The Coronavirus Job Retention Scheme

Friday March 27, 2020

Updated: 27/03/20

The ongoing COVID-19 outbreak is putting businesses at every level of the UK's economy under unprecedented pressure. To ease that strain and prevent affected workers losing their jobs altogether, the government's doing something basically unheard of. It's stepping in to pay 80% of the wages of people unable to work because of the pandemic. Any UK business whose employees are facing the axe because of COVID-19 can qualify, with the scheme initially running for 3 months and to be extended if needed.

80% of workers' wages will be covered, up to £2,500 per month, theoretically saving thousands of jobs in vulnerable businesses. Payments will be backdated to the 1st of March, meaning it could actually see people who've already been laid off given a lifeline (and their old jobs back). The cash will start flowing within a few weeks. Here's how it works:

  • Instead of laying its employees off, a business will designate them as “furloughed workers”. Obviously, this is a change in employment status so it might mean some extra paperwork and contract negotiation. Employers need to write to affected employees to confirm that they’ve been “furloughed”.
  • The employer sends word to HMRC about all of its furloughed employees, listing their earnings and any other essential information. They can do this online through a new, custom-built portal, with the exact details still to come.
  • Since this is a reimbursement scheme, the business continues to pay its employees as normal. The money is then claimed back through the system. The exact mechanism for this is still in the works, but it's being treated as a priority.
  • You can use the scheme for full-time and part-time employees, along with people on agency, flexible or zero-hour contracts. In all cases, employees are only eligible if they aren’t taking on any work for you because of the pandemic. Employees on reduced hours or pay won’t count. Furloughed employees can still take on volunteer work or training, as long as they’re not generating income or providing services for on behalf of their employer.
  • Employees you took on after the 28th of February don’t qualify for the Job retention Scheme, but anyone you had to make redundant since that date is eligible if you rehire them.
  • Anyone on paid leave won’t qualify if their leave started before the 28th of February.
  • Employees on Statutory Sick Pay can’t be classed as furloughed until after their SSP ends. However, people who are self-isolating because of public health guidance can still qualify.
  • People with more than one job can be furloughed for each. The £2,500 cap counts separately per job.
  • The standard rules on Maternity Leave still apply, meaning employees have to take at least 2 weeks off after giving birth. People eligible for Statutory Maternity Pay or Maternity Allowance will still get it as normal.
  • For people whose pay varies, the rules say that employers can claim either for the same month’s earnings from a prior year or an average of their monthly earnings from the 2019/20 tax year. Whichever’s higher applies, as long as they’ve been employed for at least 12 months. For people employed more recently than this, the average can be worked out based on what they’ve earned to date – or pro rata if they were only taken on in February.
  • Employers are still responsible for Employer National Insurance Contributions and automatic enrolment pension contributions for furloughed employees. When you claim for them under the scheme, those costs are added to your claim.
  • Coronavirus Job Retention scheme payments are counted among a business’ taxable profits for Income Tax and Corporation Tax purposes. Employment costs are deducted as normal, though.
  • Finally, claims will cover a minimum of 3 weeks, and up to 3 months - backdated to the 1st of March if necessary. You have to pass the entire grant onto the employees you’re claiming for. You can choose to give them more than the grant amount, but not less.

The scheme’s mainly targeted at private sector businesses, meaning the government expects businesses that receive public funding to carry on as normal. Once the system ends, it’ll be up to employers to decide which employees should come back to work. Depending on the circumstances, they may need to consider redundancies then.

In the meantime, there's a range of other measures in place to help tide businesses over the rough waters ahead, including:

  • A 3-month VAT deferral for businesses and a 6-month deferral of July's Self Assessment payments for the self-employed.
  • Support for small businesses paying out Sick Pay to employees, covering 14 days of Statutory Sick Pay costs. Only businesses with fewer than 250 workers can get this.
  • A 1-year business rates holiday for firms in the retail, hospitality and leisure sectors. These sectors can also get grants of between £10,000 and £25,000, depending on their rateable values.
  • A Small Business Grant scheme offering £10,000 for firms eligible for Small Business Rate Relief or Rural Rate Relief.
  • Business Interruption Loans for SMEs, offering as much as £5 million for up to 6 years, with the first 12 months being interest-free. Larger firms will be able to benefit from a Bank of England system that sees the Bank buying up their short-term debt.

Whatever impact COVID-19 is having on your business, don't suffer in silence. Talk to RIFT to find out what help you qualify for, and to make sure you and your employees are protected.

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