COVID-19: An Update on the Job Retention Scheme25th March 2020
Following the UK Government’s recent orders for non-essential services to close, multiple support packages have been put in place in order to support businesses who may be struggling financially and receiving next to no income. Gilbert Stephens Solicitors would like to provide you with some information on the Job Retention Scheme which was introduced on Friday 20th March 2020.
What is the Scheme?
To put it simply, the Coronavirus Job Retention Scheme will provide a grant (not a loan) to employers of up to 80% of their employee’s wage. This grant will be capped at £2,500 per month and is inclusive of employers’ national insurance and pension contributions.
This Scheme will therefore be of most benefit to employers with employee’s salaries of £37,500 or less.
Who is eligible?
All UK employers, small or large, charitable or non-profit, are eligible to apply for the scheme up until the end of April. The cost of wages can be backdated to Sunday 1st March 2020 and the Scheme will stay open for at least three months. The Government have stated that the Scheme can be extended if necessary.
It is available to employees on the payroll from 29th February 2020.
How will it work?
Primarily established as a means of avoiding redundancies, the Scheme enables employers to lay off or ‘furlough’ their staff whilst keeping them on the payroll. ‘Furlough’ is a new addition to English Employment Law which means to make an employee temporarily absent from work.
After the employer has furloughed their employee, the employee must not undertake any work for their employer during this time. As a result, the employer can then claim a grant for up to 80% of their employee’s wage, subject to the fact that their monthly wage does not exceed £2,500. This grant will be received via a new system the HMRC are currently in the process of developing. It’s important to note that changing the status of employees may be subject to the employment contract and existing employment law.
Employers will pay their employee through payroll and the Real Time Information (RTI) system as usual. Whilst the employer may also choose to pay their employee the difference between their payment and their usual salary, it is not obliged they do so.
The Scheme does not affect an employee’s annual leave or their continuity of their service.
How can I apply?
After notifying your employee that you are making them a furloughed worker, you must contact the HMRC via the new online portal with information on your furloughed employee and their earnings. At the time of writing (25/03/2020), HMRC are still in the process of creating and launching the portal.
The Department are also still working on a system to reimburse employers and are expecting to have this sorted by the end of April. This five week roll out period could generate short term issues with cash flow for affected employers as they wait for money to be recovered from the Scheme.
During this difficult time, the Government are advising businesses to look into the Coronavirus Business Interruption Loan Scheme for additional support.
If you’re an employer or business owner and would like further guidance during this time of uncertainty and potential insolvency, please get in touch with Gilbert Stephens for expert advice on 01392 424242 or email .