All UK employers will be able to access support for furloughed workers who would otherwise be laid off during the COVID-19 emergency. Details have now been released. An online portal will be made available to claim funding from the Coronavirus Job Retention Scheme, which will backdate funding to 1st March 2020.
Employment grants will commonly ignore National Insurance Contributions (NIC) and employer’s pension contributions. The good news with the Coronavirus Job Retention Scheme is that the UK Government will pay NI and minimum automatic enrolment employer pension contributions in addition to the £2,500 wage cost.
The wage cost will be calculated per employee and is the lower of:
Fees commissions and bonuses are not included in the wage calculation.
If an employee is entitled to the maximum of £2,500 per month, HMRC will add NIC at 13.8% (£345) and employer’s pension contributions of £59. This brings the total grant to the employer to £2,804 and covers all of the costs of paying the 80% salary.
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:
The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
All employees with regular wages will have their February 2020 salary used as the basis for the calculation. This is the same for part time and full time workers. Fees, commission and bonuses should not be included in the base figure. This means if your regular monthly gross salary is £1,000 and you received a bonus of £500, it is just the £1,000 that is used to calculate the grant. Your wage will be £800 a month for time that you are furloughed.
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:
This would also apply for directors who do not receive a regular monthly salary.
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
You can choose to provide top-up salary in addition to the grant. Employer NIC and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme.
Voluntary automatic enrolment contributions above the minimum mandatory employer contributions will not be funded either. The minimum employer pension contribution is 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).
If you are temporarily laid off and will have no operational involvement with the business you can be furloughed.
To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. For most companies with a sole director this means that it is unlikely that the Coronavirus Job Retention Scheme will apply. If there are no employees or directors who are still able to work, it would be possible to place the company under the management of an administrator. Where this is the case, the administrator will be able to access the Job Retention Scheme.
It is thought that a sole director could be furloughed as long as they were performing no operational activities. This means that directors could still sign annual accounts and tax returns and make other statutory filings while on furlough. This is most likely to mean no marketing, no payroll processing, no customer communication, no debt management etc. If all these activities were outsourced (e.g. to an accountant) a sole director could make a case that they could be furloughed, but to receive any funding from HMRC, they would also need to have received salary (not dividends) as explained above.
If you don’t have an in house payroll service or you no longer have support from an external payroll bureau, please contact Alterledger using the form below to see how we can help. All our systems are online, including the client sign up process, so we can provide the support you need wherever you are based.
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