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What is the Coronavirus Job Retention Scheme and how will it work? BCU’s Assistant Director of Enterprise, Bernard Curren takes a look at the scheme and some of the implications for business. Bernard has over 30 years’ experience as a Company Founder, Director and Innovation Centre Manager, and is currently responsible for overseeing BCU’s new STEAM Incubator.
 
This content was last updated on 27 March 2020. It was edited on 14 April 2020 to include details of the author.

HOW DOES THE SCHEME WORK?

The basic idea behind the Coronavirus Job Retention Scheme is that, in order to be eligible for the 80% salary grant, employees must be “furloughed”.

This means that they’re placed in a limbo zone where they’re still employed but not able or allowed to do any work.

This salary grant is capped at £2,500 per month, per employee.

Employers and employees will need to agree to the employee being designated as a ‘furloughed worker’.  This should be straightforward because this will no doubt be more attractive to employees than redundancy, lay off, unpaid leave or a reduction in pay. We are recommending that employers:

  • Send a letter or email to the employee concerned, asking them to agree to the change in status in writing.
  • Submit details to HMRC through a new online portal which is being set up urgently to get the funds.

Employees cannot elect to be a furloughed worker without their employer’s agreement.

Information should then be submitted to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).

The scheme is currently under development and it’s not clear when exactly businesses will receive payments, with the government having only committed to having the scheme open for applications by the end of April.

This is the key point:

Employees being supported through the Coronavirus Job Retention Scheme must not do any work whatsoever for the company – this includes answering calls and emails.

The other vital point is that the salary paid will be reimbursed by HMRC – in other words, you’ll need to pay your employees and then claim the money back for those that are furloughed and eligible for the scheme.

Currently, the scheme is expected to run for at least three months from 1 March 2020, with wages backdated to this date.

It applies to workers who were employed up to and including 28 February.

Companies (and especially small businesses) may therefore still face cashflow issues in the meantime, and may need to apply for a coronavirus business loan for help with these. For more information on how to apply for a Coronavirus Business Interruption Loan, clock see our page on here.

Finally, companies can then fund the remaining 20% to pay employees their full salary, but this is not compulsory.

The official government guidance is that all UK businesses that pay their staff via PAYE are eligible for the scheme.

However, as discussed above, employees must be furloughed to be eligible for the grant, this means they cannot do any work and must officially have their employment status changed.

This change is subject to existing employment law and may, in some cases, require negotiation with affected employees. Employees must be notified of this change.

If an employee is working from home then they will not be eligible for the support as they must be ‘Furloughed’ therefore not producing any work.

Once the scheme is up and running, the process is expected to be similar to running payroll – you’ll enter details of any affected employees into an online system set up by HMRC, and be reimbursed appropriately.

One key question mark regarding the scheme is how an employee’s base pay will be worked out. This has not yet been confirmed by the government, but one leading tax specialist indicated that it’s likely to be based on pay for the 12 weeks up to the end of February (excluding overtime and bonuses).

If you expect to apply for the scheme, you should start preparing now by taking the following steps:

  • Work out which employees are at risk and would otherwise need to be laid off
  • Calculate the monthly pay of those employees – for now, use the Macintyre Hudson 12-week timeframe
  • If desired, calculate the additional pay required for ‘normal’ salary
  • Inform affected employees of the new arrangements
  • Agree new arrangement with employees, and unions where appropriate
  • Prepare HMRC submission

If applicable, you may need to consult with employees that your business retains, negotiating to alter pay where necessary.

CORONAVIRUS JOB RETENTION SCHEME FAQS

Here are answers to some common queries about the Coronavirus Job Retention Scheme.

The current guidance is that employees who are off sick or self-isolating in line with government guidelines are not eligible for the Coronavirus Job Retention Scheme.

They should be, as a bare minimum, paid statutory sick pay, the cost of which can then be reclaimed from the government.

However this is subject to change, especially with the country now having been placed under lockdown, and only a select list of essential businesses allowed to continue operating as normal.

The guidance seems to be that as the employee will effectively remain on the payroll, their entitlement to annual leave and continuous length of service shouldn’t be affected.

Yes, you can force your employees to use their paid holiday entitlement, but you have to give them notice of twice the length of holiday you are requiring them to take.

So, if you wanted to make your employees take 14 days of paid holiday, you would need to give them 28 days of notice on this.

SUMMARY OF KEY POINTS:

  • The Coronavirus Job Retention Scheme is designed to support employees who would have otherwise been made redundant.
  • It will cover 80% of the salary of an employee that is “furloughed”.
  • Furloughed employees must not do any work for the company – this includes answering calls and emails.
  • The grant is capped at £2,500 per month, per employee.
  • The salary paid will be reimbursed by HMRC, companies will need to first pay their employees a lower salary and then claim this money back.
  • The scheme will operate for a minimum of three months, with wages backdated from 1 March 2020.
  • It applies to workers who were employed on 28 February.
  • The scheme is expected to be open for applications by the end of April.
  • The scheme is open to all UK businesses that pay their staff via PAYE.
  • Once live, applications will be made via an online HMRC portal.
  • Companies should begin planning to take advantage of this scheme now, by identifying employees likely to be affected, consulting with them, and maintaining records of which employees have been furloughed and how much they are being paid.

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