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Motor Trade Legal News

Coronavirus Job Retention Scheme UPDATE

This advice note considers the provision of the Coronavirus Job Retention Scheme (“CJRS”) announced by the government on 20 March 2020.  

It is important to note that the situation is very fluid and Government guidance is changing daily. We are keeping our ears close to the ground for RMI members who are all, understandably, desperate for more certainty regarding the furlough scheme whilst we all await the publication of the formal government Regulations. 

The information in this note is based on information released by the Government as at 26 March 2020.  

What is the CJRS?

The CJRS is a scheme designed to assist all UK employers to access support to continue paying part of their employees’ salary for those employees that would otherwise be laid off during the coronavirus outbreak (See our previous note for more details on the scheme in general).

HMRC Guidance

HMRC have already begun to flesh out the bones of the political statement regarding the CJRS. Further guidance dated 26 March 2020 regarding the scheme which can be found at

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Who can apply?

HMRC have confirmed that the scheme will be open to 

  • businesses
  • charities
  • recruitment agencies (agency workers paid through PAYE)
  • public authorities

Any applicant must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

Who can be placed on ‘Furlough’?

The following are eligible for furlough under the scheme

  • full-time employees
  • part-time employees
  • employees on agency contracts
  • employees on flexible or zero-hour contracts

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

However it should be noted that to be eligible under the scheme employees must have been on a company’s PAYE payroll on 28 February 2020.

Employees hired after 28 February 2020 cannot  claim for furlough in accordance with this scheme.

Can an employee undertake any work whilst on furlough?

To be eligible for the subsidy an employee cannot undertake work for or on behalf of the organisation when on furlough. This includes providing services or generating revenue. 

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.

A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.

Employees can undertake training courses whilst they are furloughed. However, they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

Do I have to close entirely?

No. You do not need to place all your employees on furlough. To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.

However, as stated above, those employees who you do place on furlough cannot undertake work for you.

What is the tax status of any payments?

While on furlough, the employee’s wage will be subject to usual income tax and other deductions. However further guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, will be provided before the scheme becomes live.

All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.

Can I furlough employees who are self-isolating?

No. Employees on sick leave or self-isolating should get Statutory Sick Pay until the end of the 7 or 14 day period as appropriate. However, they can be furloughed after this.

Employees who are shielding in line with public health guidance can be placed on furlough.

How do you calculate what can be claimed?

Employers will receive a grant from HMRC to cover the lower of 

  • 80% of an employee’s regular wage or £2,500 per month, plus 
  • the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. 

Fees, commission and bonuses should not be included.

Full time and part time employees- For full time and part time salaried employees, the actual salary before tax as of 28 February should be used in the calculation.

For employees whose pay varies - where 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:

  • the same month’s earning from the previous year
  • average monthly earnings from the 2019-20 tax year

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.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working. Furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.

Further developments

In addition to guidance provided by HJMRC, there has been information given by a backbench MP about the potential workings of the scheme and some potential clarifications.  These come with a health warning that this is still speculation and not officially going to be included in the Government Regulations.  It therefore appears likely that: 

  • the aim is to get the scheme up and running ‘before the end of April’. 
  • businesses can re-employ people who have been made redundant since 1st March, and then furlough them. 
  • to qualify for the payment, an employee must be furloughed for a minimum of three weeks.  They can then come off furlough.  This means that employers cannot rotate staff weekly between furlough and non-furlough.