WFM UK: Furloughed Employees: HMRC Guidance

Furloughed Employees

On 26th March, further guidance was issued by the UK Government in relation to the Coronavirus Job Retention Scheme.

This article outlines the main points of the scheme. More information can be found on the Government website:

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Coronavirus Job Retention Scheme

This scheme is a temporary scheme which is open to all UK Employers for at least three months, starting from 1st March 2020.  It is designed to support employers whose operations have been severely affected by COVID-19.

Employers can use a HMRC Portal to claim for 80% of Furloughed employees’ usual monthly wage costs, up to £2,500 a month.  Employers National Insurance contributions and Employers Pension contributions can be claimed on top of the £2,500.

The scheme is open to all UK employers that had created and started a PAYE Payroll scheme on 28 February 2020.

Who Can Claim?

Any UK Organisation with employees who had a PAYE Payroll in place, with employees attached, on or before 28th February 2020 can apply.

The Organisation must also have a UK bank account.

Employees you can Claim For:
 

• Furloughed employees must have been on your PAYE Payroll on the 28th February 2020, and can have any kind of contract
• The scheme also covers employees who were made redundant since 28th February 2020, if they are re-hired by their employer
• To be eligible, when on Furlough, an employee can not undertake any work on behalf of the organisation
• The employee’s wage will be subject to usual Income Tax and other deductions
• If an employee is working, but on reduced hours or pay, they will not be eligible for this scheme. Employers must continue to pay the employee through their Payroll in line with the terms of their Employment Contract
• Employers should discuss any changes to Employment Contract with the employee, and both parties must agree
• Usual discrimination laws apply when deciding which employees to Furlough
• Employers must write to employees to confirm their Furlough status, and a record of this correspondence should be kept
• Employees hired after 28th February 2020 cannot be Furloughed
• Employers do not have to Furlough all employees

Employees in Unpaid Leave

Employees on unpaid leave cannot be Furloughed, unless they were placed on unpaid leave after 28th February 2020.

If an Employee is on Statutory Sick Pay

Employees on sick leave or self-isolating should get Statutory Sick Pay, and can be Furloughed after this ends.

Employees who are shielding in line with public health guidance can be placed on Furlough.

If an Employee is on Parental Leave

If employee is eligible for Statutory Parental Leave, then normal rules apply.

If employee is eligible for Statutory Parental Pay, they will still be entitled to the normal payments. If you offer contractual enhanced Parental Pay, this would be included in wage costs that can be claimed back through the scheme.

Working Out What to Claim

Employers need to make the claim for wage costs through this scheme.

Employers will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage, or £2500 per month, plus the associated Employer National Insurance contributions, and minimum automatic enrolment Employer Pension contributions on that subsidised wage.

Fees, commission, bonuses and other payments should not be included in this.  Please note, CIPP have confirmed that Tronc should not be included in the costs reported to HMRC.

At a minimum, employers must pay their employee the lower of 80% of their regular wage, or £2500 per month.  An employer can choose to top up an employee’s salary beyond this, but are not obliged to under the scheme.

HMRC will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions, and minimum automatic enrolment Employer Pension contributions before the scheme becomes live.

Full Time and Part Time Employees

For Full Time and Part Time salaried employees, the employee’s actual salary before tax, as of 28th February 2020 should be used to calculate the 80%.

Please refer to WFM - Furloughed Employees - Paying Salaried Employees  for information around paying salaried employees.

Employees Whose Pay Varies

If the employee has been employed for a full 12 months, there are two suggestions of how to calculate their average pay:
 

1. Use the same month’s earnings from the previous year
2. Use the average monthly earnings from the 2019/2020 tax year

If the employee has not been employed for a full 12 months:
 

1. Use the average monthly earnings since they started work

If the employee only started in February 2020, use a pro-rata for their earnings to claim.

To clarify, for employees who are not paid on a monthly basis, their ‘period’ earnings should be used – i.e. Weekly, Fortnightly or Four-weekly
 

Please Note – We are working on getting a complete understanding of the payment calculation for employees with variable hours.  We have the new 52-week flexible Holiday calculation for Holiday pay, which has been suggested as possible calculation to use. Once this process has been clarified, we will update this page.

In the meantime, the new Furloughed Employee page will show the average hours based on the current holiday calculation within the portal.

To update this to 52 weeks manually, please refer to WFM Release Note - 52 Week Holiday Calculation

Once you’ve worked out how much of an employee’s salary can be claimed, you must work out the amount of Employers National Insurance Contributions and minimum automatic enrolment Employer Pension contributions you are entitled to claim.

Employer National Insurance and Pension Contributions

All employers remain liable for associated Employers National Insurance Contributions, and minimum automatic enrolment Employer Pension contributions on behalf of Furloughed employees.

A grant can be claimed from HMRC to cover wages for a Furloughed employee, equal to the lower of 80% of an employee’s regular salary - or £2500 per month - plus the associated Employers National Insurance Contributions, and minimum automatic enrolment employer Pension Contributions on paying those wages.

An employer can choose to pay more than the grant. However, the associated employer costs will not be covered by the scheme.

Any automatic enrolment Employer Pension contribution costs to the employer above the minimum 3% of qualifying earnings (£512 until April 5th 2020 then £520 from April 6th 2020 – per month) will not be covered by the scheme.

National Minimum and National Living Wage 

National Minimum and Living Wage applies to the hours which the employee is working. Therefore, Furloughed employees must be paid 80% of their salary, or £2500, even if based on their normal working hours, this would be below NMW/NLW.

However, if any employee is continuing with online training courses whilst they are Furloughed, they must be paid at least the NMW/NLW for the time spent training, even if this is more than 80% of the wage subsidised.

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