 100 employees from the Job Retention Scheme?
Employers who wish to claim for 100 or more employees from the Job Retention Scheme must complete and submit the UK government's downloadable template, available in XLS, CSV, ODS, and XLSX formats, on or after July 1, 2020.