Employee support
Details still to follow, but businesses are to be able to reclaim 80% of furloughed workers salary costs, up to £2,500 per month. Applications will be through an online portal supposedly during the week beginning 23rd March. Effectively, rather than making staff redundant, this is a measure to keep staff employed despite not being able to afford salaries.
There may well be opportunities for "1 person companies" here by increasing salaries from the current minimal one that has been advice for many years.
But at this point, too early to say what to do. There is a very good article by one of the tax experts at Francis Clarke here that has more questions than answers over this topic. So we just need to wait and see.
There may well be opportunities for "1 person companies" here by increasing salaries from the current minimal one that has been advice for many years.
But at this point, too early to say what to do. There is a very good article by one of the tax experts at Francis Clarke here that has more questions than answers over this topic. So we just need to wait and see.
How to access the scheme
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)
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
If you furlough a worker, advice is that you should put it in writing. You will probably need to upload the email or letter to the portal when it is available to get reimbursement.
For those who take a dividend, will this 80% still cover the PAYE portion of wage? Do you expect any additional funds for those who draw dividends?
ReplyDeleteThe answer is I don't currently know, but would be very very surprised if dividends were included. My thought is that March payrolls could be increased for small husband and wife type companies, to say £2,500 each. The advantage here is that this may give you 80% back. The disadvantage could be that you will not qualify and end up with an immediate tax and NI bill. We should know more this week.
ReplyDeleteTHE SALON WHERE MY WIFE WORKS HAS SHUT AND THEY SAY THAT SHE WILL NOT BE PAID AFTER THIS WEEK, CAN SHE BE REGISTERED AS FURLOUGHED BY HER EMPLOYER AND GET 80% OF HER NORMAL SALARY ? BARRY
ReplyDeleteHi Barry. The employer has the choice of laying her off (i.e.making her redundant or registering her as a furloughed worker and paying her the normal salary of which the employer will get back 80% of that cost.
DeleteAre you sure the employer has to pay the normal salary? Wasn’t it said that it was optional to make up the 20%? Can you please clarify?
ReplyDeleteThe latest guidance says that employers can choose to top-up pay, either for the unfunded 20% of pay or the amount above £2,500 for higher earners, but this will not be a formal requirement to obtain access to the scheme.
DeleteHi Matt,
ReplyDeleteCan you expect staff to work under furlough seeing as they are being paid, albeit by the government. Joe
Not really. The idea is that if there is no work, then you furlough the worker to retain him for when there is work. If there is work, then you pay them as normal and don't get the Govt rebate. Presumably this is open to abuse though.
DeleteCan a director benefit form the 80% support package?
ReplyDeleteThis has been the main question of the day from clients. initially, it looked like directors were not going to be able to benefit as the guidance is not clear.
HMRC has said Ltd Company Directors ARE entitled to claim 80% of their salary, however, dividends will NOT be included in calculating the amount they will pay.
This means that a director who has taken the annual personal allowance per year as a salary WILL be entitled to claim 80% of 1/12of this. Before anyone asks, you can't backdate it and show a higher salary. They will look at previous payrolls and can check payments made to you.
Those who take a higher salary will be capped at 2.5k to bring it in line with PAYE.
They also said, that those directors who ONLY take dividends as a wage, will more than likely fall under the Self Employed rules and as such will need to wait for the government to announce whether they will be planning any relief for the self-employed in this country.
This does create an interesting question, if the government does decide to help the self-employed, you might find a situation where directors who have paid themselves a higher rate of dividends could decide to claim via the Self Assessment route, instead of the salaried route, in order to increase the amount the government will pay.
However, you will need to keep in mind, that directors MUST follow the same rules as employees who have been furloughed, ( A fancy word meaning leave of absence!)
This means, that they will NOT be able to do ANY work for their company during the period in which a claim is made.
So directors will only be allowed to claim if they really do have to close their business down, simply being unable to afford to pay a wage whilst continuing to operate as a functioning director will not be acceptable to claim the relief.
How do you claim the 80% Support package?
The Chancellor advised that you can furlough your employees and they will receive 80% of their salary costs from the government. If there is a short term or lay off clause in the contract you cannot automatically do this, you still need the consent of the employee. In the current climate, we believe they will all agree, but you need to ensure you have that agreement in writing.
Employers who wish to follow this course of action must designate the affected employees as furloughed workers and notify them of this change. Then you should submit these details on an HMRC portal, which we believe isn’t ready yet. It is best to keep an eye on HMRC’s websites. HMRC will then refund the monies, once systems are in place.
The Chancellor stated the reimbursement is for 80% of an employee’s costs up to £2,500, this may mean the pension and NI contributions too, but we are awaiting some clarification. It is up to you, the employer if you agree to top up the 20% but you do need the employee's consent to do this unless it is contractual. Again, we would believe they would agree with this in the current circumstances.
During this furlough, to claim the money the employees should not undertake any work. The employee can’t decide they are furloughed, it is the employer’s decision.
Can an employee come off MAT leave early and be furloughed if it benefits them financially?
DeleteAlso what will the 80% be based on? Salary, last three month average pay??
Is a reply to an email to staff saying you are being furloughed enough to have agreement in writing or do I need to post a letter and get a signature?
Joe
There is an excellent video from a lawyer that discusses these points, it can be accessed here https://www.youtube.com/watch?v=ojZzBG-NFEA
ReplyDeleteIt is long (about an hour) but it discusses all these points including maternity etc - as most of us have now got plenty of time on our hands, I would say its worth a watch
Do you know if a business is able to take advantage of the interruption loans available to pay wages, if there isn't enough money in the business account to pay directors?
ReplyDeleteYou could certainly approach your bank and advise that a loan is required. May be some help for small Ltd companies in this afternoons speech
DeleteThanks Matt, we will see what is said this afternoon and take it from there,.
DeleteZero hour contracts - you can still furlough these workers
ReplyDeleteTo confirm the position on furloughing - if there is no work for a member of staff, write or email them advising that you intend on furloughing them from a particular date, otherwise the other option is redundancy. Get their agreement to this in writing. Advise them that they can't do any work for you. You are allowed to call them back to work and end the furlough. And then potentially you may need to refurlough them later. You pay them at least 80% of their pay and this will be funded at a later date to the company by the Government. Full details here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
ReplyDeleteHi Matt, question for Directors being furloughed.
ReplyDeleteCan you furlough for 3weeks then remove for a week then furlough.
Trying to get around the restrictions. I know you can start furlough mid month. Does it have to be for 3 months though?
Joe
Yes I believe you can Joe. Minimum 3 weeks for the furlough, then if there is some work, you unfurlough. And then if there's no work, then you can refurlough, again 3 weeks needed.
DeleteIt does not need to be for 3 months.
https://www.accountancydaily.co/hmrc-launches-beta-testing-80-furlough-portal-harra-tells-mps
ReplyDeleteworth a read in readiness for the 20th
ReplyDeletehttps://content.govdelivery.com/accounts/UKHMRCED/bulletins/285ab1c