All employers can apply to HMRC for a grant to pay 80% of the wages of retained staff who are not working (known as “furlough”) up to a maximum of £2,500 per worker per month.
The Coronavirus Job Retention Scheme (CJRS) will be backdated to 1st March 2020 and will remain in place until at least the end of June 2020. It is likely that payments will be made by the end of April. Government guidance just released states:
“You will need to:
- designate affected employees as ‘furloughed workers’, and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation;
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)”
Under Coronavirus Job Retention Scheme (CJRS) all employers can apply to HMRC for a grant to pay 80% of the wages of retained staff who are not working (known as “furlough”) up to a maximum of £2,500 per worker per month.
Although this was announced on Friday 20th March, the Government portal didn’t go live until 20th April and the grants are unlikely to be paid until the end of April.
Staff Furloughs and Salary Reductions
Unfortunately, despite lobbying from pressure groups, the furlough scheme only applies to staff that are ’laid off’ and therefore not available to do any work for their employer. It doesn’t provide any flexibility around ‘part-time furloughs’ for employers that are looking to reduce hours worked per person rather than headcount. Government technical update can be found here. Consequently, most businesses will now need a more complex HR solution that includes furloughing some staff and reducing the hours worked of other staff via a consultation process.
For staff you have chosen to furlough you will need to:
- Obtain written consent from the staff you have chosen to furlough so that you can begin implementation.
- Prepare letters confirming the position to inform them immediately of the situation and your decision.
For staff who shall continue working, you will need to:
- Consider the level of wage reduction you will need to implement;
- Begin a consultation process preparing the staff for what is to come;
- Obtain written consent from the staff and prepare letters confirming the position.
Contact the TC team at your earliest possible opportunity if you need any assistance with your HR strategy or delivery. We are anticipating that this process will continue for some time as the legislation develops and there might also be scenarios where staff move in and out of ‘furlough’ depending on the business’ performance. As always, TC Group will be on hand to support you through this difficult time.
The Treasury has confirmed that a director can be furloughed and still carry on the statutory duties as a director as these do not count as work.
If a director receives a salary through PAYE then CJRS support is available for 80% of their qualifying salary.
There are still a lot of uncertainties around individual circumstances so please call our HR team for support in relation to your position.
Payroll / Furlough Processes
The Coronavirus Job Retention Scheme (CJRS) described above significantly complicates the payroll process for the foreseeable future. The month end (or period end) process will now require a combination of commercial, legal, HR, tax and financial processes all working in sync to ensure you comply with all of the necessary legislation and more importantly get the money you need to continue trading. We are encouraging all TC clients to talk to us urgently about their payroll processes and wherever possible handing this over to the TC team who can manage this from start to finish and avoid the complications of internal teams or 3rd parties trying to interpret our guidance.
Contact us today to discuss the points raised in this post or any other concerns you have as a business owner, about your personal finances, or, as an employer now on 0330 088 7111.