The government has announced support for businesses affected by the Covid-19 outbreak in the form of grants to cover 80% of employee wages (up to £2500 per month per employee).
Here is what you need to know about the Coronavirus Retention Scheme:
- The scheme is to provide support where you would otherwise have to have laid off employees due to the impact of Covid-19
- The scheme is available to all UK employers, including businesses, charities, recruitment agencies and public authorities, of any size and in any sector.
- To be eligible, employers must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
- The scheme will pay out grants to cover 80% of employee wages (up to £2500 per month per employee) plus the associated Employer National Insurance contributions and minimum automatic enrolment employer contributions on that wage
- In order to access the scheme, you need to place the affected employees on “furlough leave”
- employees hired after 28 February 2020 cannot be furloughed
- employees who were made redundant (or who resigned) since 28 February 2020 can be rehired and be eligible for this scheme
- company directors who are on PAYE payroll can be furloughed in relation to the PAYE part of their income (not the dividend income)
- you will need to agree with the employee that they are being placed on furlough leave (unless you already have the right to do so in your employment contract)
- you do not have to furlough all employees but you must not discriminate in choosing who to select for furlough leave
- if you plan to reduce the salary to 80% (up to a cap of £2500 pm) to reflect the payout under the scheme, this reduction will also need to be agreed with the employee
- at a minimum, you must pay the employee the lower of 80% of their regular wage or £2500 per month
- you can choose to top up the government grant so that you continue paying your employee in full but you are not required to do so
- There is no obligation to top up to national minimum wage if the 80% of salary takes an employee below the minimum wage (unless the employee is carrying out training)
- the 80% is based on the employee’s actual salary before tax as at 28 February 2020. Fees, commissions and bonuses should not be included
- the furloughed employee must not undertake any work for you. They can do volunteer work, or training if this does not provide services to or for the employer, or generate revenue for you.
- If an employee is working for you but on reduced hours or reduced pay, they are not eligible for the scheme
- An employee can be furloughed with you and then take a job with another employer. In the furlough letter you should provide that if they take employment with another employer and there is any impact on the scheme pay out to you as a consequence of them taking that other employment, you reserve the right to adjust their salary
- if the furloughed employee is a sole director, they may only carry out their statutory duties. For more on what statutory duties comprise see https://companieshouse.blog.gov.uk/2019/02/21/7-duties-of-a-company-director/
- if you are wanting to furlough more than 20 employees, you may need to follow more formal consultation proceedings – take legal advice on this
- the furlough period must be at least 3 weeks. You can then choose to bring employees back to work and subsequently furlough them for further periods of at least 3 weeks
- claims can be backdated to the 1 March 2020 (for the period of time that the employee has not been working) but the scheme is only likely to be paying out by the end of April. In the meantime you should keep paying employees at the agreed (reduced) rate
- employees continue to enjoy employment rights while on furlough leave including the right to statutory sick pay, parental leave, unfair dismissal rights and redundancy rights
- employees continue to accrue holidays
- employees continue to pay income tax, national insurance and other deductions in the usual way
- in order to claim under the Retention Scheme, you must write to the employee to agree the necessary changes and keep this on file
