The Coronavirus Job Retention Scheme is designed to help employers retain staff during the coronavirus pandemic, even if they are forced to temporarily shut their business.

Employers will be able to claim a grant from HM Revenue and Customs (HMRC) to cover most of the wages of their workforce who remain on payroll but who are temporarily not working during the coronavirus outbreak.

The scheme will run until at least 31 May 2020 and payments can be backdated to 1 March 2020 provided that employees met the eligibility criteria at the time. The HMRC portal through which claims must be made is scheduled to come into operation on 20 April 2020.


Which businesses are eligible?

Any employer in the country is eligible for the scheme, provided that it had a PAYE scheme in operation on 19 March 2020.


What does the grant cover?

Employers may claim 80% of the normal pay of furloughed employees up to a cap of £2,500, plus the employer’s National Insurance contributions and minimum auto-enrollment employer pension contributions on that 80%.

The grant does not cover the cost of providing benefits-in-kind, and all sums received must be paid to employees in the form of money. No administration fee can be charged.

The expectation is that employers will need to continue to pay furloughed employees on their normal payroll dates, and will not be able to wait for receipt of the grant before making payments. This pay must be taxed as normal.


Which employees are eligible?

The scheme will apply to people who have been designated by their employers as ‘furloughed employees’ for at least three weeks. ‘Furloughed’ means still employed but not doing any work at all for the employer.

Employees who have had their hours reduced but who are still working will not be eligible. However, employees may carry out training and voluntary work provided that they do not provide services to or generate revenue for their employer or any linked entities. If they undertake training, they must be paid at least National Minimum Wage for the training time.

All employees who were in employment on 19 March 2020, rather than 28 February as previously announced, are potentially eligible. Those who started after that date are not, subject to the TUPE point below. Where employers have no work for new starters to do, they will need to agree to defer the start date or pay notice to cancel the contract.

HMRC has now confirmed that employees who transfer to a new employer under TUPE after 19 March 2020 are eligible and may be furloughed.

The scheme applies to all employees whether full-time, part-time or on zero-hours contracts. Apprentices are also covered. The scheme also applies to any other person paid via PAYE, including company directors and agency workers (if the agency pays them via PAYE, in which case it would be the agency who could furlough them).


Company Directors

As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

This also applies to salaried individuals who are directors of their own personal service company (PSC).


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