10 things you need to know about the Covid-19 Job Retention Scheme

The government have issued a great deal of guidance on the Job Retention Scheme. Full details can be found at:

https://www.gov.uk/guidance/ch...

The following are the top 10 key things to know.

1.    Furloughed members of staff must not work for the employer during the period of furlough.

2.    Furlough is from 1 March 2020, so is to be backdated. It will last for at least 3 months and will be extended if necessary. Note that while the scheme is backdated to the beginning of March as it is intended to support all those employed then, a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. This will of course be subject to employment law in the usual way.

3.    The scheme is available for employees on the payroll at 28 February 2020.

4.    All UK businesses are eligible, 'any employer in the country, small or large, charitable or non-profit' to use the Chancellor's words.

5.    Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme. Such companies must have been paying a salary through a payroll to be eligible for a grant. We do not yet know the extent to which minor directorial duties would be disregarded but most advisers feel that these would be allowed so long as all other work has ceased.

6.    The scheme pays a grant (not a loan) to the employer.

7.    The grant will be paid to the employer through a new online system which is being built for this purpose. There is no detail about the application process at the moment.

8.    The employer will pay the employee through payroll, and report payments to HMRC using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be re-negotiated, but that is a matter for employment law.

9.    The scheme will be administered by HMRC:
•    Relevant employees must be designated as furloughed employees.
•    Employers will submit claims to HMRC through a new online portal.
•    As the system will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. The narrative used in the information released so far says ‘if your employer cannot cover staff costs due to COVID-19 they may be able to access support…’. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined, nor whether there is a bar of some description.

10.    The maximum grant will be calculated per employee and is the lower of:
•    80% of ‘an employee's regular wage’ and.
•    £2,500 per month.

Plus the associated employers’ national insurance contributions (NIC) on this amount and the minimum automatic enrolment employer pension contributions on that wage.

Fees, commission and bonuses should not be included.

This gives a maximum cap of £2,500 +£245 (employers’ NIC) + £59 (auto- enrolled pension contribution) = £2,804 of total possible grant that can be applied for per employee per month.