COVID-19: Company Directors & Shareholders: many small companies are run by just one or two directors and have no other employees.

 

What government financial support is available to director/shareholders during the Coronavirus crisis?

 

The government has confirmed our views on this:

 

• A director or company officer is an employee for PAYE purposes.
• A director cannot claim the COVID-19 Grant for the Self-Employed by virtue of holding the office of a director.
• A company may furlough a director under the government's Coronavirus Job Retention Scheme.
• For small companies: at least one director must stay on to perform their statutory duties of office. They may be furloughed in respect of their normal employment duties (if applicable).

 

See COVID-19: Company Directors & Shareholders

What is the best course of action for an employer in dealing with staffing during the COVID-19 emergency?

 

If you want to retain your staff but cannot afford to pay them you can:

 

• Furlough them.
• Make them redundant and hope that they will be available if your business starts up again.
• From 1 July, you may offer them work on a part-time basis.
• You cannot use furlough payments for redundancy payments.

 

Furloughing as an option

 

Do you wish to retain your employee?

 

Yes

 

Is your business, due to the effects of COVID-19:

 

• Temporarily closed or shutting down by government restriction.
• Unable to provide a safe workplace for your employees or safe travel to and from work.
• Unable to offer home-working for employees.

 

In other words, is it impossible for the employee to work for you at present or there is no other paid work currently available for them to do?

 

Yes

 

Are they employed by you under an employment contract i.e. a written or verbal contract?

 

Yes

 

Are they paid a regular wage in return for working regular hours?

 

Yes

 

You can furlough them, by keeping them on the payroll.

 

Casual workers

 

Is your worker casual or subject to a zero-hours contract?

 

Yes

 

Does your business have any ongoing obligation to offer them work?

 

No

 

Does the worker only work when they want to?

 

Yes, or generally they accept work when its offered.

 

You do not need to furlough them as you already have no obligation to provide work. You may want to use the furloughing process as a way of ensuring their future their loyalty. *

 

*More information is awaited from the government as it is unclear what rights casual workers have in this instance.

 

Redundancy

 

Employees

 

• Employees will be entitled to statutory redundancy pay if they have been employed for two years or more.
• Redundancy measures may also be dealt with by their employment contract.

 

Short-term and temporary lay-offs

 

You can claim statutory redundancy pay if you’re eligible and you’ve been temporarily laid off (without pay or less than half a week’s pay) for either:

 

• More than four weeks in a row.
• More than six non-consecutive weeks in a 13 week period.

 

Write to your employer telling them you intend to claim statutory redundancy pay. This must be done within four weeks of your last non-working day in the four or six week period.

 

See HMRC Redundancy Pay Your Rights

 

Casual workers

 

Workers are not normally entitled to:

 

• Statutory Redundancy pay or minimum notice periods if their employment ends.

 

See HMRC Employment Status Guidance for Workers

This template is for use with employees furloughed before 30 June 2020. From 1 July new letters will be required if you are introducing flexible furlough arrangements such as part-time working and to reflect the new minimum furlough period of one week and changes in the caps from September 2020.

 

Instructions: you can use this as a template, cut and paste the text on to your own letterhead. There are Notes for completion below.

 

Letter start:

 

[Employer name if not on headed paper]

 

[Employer address]

 

[Date]

 

Dear [Employee name]

 

Due to the ongoing COVID-19 (Coronavirus) pandemic, we have identified you as a suitable employee [to be furloughed / agreed with you that you will be furloughed]* under the Government Job Retention scheme.

 

What this means is that you will not be required to work until further notice but will continue to be paid [as normal / and will receive 80% of your normal pay / you will receive pay of £2,500** per month.]*

 

Income tax and national insurance will be deducted from your pay as normal.

 

You will continue to be our employee during the furloughed period, however, you must not undertake any work for us during this period.

 

Your furlough period starts on [insert start date – this cannot be before 1 March 2020]. It will end on the earlier of:

 

• The date we request you to return to work.
• 30 June 2020 unless this date is extended by the government. We will notify you if this is the case.

 

We expect the period not to exceed four months. This may be extended if government restrictions mean that it is not possible for you to return to work.  The government has set the minimum furlough period at 3 weeks.

 

[As already discussed we agree that you may other undertake paid temporary work/and unpaid voluntary work during your furloughed period]*

 

We will contact you when you are required to return to work.

 

[Please sign the attached form to confirm your agreement to being a furloughed employee and return to [name of appropriate person/address or email address] by [date]***.

 

Yours sincerely

 

[your name]

 

Letter end

 

......................................................................................................................................................................

 

 

Notes for completion - DELETE BEFORE SENDING

 

*Delete as appropriate.

 

 **Only use the £2,500 per month option where employee earnings are such that 80% of their normal gross pay is more than £2,500 per month. For example, someone earning £3,500 per month would be due £2,800 at 80% but this is reduced by the cap to £2,500.

 

You will not need your employee’s agreement to the furlough if:

 

• They will continue to receive their full pay.
• Their contract allows you to reduce their pay if there is no work for them.

 

***It is recommended that you set a deadline for responses.

 

......................................................................................................................................................................

 

 

A form for a furloughed employee to return to the employer

 

 

I [Employee name and works / employee number (if they have one)] consent to being a furloughed employee until such time as I am asked to return to work.

 

I understand that I remain an employee of [insert name of employer] and must continue to adhere to the terms of my employment other than by prior agreement with my employer.

 

……………………………………………

 

PRINT NAME

 

…………………………………………….

 

SIGN HERE

 

………………………………………………

 

DATE

[Employer name if not on headed paper]

 

[Employer address]

 

[Date]

 

Dear [Employee name]

 

Due to the ongoing COVID-19 (Coronavirus) pandemic you have already been furloughed under the Coronavirus Job Retention scheme for a period of not less than 3 weeks prior to 30 June 2020.

 

We have identified you as a suitable employee to remain furloughed.

 

You will continue to be paid [as normal/and will receive 80% of your normal pay/ you will receive pay of £2,500/£2,187.50 and £1,875 per month]***

 

Income tax and national insurance will be deducted from your pay as normal.

 

You will continue to be our employee during the furloughed period.

 

Your furlough period starts on [insert start date – this cannot be before 1 July 2020]. It will end on the earlier of:

 

• The date we request you to return to work.
• 31 October 2020 unless this date is extended by the government. We will notify you if this is the case.

 

We expect the period not to exceed four months. This may be extended if government restrictions mean that it is not possible for you to return to work. The government has set the minimum furlough period at one week.

 

[During your furlough period you will be required to work [insert number of hours]** per week/month]*. OR [The number of hours that you will be required to work during your furlough period will be agreed with you in writing at the start of each week/month]*

 

[As already discussed we agree that you may other undertake paid temporary work/and unpaid voluntary work during your furloughed period]*

 

We will contact you when you are required to return to work.

 

[Please sign the attached form to confirm your agreement to being a furloughed employee and return to [name of appropriate person/address or email address] by [date]****.

 

Yours sincerely

 

......................................................................................................................................................................

 

 

Notes for completion - DELETE BEFORE SENDING

 

*Delete as appropriate.

 

** Insert the number of hours you require the employee to work per week or month. If this will change you should agree this with the employee and issue them with a new letter accordingly.

 

 ***Only use the £2,500 per month option where employee earnings are such that 80% of their normal gross pay is more than £2,500 per month and for claim periods from 1 July to 31 August. This is reduced to £2,187.50 for the month of September and £1,875 for October.

 

You will not need your employee’s agreement to the furlough if:

 

·         They will continue to receive their full pay.

 

·         Their contract allows you to reduce their pay if there is no work for them.

 

****It is recommended that you set a deadline for responses.

 

 

 

......................................................................................................................................................................

 

 

A form for a furloughed employee to return to the employer

 

 

I [Employee name and works / employee number (if they have one)] consent to being a furloughed employee until such time as I am asked to return to work.

 

I understand that I remain an employee of [insert name of employer] and must continue to adhere to the terms of my employment other than by prior agreement with my employer.

 

……………………………………………

 

PRINT NAME

 

…………………………………………….

 

SIGN HERE

 

………………………………………………

 

DATE

 

 

 

 

What does the government mean by furloughing

• 'Furloughing' is an alternative to laying people off.
• Employees are kept on the payroll instead of dismissing them as redundant or laying them off without pay.
• It is relevant for employees who are not off sick or claiming other statutory employment benefits. Sick workers are instead eligible for government support under the Statutory Sick Pay (SSP) rules.

Who can be furloughed?

• Any employee, apprentice, agency worker, salaried member of an LLP, or director or other office-holder.
• Full time, part-time or casual or zero-hours workers.
• Employees on fixed-term contracts if the contract was in place on or before 19 March 2020 and it has not ended, regardless of how long is left to run on the contract.
• They must have been on your payroll on 19 March 2020 (prior to 15/04/2020 this date was 28 February 2020).

Can your employee work for you when furloughed?

Rules from 1 July 2020:

 

• Yes, the employer will then pay the employee's wages and ERs NICs and pension costs for those hours worked.
• The employer may claim under the CJRS for the difference in normal working hours and actual working hours, subject to the claim caps.

 

Rules to 30 June 2020:

 

• No. They cannot be 'providing services or generating revenue'.
• They may undertake job-related training.
• Employers are free to consider allocating any critical business tasks to staff that are not furloughed.
• Furloughed staff must not work for any company or organisation linked or associated with the employer.
• The exception to this is union representatives who may undertake duties and activities for the purposes of individual or collective representation of employees or other workers, as long as they do not provide services to, or generate revenue for, the employer organisation or a linked or associated organisation.

 

HMRC's guidance is slightly muddled in terms of what kind of entity can be linked or associated.

 

• HMRC says in its guide, 'Check if your employer can use the Coronavirus Job Retention Scheme', 'Whilst furloughed your employer cannot ask you to do work for another linked or associated company.'
• In a different guide, 'Check if you can claim for your employees' wages through the Coronavirus Job Retention Scheme' HMRC says any associate organisation, 'To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation or any linked or associated organisation.'

 

We assume that the latter applies, as not all employers are companies and so it is odd to limit the rule to just companies. We have requested clarification from HMRC.

 

How does it work and how much can be claimed?

 

1. Tapered changes from 1 September 2020

 

The maximum grant that can be claimed will be:

 

• up to 70% of salaries subject to a cap of £2,187.50 for September 2020.
• up to 60% of salaries subject to a cap of £1,875 for October 2020.

 

Employers pay the balance to take furlough pay up to 80% of normal pay and pay all ERs NICs and pension costs.

 

HMRC have provided an example of how to calculate the minimum furlough pay from 1 September 2020:

 

• R Ltd’s employee has been furloughed continuously since 15 April 2020. The employee is paid calendar monthly.
• R Ltd makes a claim for 1 September to 30 September. R Ltd has calculated that the minimum furlough pay for this period is £1,500, which is 80% of the employee’s usual wages.

 

R Ltd calculates how much it can claim for its employee’s furlough pay:

 

1. Start with £1,500 - this is the minimum furlough pay
2. Divide by 80
3. Multiply by 70 - because the claim period is in September.

 

R Ltd can claim a grant of £1,312.50 towards its employee’s wages. R Ltd must pay the employee the minimum furlough pay amount of £1,500, and can choose to pay more than this but does not have to.

 

If the claim period here was October 2020, step 3 above would require you to multiply by 60.

 

2. From 1 August 2020

 

• Employers must pay ERs NICs and pension contributions in respect of furlouged pay.
• Claims can be made in advance from 20 July.

 

3. From 1 July 2020

 

• The minimum furlough period is one week.
• Employees may also work part-time.
• Employers may claim a grant of up to 80% of salaries, plus ERs NICs and pensions costs, adjusted for paid working hours.

 

HMRC have provided the following example of how to calculate minimum furlough pay for an employee who is flexibly furloughed and is working part-time from 1 July.

 

• Q Ltd’s employee has been furloughed continuously since 1 May 2020. The employee is paid calendar monthly. From 1 July, the employee returns to work part-time for Q Ltd and is furloughed for the rest of their usual hours. Q Ltd makes a flexible furlough claim for 1 July to 31 July.
• Q Ltd has calculated that the employee’s usual hours from 1 July to 31 July are 164. The employee actually works 80 hours, and is therefore furloughed for the remaining 84 usual hours. Q Ltd has calculated that 80% of the employee’s usual wages is £1,800. The maximum wage amount is £2,500 as the claim is for a full month.

 

Q Ltd calculates the minimum furlough pay:

 

• Start with £1,800 - this is the lesser of 80% of the employee’s usual wages (£1,800) and the maximum wage amount (£2,500)
• Multiply by 84 - this is the employee’s furloughed hours
• Divide by 164 - this is the employee’s usual hours
• Q Ltd must pay the employee £921.95 for the time they are on furlough. Q Ltd can choose to pay the employee more than this for the time they are furloughed, but does not have to.

 

Q Ltd must also work out how much they can claim for ER's NIC and pension costs based on the hours worked.

 

4. Rules 1 March to 30 June 2020

 

• HMRC will reimburse: up to 80% of the wage costs of furloughed employees, subject to a cap of £2,500 per month (£576.92 per week) per employee, plus, Employer National Insurance Contributions (NICs) paid on the furloughed wage and minimum automatic enrolment employer pension contributions due on that sum.
• If the Employment Allowance is being claimed this must be deducted from the Employer NIC's being claimed.
• If the furlough period is not a complete week or month you will need to calculate the maximum amount on a daily basis.
• There is a minimum furlough period of three consecutive weeks.
• Employees can be taken in and out of furlough, when this happens the three week minimum period applies to each separate instance of furloughing.
• Claims for periods ending on or before 30 June 2020 must be made by 31 July.

 

What are wages?

 

Wages are your monthly earnings:

 

• If wages are of a fixed annual amount this is the amount paid in the last pay period prior to 19 March 2020 (prior to 15/04/2020 this was in the month to 29 February).
• HMRC say that if, based on previous guidance, the employer has calculated a claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) the employer can choose to still use this calculation for the first claim.

 

If your employee's salary varies:

 

• If they have been employed for a full year or more prior to the claim, you can claim the higher of:
  • their earnings for the same month in the previous year and
  • their average monthly earnings for 2019/20 tax year.
• If they have been employed by you for less than a year, take their average monthly earnings since they started working for you.

 

Update: 4/4/2020

 

• The grant paid to your employer will be calculated based on your regular, contractual pay, such as wages, compulsory commission and past overtime.
• The calculation will not include discretionary commission (including tips) payments or bonuses, non-cash payments or benefits in kind.

 

What about overtime?

 

It is paid. We queried this on 3 April 2020 and HMRC have been quick to update their guidance.

 

• The grant paid by your employer is based on regular contractual pay including past overtime.

 

Practically speaking, this means that the amount paid is based on your contractual earnings as paid in February 2020, or if the calculation is based on variable pay, the mechanism will be the average of contractual earnings for 2019/20 paid up to 28 February 2020. It will not include discretionary amounts paid.

 

What about the National Minimum Wage (NMW)?

 

The NMW increased on 6 April 2020.

 

Apprentices must be paid at least the Apprenticeship Minimum Wage/National Living Wage (NLW)/NMW. The employer must top-up any shortfall between the amount it can claim for an apprentice's wages through the furlough scheme and their appropriate minimum wage.

 

Other employees are subject to different rules: prior to 1 July no one is working during the time that they are furloughed. If they are paid 80% of their usual pay, this may well take them below the NLW/NMW and that is accepted. If they are undertaking training in that period, they must be paid the NLW/NMW for the training period and the employer must top-up any shortfall.

 

What about holiday pay and bank holidays?

 

Your employees can still take a holiday while they are furloughed. Under the Working Time Regulations (WTR), holiday pay must be paid at the employee’s normal rate of pay or, if this varies, it must be based on the average pay the employee has received in the previous 52 working weeks. This means that if a furloughed employee takes holiday, the employer will have to pay additional amounts over the grant in order to meet the requirements of the WTR.

 

Where an employee usually works bank holidays the employer can agree this is included in the grant payment. If the employee usually takes the bank holiday as leave, the employer will either have to top up their holiday pay or give them a day of holiday in lieu. Since April and May include four bank holidays employers will need to consider how they are going to deal with this.

 

What about directors and annual salaries?

 

HMRC have now included this in their guidance. Directors and any other employees paid annually are eligible to claim, provided they meet the qualifying conditions, which include:

 

• Being notified to HMRC on an RTI submission on or before 19 March 2020 and
• The notification is for a payment of earnings in the 2019/20 tax year.

 

Directors who are paid annually just in March/start of April will not be eligible:

 

• Their last payment notified under RTI (assuming that an annual payroll was run in the previous tax year) was before 5 April 2019, and no further payments were then notified until after 19 March 2020.
• They will not have a payment of earnings for 2019/20 returned under RTI before 19 March 2020 as the pre 5 April 2019 payment will have been in respect of 2018/19.

 

Conversely, a director who was paid an annual salary in say February 2020, would be eligible for the grant as they would have been notified to HMRC on an RTI submission on or before 19 March 2020 for a payment of earnings in the 2019/20 tax year.

 

The HMRC online claims calculator should not be used for directors and those who are paid annually. Manual calculations must be performed instead.

 

Transfer of Undertakings (Protection of Employment) Regulations (TUPE)

 

• When a payroll has been transferred as part of a business transfer, the new employer can claim a CJRS grant where an RTI submission has been made on, or before, 19 March 2020 for employees who were employed by the former employer in a qualifying PAYE scheme on 28 February 2020.
• See Treasury Direction 22/5/2020.

 

How to claim

 

• Valid claims can be made using HMRC's employer claim online portal.
• Claims should be made in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll. You should pay your furloughed employees through the payroll under Real-Time Information (RTI) as normal but at the 80% adjusted amount unless you have agreed to top up their pay (see below).
• The measure initially applief for four months from 1 March 2020, it was further extended to 31 October.
• Claims can be made every three weeks up to 30 June, and every week (or longer) from 1 July.
• Payment is by a grant provided by HMRC to be paid by BACS directly into a UK bank account.
• From 1 July you will need to provide details of the number of hours worked by the employee and what their usual hours would be for each claim period. This will make claiming in advance difficult; if the actual hours worked differ from the expected hours used in the claim the claim will need adjusting and a payment to HMRC may be required of the result is an overclaim.

 

What to pay?

 

As an employer you may need to renegotiate the employee's contract. The need to do this may well reflect your financial circumstances.

 

• It is up to you whether you pay the difference between the government funded amount and the total pay so that your employees receive their full pay.
• When the amount that the employer contributes to furloughed pay increases from 1 September, employers must ensure that the employee receives at least 80% of normal pay if they are full furloughed and the employer is expected to pay the difference between what the government funds and 80% furlough pay.

 

You must pay the employee all the grant received for their gross pay, no fees can be deducted from the grant money.

 

The employees you furlough must not work for you during the first furlough period, March to June 2020. From 1 July they may work part-time.

 

Throughout the furlough period, the employee remains your employee.

 

Do not forget about employment law. This is for your protection as an employer (against claims by employees once this is all over) as well as the protection of your employees.

 

*We are unable to give employment law advice but have included some suggestions below which should help manage your risk here. If in doubt you must seek independent legal advice.

 

What period is covered by the job retention grant claim?

 

• Grant claims can be backdated to 1 March 2020, only in cases where an employee was laid off from that date, and where the employer subsequently decided to furlough that employee.
  • Employees who were made redundant on or after 28 February 2020 can be re-employed and furloughed even if they are not re-employed until after 19 March.
• The job retention grant cannot be claimed for anyone who is still working: it may only be paid once the job has ceased due to the COVID-19 crisis.
• In many cases furloughing commenced only on the day that the employer was affected by the COVID-19 lockdown.

 

These examples illustrate how we think the grant will work for many businesses:

 

Example 1: Corona Travel Ltd is a specialist tour operator sending UK tourists to remote parts of China. When Wuhan Province announces a lockdown in February 2020, the company decides to cancels all its spring and early summer tours. All staff are laid off at the end of February except the director. When the UK announces its employee job retention scheme in late March 2020, the company contacts staff and advises them that they will be re-employed and furloughed. As the staff were all laid off before 1 March the company's furloughing claim in respect of the furloughed staff can be backdated to 1 March as none of these employees worked in March.

 

Example 2: Corona Gelatos Ltd employs 15 employees, 12 who work in sales and the production line and delivery. The UK went into COVID-19 lockdown on 23 March and all the company's retail customers shut down their gelato parlours. The company decides to cease all production and lay off and furlough all sales, production and delivery staff from 24 March. Staff are paid their normal salary up to 23 March and the furloughed staff are paid their salary as negotiated with the company for the period they are furloughed from 24 March onward.

 

What is required to make a claim

 

The online portal for making claims became available on 20 April.

 

Payment will be made within six working days after the claim. HMRC say you should only contact them about your claim if you have not received payment within 10 working days.

 

To make a claim you will need the following information:

 

• Employer PAYE reference number.
• The number of employees being furloughed.
• Names and National Insurance Numbers for the furloughed employees (payroll/works numbers are optional)
• Your Self Assessment Unique Taxpayer Reference (UTR) or Corporation Tax Unique Taxpayer Reference or Company Registration Number (CRN).
• The claim period (start and end date, the start date cannot be before 1 March 2020).
• Amount claimed (the minimum length of furloughing is three weeks, reducing to one week from 1 July).
• Your bank account number and sort code.
• Your contact details.

 

No claims can be made using the online portal for any furloughed employees without NI numbers. Where an employer has furloughed employees without NI numbers:

 

• If they have less than 100 furloughed employees they should call the COVID-19 helpline on 0800 024 1222 to make their claim.
• If they have 100 or more furloughed employees, they should provide a payroll or employee reference number for those employees without NI numbers.

 

Where the employer does not have a UTR or CRN they should answer ‘No’ to the questions:

 

• Does the employer submit a company tax return?
• Is the employer registered for self-assessment?
• Is the employer registered at companies house?

 

They will then be asked ‘What is the name of the employer?’ and the claim can proceed.

 

• Prior to 7 May the claim had to be made in one session, you could not save it and go back to it.
• From 7 May claims can be saved so you can go back and finish them later; you have seven days to submit a claim once started.
• From 9 July you can delete a claim if you have made an error if you do so within 72 hours of submitting it.
• You should print or print to pdf once you have finished completing the claim so that you have a copy for your records.
• Once you have submitted the claim you will get a confirmation screen with a reference number. No email confirmation will be provided so you should print or note down the reference number.

 

You must calculate the amount to claim, HMRC will not do it for you. HMRC have provided an online calculator but this cannot be used in some circumstances including for directors and those who are paid annually. You should keep a full record of your calculations.

 

• If you have less than 100 furloughed staff you will be asked to enter details of each employee you are claiming for directly into the system.
• If you have 100 or more furloughed staff you will be asked to upload a file with the information rather than input it directly into the system. HMRC will accept the following file types: .xls .xlsx .csv .ods
• You should retain all records and calculations in respect of your claims.
• If you use an agent who is authorised to act for you for PAYE purposes, they will be able to make a claim on your behalf. You will need to tell them which bank account you would like the grant to be paid into.
• If you use a file only agent who does not act for you on any other matters they will not be authorised to make a claim and you will need to do it yourself.

 

Record keeping

 

HMRC have said that they will retain the right to retrospectively audit all aspects of your claims and payments may be withheld or have to be fully repaid if HMRC find that they are based on dishonest or inaccurate information or if they are fraudulent.

 

A Treasury Direction issued on 22 May 2020 makes it clear that the written agreement for the employee to cease all work has to be retained by the employer until at least 30 June 2025 and must:

 

• specify the main terms and conditions,
• be incorporated (expressly or impliedly) in the employee’s contract, and
• is made or confirmed in writing.

 

Where an employer is flexibly furloughing staff from 1 July they must also keep records of the hours worked by those employees and what their usual hours would have been for each claim period, for up to 6 years.

 

Tax Treatment of the Job Retention Grant

 

• Payments received under the scheme must be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.
• Employment costs may be deducted as normal when calculating taxable profits.

 

VAT implications Added 19/5

 

HMRC have not provided any guidance as to whether the grants under the CJRS will be subject to VAT or count towards turnover for VAT registration limits. Normal principles are expected to apply meaning:

 

• The grants are outside the scope of VAT and no output VAT should have to be accounted for.
• The grant income should be disregarded for VAT registration and deregistration limits.

 

Steps to take when furloughing workers

 

• Decide which employees are to be furloughed and designate them as such. If this is not all your employees, you should ensure you use a fair selection process*:
  • You could start with any employees who cannot work from home, if this is appropriate, or those who need to stay home to look after children.
  • Ask for volunteers.
  • You could adopt the same sort of process you would if making people redundant, using pooling and selection criteria.
• Decide whether you will top up the amount being reimbursed by HMRC and if so by how much.
• From 1 July decide whether some or all furloughed employees will undertake some part-time work, if so what hours they will work, and agree this with those employees. You can keep this flexible if necessary.
• Decide whether you are furloughing employees for a fixed period e.g. the full four months or whether you need to keep it flexible. This means less certainty for everyone but allows you to call employees back if the situation changes and restrictions on working are lifted.
• There is a minimum furlough period of three consecutive weeks (one week for furlough periods from 1 July 2020) and this applies to each instance so you may move someone in and out of furlough each furlough period. You cannot extend a furlough period once it has ended but you can immediately start a new period.
• Decide whether you would agree to employees taking temporary work elsewhere during the furlough period. You may wish to only address this if asked by your employees.*
  • If their contract currently forbids this, you should advise them of your decision in writing.
  • If the contract does not forbid this it would seem, unless the government advises otherwise, that employees are free to do this.
• Monitor your cash flow position to see if you have sufficient funds to pay your employees until the HMRC grant comes in, likely to be sometime before the end of April. If you do not, you may wish to consider a business interruption loan or deferring your VAT payment.
• Check the employment contract for each employee you intend to furlough.
  • If you intend to top up their payments to maintain their normal pay you should not need the employees’ consent as you are not deviating from their contractual terms.
  • If you do not intend to top up their payments then you will need the employees’ consent unless their contract allows for you to reduce or stop their pay when there is no work for them to do. If in doubt you may wish to take legal advice.
• Notify the designated employees in writing that they are furloughed. Tell them whether you are topping up their wages or whether they will just get the 80% amount reimbursed by HMRC (subject to the £2,500 cap per month, noting changes to the cap from September and October), whichever applies. If you are moving employees onto flexible furlough from 1 July you will need a new agreement with them, in writing, for the new furlough arrangement.
• If required (see above) obtain consent from the employees, in writing, to be furloughed.
• If you do have sufficient funds, make payments to your furloughed workers accordingly.
  • This should go through the payroll as normal with tax. Employee NICs should be deducted as normal. HMRC confirmed this on Twitter on 25 March 2020 and again in their guidance of 26 March 2020.

• Submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal available from 20 April 2020. If you are flexibly furloughing from 1 July you will need to submit and keep information about hours worked and usual hours which would have been worked, during each claim period.

 

HMRC have said that payment should be made within 6 working days.

 

Government's Guidance: Coronavirus Job Retention Scheme

 

HMRC's Coronavirus Job Retention Scheme Step by step guide.

 

HMRC's Check if your employer can use the Coronavirus Job Retention Scheme

 

HMRC guidance: Reporting payments in PAYE Real Time Information from the Coronavirus Job Retention Scheme

 

HMRC's PAYE Portal

 

Pay Coronavirus Job Retention Scheme grants back

 

Penalties for not telling HMRC about Coronavirus Job Retention Scheme grant overpayments - CC/FS48

 

HMRC: Service Availability and Issues

 

 HMRC webchat

 

House of Commons briefing paper: FAQs: Coronavirus Job Retention Scheme