What is the Job Retention Scheme (Furlough scheme)?

by | Apr 7, 2020 | Accountant

The Job Retention Scheme

The Job Retention Scheme is for when there is no work for an employee to do (because of Covid-19), so rather than exit them from your business, you can pay them 80% of their wages and the Government will reimburse you for the wage cost.

You’ll be reimbursed for up to 80% of employee wages, capped at £2,500 per month when the employee is Furloughed. Furloughed means that that person is not doing any work for your business.  If they do any training whilst they are on Furlough then you need to pay them the minimum wage for doing that training.

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020. So basically, you need to have run a payroll for the person in February 2020 for them to qualify.

The Job Retention Scheme has some rules (of course).

You must:

Notify the employee in writing that they are Furloughed (you may need employment law advice) and you must keep a copy of the notification. Our advice is to get the employee to sign to say that they agree to the Furlough and the terms of the Furlough to minimise any potential legal risk.

Furlough each employee for a minimum of 3 weeks. If the situation changes and you have work for them to do you can bring them back to do the work and then Furlough them again BUT each Furlough must be for a minimum of 3 weeks.

Work out how much you are claiming (there are different methods). See the Government Website for more info.

Submit your claim to HMRC – at least one claim every 3 weeks.

It is suggested that you will be able to claim the Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

The scheme is not applicable if an employee is on Statutory Maternity Pay or Maternity Allowance BUT if you top up their salary (and have been doing so to date) you can claim the top up amount as wage costs. Same applies for Adoption, Paternity or Shared Paternity Pay.

If you are the Director of a Limited Company you can Furlough yourself and/or other Directors and the same process will apply.

The glitch is that the online scheme is not open yet on the HMRC website, so employers are still having to pay wages (at 80%) until the reimbursement happens. HMRC are hoping that the portal will be ready by the end of April 2020.

If you are struggling to make wage payments and/or if your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan

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What is the Job Retention Scheme (Furlough scheme)?

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