Coronavirus Job Retention Scheme ( JRS ) –Furloughed Employees

The JRS is an incentive for employers to help employees to stay on the payroll. To access the scheme the employee needs to be classified as a furloughed worker. Whilst furloughed the employee should not undertake any work whatsoever for the employer, including answering calls or emails. The employer can claim a grant of up to 80% of the employee wage payment up to a cap of £2,500 per month.

The employee remains employed, and it is NOT compulsory for the employer to fund any difference between the furloughed payment and normal 100% salary.

The employer should discuss the JRS with the employee as part of the normal consultation process. It is likely that JRS will not interrupt an employees continuity of service and holiday entitlement will continue to accrue.

The grant is a reimbursement by HMRC of costs paid to the furloughed employee, so the employer will face negative cash flow costs on any payments made. The scheme will run for at least 3 months from 1st March 2020, and the scheme will be open hopefully before the end of April for employers to submit their claims.

We anticipate, if our scheme follows that used in the USA, that furloughed employees will be deemed as taking a leave of absence from work, and the grant will not be ” pay ” for PAYE/NIC purposes.

All UK businesses are eligible to access the JRS as long as they a) designate affected employees as furloughed workers b) notify the employee of this change in accordance with employment legislation, and c) submit information to HMRC about the employee ( NB this has not yet been set up by HMRC ).

Businesses should prepare by

1) set up payroll with a furloughed pay element

2) calculate the furloughed pay based on the 12 weeks salary to 28th February 2020, using regular pay ( exclude overtime & bonuses ).

3) for sick employees base the furloughed pay on amounts excluding sick pay.

4) Assume PAYE/NIC deductions will be due, albeit these HMRC payments will likely be deferred.

5) this is a grant, so cash flow to the employer will be negative, and so a loan may be needed.

NB……….If an employer shuts and tells staff who are able and willing to work not to come into work, then the employer would be liable to pay full pay as it is they who have made the decision, unless there is a shortage of work/lay off clause in their contract of employment/handbook.

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