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UPDATE 3: Furlough / Job Retention Scheme - 30th MARCH 2020

We have now received some updated information from HMRC with regard to the Job Retention Scheme that we would like to bring to our clients attention. The below only provides guidance on the Job Retention Scheme, we strongly advise clients to seek employment/HR advice prior to placing any employee(s) on furlough.

Employees that can be claimed for:
  • - The employee must have been on the payroll as at the 28th February 2020.
  • - The scheme is currently set to run from the 1st March 2020 to the 31st May 2020 however the Government has indicated it will be extended if necessary. An employer can use the scheme any time during this period (subject to the below).
  • - Employees hired after the 28th February 2020 cannot be furloughed or claimed for.
  • - Employees on unpaid leave prior to the 29th February 2020 cannot be furloughed.
  • - Employees on sick leave or self-isolating should get Statutory Sick Pay. Employees can be furloughed after this sick period.
  • - Employees who are shielding in line with public health guidance can be placed on furlough.
  • - The employees can be full time/part time/on a flexible contracts/on a zero-hour contract.
  • - The guidance is silent on whether directors can be furloughed however Ben Kerry from HMRC has confirmed that a director can do so provided they were paid via PAYE as at 28 Feb 2020. Company Directors can complete their statutory duties, even if furloughed. This is the only work allowed.

Conditions for the reclaim:
  • - The minimum period an employee can be furloughed for the employer to receive the grant is 3 weeks. Currently the latest date an employee can start the furlough period is the 10th May 2020.
  • - An employee can be furloughed more than once during the schemes lifetime (currently 1st March 2020 to 31st May 2020), subject to the 3 weeks minimum. For example an employee could be furloughed for 3 weeks, then work for 1 week, then re-furloughed for another 3 weeks.
  • - The employee must not do any work for the business while being furloughed.
  • - To be eligible for the grant employers should write to their employee(s) confirming they have been furloughed and keep a record of this communication. Employers should take legal/HR advice in relation to this point.

Amount that can be reclaimed:
  • - As previously advised the employer can claim 80% of a furloughed employees wage cost per month, up to a cap of £2,500. HMRC have now clarified that the associated Employers National Insurance cost and 3% employer pension cost (above £512 per month) can be reclaimed in addition to the £2,500 cap.
  • - As a minimum employers must pay their employee(s) 80% of their regular wage (subject to a £2,500 cap per employee) per month. An employer can choose to top this up but is not obliged to do so under the scheme. The National Living Wage and National Minimum Wage does not apply during the period of furlough e.g. if your employee is paid minimum wage then paying 80% of this figure does not impact the NLW/NMW.
  • - For full time and part time salaried employees, the employee's actual salary before tax as of the 28th February 2020 should be used to calculate the 80%. Fees, commission and bonuses should not be included.
  • - For employees whose pay varies, you can claim the higher of either:
    • - The same month's earnings from the previous year.
    • - Average monthly earnings from the 19/20 tax year (if the employee started in the 19/20, then the average monthly earnings from when they started can be used)

When can the grant be claimed:
  • - We do not yet know the exact start date for the scheme, however HMRC plan for the scheme to be running by the end of April '20 (allowing for back dating the claim to the 1st March 2020).
  • - The grant will be paid directly into the business bank account.
  • - To claim the following information will be required:
    • - your ePAYE 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

Also please note, the grants are considered taxable income for the business.

We will continue to communicate updates as and when they become available to us

Please do not hesitate to contact us if you wish to discuss the above or how COVID-19 is affecting your business generally.

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The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

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