Last night the Chancellor announced new measures intended to provide support for people who are self-employed and further guidance was released on the Coronavirus Job Retention scheme.
Coronavirus Job Retention scheme – a summary
Employers need to carefully consider the following key points, particularly if they have already placed employees on Furloughed Leave:
- the scheme is only open to UK employers that had a PAYE scheme in place on 28 February 2020 and have a UK bank account. The government doesn’t expect the scheme to be used by most public sector organisations or those who are not public sector but who receive public funding for staff costs.
- an employee can only be furloughed if they were on the payroll on 28 February 2020. If they were employed after 28 February, they are not eligible and difficult decisions may need to be taken regarding these employees (especially if they have already been furloughed).
- employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February. The scheme can cover employees who were made redundant after 28 February 2020, if they are rehired by their employer. Employers will need to carefully consider all of the relevant circumstances before making this decision.
- prior to placing an employee on Furloughed Leave, employers should discuss the proposal with the employee and make any changes to the employment contract by agreement and send and retain the written confirmation. Employers must be careful not to discriminate in deciding who to offer furlough too. Indeed the guidance confirms that employers may need to seek legal advice on the process and that, if sufficient numbers of staff are involved, it may be necessary to comply with collective consultation processes.
- employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month, plus the associated employer NICs and minimum automatic auto-enrolment pension contributions on that wage. The guidance says ‘usual’ monthly wage costs can be claimed. This may therefore include usual payments such as shift allowances and overtime payments. Fees, commissions and bonuses are not however included.
- for employees whose pay varies, the employer can claim for the higher of (i) the same month’s earning from the previous year; or (ii) average monthly earnings in the 2019-20 tax year. furloughed leave must be taken in minimum blocks of three weeks to be eligible for funding. The current guidance does not specifically prevent rotating furloughed leave amongst employees, provided each employee is off for a period of at least three weeks. However it is not known whether employees can be taken off Furloughed leave and then placed back on it.
- Employees on Furloughed Leave must not be working at all and employees on reduced pay or reduced hours are not eligible for the scheme. However, they are able to undertake training or do volunteer work, provided they do not provide services to or make any money for their employer. They must be paid at least the NMW equivalent for any time spent training.
- Employees on sick pay or self-isolating cannot be furloughed, but can be furloughed afterwards. Employees who are shielding can be placed on Furlough.
- Employees on maternity (or similar) leave can continue to draw SMP (or similar) payments. If employers offer enhanced contractual pay during Maternity Leave, this may be included as wage costs that can be claimed through the scheme. The current guidance does not specifically prevent women on maternity leave agreeing to return to work early and then being furloughed, providing this is not within the first 2 weeks off work (4 weeks if they work in a factory or workshop).
- If employees have a second job, they can be furloughed in respect of each job.
- Employers can only claim once every three weeks and claims can be backdated to 1 March 2020. The scheme is to be in place for at least 3 months.
Further guidance in relation to claiming payments is to be issued in due course and it is now expected that the scheme will be in place by the end of April.
A scheme is also to be put in place to provide support as follows:
- paying self-employed people a taxable grant worth 80% of average monthly income, capped at £2,500 per month
- income is to be calculated based on an average income over the last three years
- the self-employed grants can be claimed whilst self-employed people continue to do business, unlike employees on Furloughed leave
- the scheme is only available to those with trading profits of up to £50k, which is approximately 95% of self-employed people. Self-employed people who earn more will not qualify.
- the scheme is only open to those who make the majority of their income from self-employment and those who submitted a tax return for 2019, subject to a four week extension for those who did not submit their tax return by the due date of 31 January 2020
- HMRC will contact eligible self-employed people directly and pay the grant straight to them after completion of an online form
- the self-employed income support scheme will be open to people across the UK for at least 3 months. However, the scheme is unlikely to be up and running before the end of June, so it will not help with immediate cash flow issues.
For further information contact our Employment Team, or call 0191 232 8345.