Coronavirus Job Retention Scheme: What You Need To Know

This week, as part of a series of measures aimed at shoring up the UK’s economy in the midst of the Covid-19 crisis, the Government launched their ‘Coronavirus Job Retention Scheme’ (CJRS).

In an unprecedented attempt to help both businesses and employees affected by the virus’ financial fallout, the scheme will pay a large portion of the wages of ‘furloughed employees’ who are unable to work due to the impact of Coronavirus.

In short, HMRC will reimburse 80% of a furloughed workers’ regular wage costs, up to a maximum of £2,500 per month.

While the scheme will not be open until the end of April, pay will be backdated to accommodate for the delay. The scheme will run for three months from March 1st and will be extended if necessary.

Qualifying organisations include UK businesses, charities, recruitment agencies and other public authorities. To register, “you must have created and started a PAYE payroll scheme on or before February 28th 2020 and have a UK bank account”.

You can read more from HMRC, here.

What is a Furloughed Worker?

If, as a result of Covid-19, your employer cannot cover the cost of your employment (namely, your salary), the Government’s CJRS is available so they can continue paying most of your wages, avoiding unnecessary redundancies.

In order to qualify for the scheme, a worker will need to be classed as ‘furloughed’. This can apply to:

• Full-time employees
• Part-time employees
• Flexible employees and those on zero-hour contracts
• Agency contracted employees

This scheme means that you’ll remain on your employer’s payroll – instead of being let go. It even applies to employees who’ve been made redundant after February 28th 2020, so long as they’re rehired by their employer.

Furthermore, you can be furloughed by one employer while continuing to work for another. However, you are not permitted to complete any work for your employer whilst furloughed. In addition, the wages of furloughed workers will still be subject to the relevant Income Tax and National Insurance contributions.

There is a minimum furlough period of three weeks for the CJRS.

As you are still employed throughout your furlough period, your employer has the option of funding the 20% difference between the Government grant and your actual salary. Note, though, that this is at their discretion.

If, as a result of being furloughed, you require additional funds to supplement your salary, welfare support such as Universal Credit – as well as mortgage holidays – are also available and you can find more details, here.

What does this mean for Limited Company Directors?

So, where does this leave those with their own Limited Companies?

Unfortunately for those of our clients who have Limited Companies, the Self-Employed Income Support Scheme announced by the Chancellor last night does not apply to Limited Company Directors.

However, according to the Government, ‘those who pay themselves a Salary and/or Dividends through their own Limited Company WILL be covered for their salary by the CJRS, IF they’re operating a PAYE scheme’.

Your grant is calculated by taking the higher figure from either of the following:

• The same month’s salary from the previous year
• Your average monthly salary for the 2019/20 tax year

Please note, though, this DOES NOT INCLUDE any dividends you draw, nor any bonuses or commissions. As an employer, you are eligible to make a claim for Employer’s National Insurance Contributions and minimum Employer’s Pension Contributions – 3% if opted in.

How do I access Coronavirus Job Retention Scheme?

In order to access the scheme, the employer will need to designate all or selected employees as ‘furloughed’. The respective employee will need to be notified of this change and must give their express consent. If the event that consent is not given the employer may look to other options such as redundancy.

Furloughed employees must not undertake any work during their furloughed period. This includes ‘fee earning’ work, as well as taking calls or sending emails.

Information should then be submitted to HMRC’s new online portal regarding each furloughed employee and how much they earn.

Until the grant arrives, businesses are expected to continue paying their staff.

If cash flow is an issue for you right now – as it is for many businesses across the UK – you may be able to access the Coronavirus Business Interruption Loan Scheme. You can find more information on this, here. In order to make a CJRS claim, you’ll require:

• Your EPAYE reference number
• The number of employees you’re furloughing
• The start and end date of the claim period
• The amount claimed
• Your bank account number and sort code
• Your contact name and phone number

There are various other schemes available to help small businesses – with more initiatives being announced each week – details of which can be found, here.

In the meantime, please rest assured that we’re working tirelessly at Danbro to bring you the information that matters as quickly, clearly and concisely as we can.

Whilst our central telephone lines are closed, your personal accountant is available via email should you have any queries or concerns.