With the fast-changing situation that is Covid-19, our Employment/HR lawyer has put together three things you need to know.
The government will provide for all employers to potentially recover up to 80% of regular employee pay (up to £2,500 a month) from HMRC. This will apply for a 3 month period where an employee is not working but is kept on the payroll or ‘furloughed’.
The scheme is open to all UK employers that had a PAYE scheme in place on 28 February 2020. The employee must have been on the payroll on this date. Anybody who was on the payroll then, and has since been made redundant, can be rehired and put on the scheme.
To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication. The employer can choose to top up to 100%, but does not have to (subject to employment law and renegotiating any contractual entitlements). Get in touch if you wish to buy a Furlough Agreement which will also enable you to reduce pay by 20%. (Use Code LawChat 30 to take 15% off )
- Employers can only claim once every three weeks; they cannot get weekly reimbursement. Claims can be backdated to 1 March 2020.
- If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
- The employer can additionally claim associated employer NICs and minimum auto-enrolment pension contributions on that wage. Fees, commissions and bonuses are not included.
- For employees whose pay varies, the employer can claim for the higher of (i) the same month’s earning from the previous year (e.g. earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year.
- Furlough leave must be taken in minimum blocks of three weeks but nothing in the guidance prohibits rotating furlough leave amongst employees, provided each employee is off for a period of at least three weeks. The employee must not be working at all during their entire furlough period.
- Employees on sick pay or self-isolating cannot be furloughed but can be furloughed afterwards. Employees who are shielding can be placed on furlough.
- The guidance does not prohibit women on maternity leave agreeing to return to work early and then being furloughed.
- The scheme is only available for agency employees who are not working.
The government will issue further guidance on the mechanics of claiming the payment in due course. It says it expects the scheme will be up and running by the end of April – find more information here.
If you have questions about the scheme and specific employee situations, please get in touch. Anyone using this link to book a telephone call will receive a Furlough Agreement which will vary terms and conditions of employment so that salary can be lawfully reduced during ‘furlough’. We are offering a 15% discount on our usual terms: for £51 you can have a 30-minute call and a Furlough Agreement tailored to your requirements. (Use Code LawChat 30 to take 15% off )
Information for Employers
The latest government guidance can be found here: www.gov.uk/guidance-to-employers-and-businesses-about-covid-19
Ultimately, the key government support mechanisms for businesses are:
- statutory Sick Pay for 2 weeks if you have to self-isolate;
- 80% salary retention package;
- deferral/ Time to pay service i.e. if you need more time to pay your taxes, you can request to have a payment plan put in place with HMRC;
- business Interruption Loan Scheme;
- Universal Credit;
- 3-month mortgage holiday; and,
- suspension and rescheduling of VAT payments and self-assessment payments.
Proposed Protection for Self-Employed and Freelancers
Rishi Sunak, the Chancellor, has just announced outline details of the rescue package for self-employed individuals.
Here are the key points:-
- a new self-employed income support scheme will pay self-employed people a taxable grant worth 80% of average monthly income, capped at £2,500pm;
- income will be calculated by taking the average of income over the last three years;
- self-employed people can claim these grants and continue to do business (so it’s not the same as furlough leave, where employees have to remain at home);
- the scheme is only open to anyone with trading profits of up to £50k (this covers 95% of self-employed people). Self-employed people who earn more will not qualify;
- the scheme is only open to those who make the majority of income from self-employment; if you are employed but have a ‘side job’ which is self-employed, you will not be eligible;
- the scheme is only those who have submitted a tax return for 2019 (this is to minimise fraud). However, those who did not submit their tax return by the due date of 31 January 2020, and have not yet submitted one, can still submit a tax return for 2019 for a further four weeks from today;
- there are no steps to take. HMRC will contact eligible self-employed people directly and pay the grant straight into their bank account after inviting them to fill out an online form; and,
- the self-employed income support scheme will be open to people across UK for at least 3 months. However, the scheme is unlikely to be up and running before the end of June, so it will not help with immediate cash flow issues.