The Coronavirus Job Retention Scheme – Furlough

Following the Governments’ introduction of the Coronavirus Job Retention Scheme on the 20th March there had been a number of areas around the Scheme’s operation which have been unclear, or for which guidance had not been given.

In response to questions from our clients, on Thursday 26th March we recorded a Streets Sessions special podcast to cover many of the general points, concerns and queries. For the majority of cases the answers provided remain highly relevant and applicable. We also explore the wider, often not considered, HR and employment aspects. We would therefore highly recommend that employers and employees take time out to listen to the podcast.

The key points of clarification announced on Thursday 26th March are as follows:

How much is the grant per employee?

The Coronavirus Job Retention Scheme is a grant of up to £2,500 per employee furloughed, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage – provided the worker remains employed.

Basis for calculating entitlement - grant award for full time and part time employees

Employers should base their calculation for determining the level of grant under furlough for an employee on the employee’s actual salary as of 28th February 2020. This calculation should NOT include fees, commissions and bonuses. The basis for calculating the entitlement for hourly paid employees will be on an average of the higher of either the same months earnings in the previous year or the average earnings from the 2019/2020 tax year.

Income tax and Employee National Insurance

Wages/salaries of furloughed staff will be subject to Income Tax and National Insurance as usual.  Employers will also be liable to pay Employer National Insurance contributions on wages/salaries.

Auto-enrolment - pension contributions

Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme. Employers are required to pay employer pension contributions based on qualifying earnings.

National Living Wage

Furloughed workers must be paid the lower of either 80% of their salary or £2,500 even if, based on their usual working hours, this would be below the National Living Wage or National Minimum Wage.

Online training and studies

If workers are required to complete online training courses whilst they are furloughed, then they must be paid at least the National Living Wage/Minimum Living Wage, even if this is more than the 80% of their wage that will be subsidised.

When will the Scheme be up and running?

HMRC have been working night and day to develop this scheme and are aiming to have it up and running by the end of April 2020.

For further information on the Job Retention Scheme and Furlough from both an employers and employees perspective please visit https://www.businesssupport.gov.uk/coronavirus-job-retention-scheme/