March 24, 2020
The scheme will help employers to carry on part-paying salaries for those employees who otherwise would be “laid off” due to the Coronavirus crisis. These employees could now be kept on the employer’s payroll, preventing potential redundancies and periods of unpaid lay-off.
The scheme will be backdated to 1 March 2020 and run for three months, with a potential extension, if necessary.
Employers will need to decide which employees will be “furloughed”, notify them of this change to their employment, and then inform HMRC via a new online portal which has not yet gone live. In return, HMRC will reimburse employers 80% of the furloughed employees wages, up to a maximum of £2,500 per employee per month. Employers can top-up the 80% salary payment from HMRC but they are not obliged to do this. Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding.
The Government clarified the scheme on 26 March 2020 and here are some of the key points, some of which had not previously been announced:
Employers can reclaim up to 80% of wage costs up to a cap of £2,500 plus (not including) the associated employer NICs and minimum automatic enrolment employer pension contributions on that wage.
Full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts are all eligible for the scheme provided they have been on the employer’s PAYE payroll on 28 February 2020.
If an employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually. However, an employee who is on furlough leave can not undertake work for on or behalf of the employer that has provided them on the furlough leave, if they work for even an hour, they are not eligible.
For employees whose pay varies, the employer can claim for the higher of (a) the same month’s earning from the previous year; or (b) average monthly earnings from the 2019-20 tax year.
Normal employment law applies to furlough employees who agree to the changes.
Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February. Employees on SSP or self-isolating cannot be furloughed either, but can be furloughed afterwards.
We are still awaiting further guidance on the mechanics of claiming furlough pay in due course, but the scheme is expected to be up and running by the end of April.
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