The offer by the Government to pay up to 80% of an employees salary costs (or £2,500, whichever is the lower) has been seen by many businesses as one of the few life lines available to help them survive this near total shutdown in our economy. On Monday of next week, the long awaited HMRC Portal opens. This will allow businesses to make their claims for the payments they have made to employees who have been furloughed.
There are a few important points to note;
– From a cashflow perspective the claim is retrospective. Although the guidance says you can make the claim at the time you run the payroll, there are 6 working days between the claim being submitted and you receiving the cash. This is not surprising- fraud is an issue here and HMRC will want to run their checks, so this is a forewarning that you are going to have to take a leap of faith as you bank roll these payments for slightly more than a full working week.
– The first claims that can be made (on Monday 20th) will be in respect of March payrolls you have already run (or an April payroll if you have already run it)
– The eligibility of employees has been extended – hoorah! Well, kind of. The legislation now covers those employees who were on your payroll as at 19th March 2020 (not 28th Feb as previously stated). Therefore, if you employed someone on, say, 2nd March, they are now eligible to be part of the grant claim you make for furloughed employees (presuming that you have furloughed them). However, and it’s a big however, you needed to have run the payroll and submitted an RTI on or before 19th March. This will probably work for weekly paid employees, but most monthly paid employees don’t get paid until the month end. So, no claim
– Furthermore, with regard to the extension in the eligibility, if the employee was not on the payroll and submitted on or before 19th March 2020 they are excluded for the whole period of the grant claim (currently, the three months ended 31 May 2020). For monthly paid employees, I suspect this extension will sweep up very few additional employees.
– If you had an employee on the payroll as at 28th Feb 2020, and then made them redundant in the first few weeks of March (prior to 19th March 2020) you are entitled to re-employ them, put them straight onto furlough, and be able to claim for their salary costs (meeting the 80% / £2,500 rules)
The information on the HMRC website is constantly being updated and if you want to read more, press this.
An important distinction between ‘a furlough payment’ and the ‘claim for a grant to cover the salary costs’
It’s up to every employer to choose whether or not they wish to change the status of an employee from that of ‘employee’ to that of ‘furloughed’. Equally, the terms of the ‘furlough’ are entirely at the employer’s discretion. He or she is expected to write to the employee stating the change of status, and the terms of the furlough. Ideally, the employee would respond in writing that they accept, or not. If they don’t respond it may not be unreasonable to assume that ‘by conduct’ i.e. not turning up for work, performing any fee earning activity or any service for the company, that they accept. And of course, if the employee does not accept the change of status or terms, then the options open to the employer are to continue under the same employed terms, or consider taking steps towards redundancy.
Normal (is that word now redundant?) Employment Law continues to apply throughout this whole process, and it won’t come as a shock to any employer that you should seek guidance every step of the way, just as you would if you were about to cross a minefield in Aleppo. I am clearly no expert and I am only hoping to draw your attention to points you may wish to consider.
The claiming of the grant, under the Government’s Coronavirus Job Retention Scheme, is independent (to a degree) of the above process. The purpose of the grant is to encourage employers to not make staff redundant but rather use the furlough scheme, and in so doing, they then become eligible for a grant to cover the costs of employment.
I have had many conversations with employers where the employee interprets the rules that the Government have set out for the reclaim of the grant, as the rules for furlough. That is not the case. The employer is entitled to reach whatever agreement he or she wishes with the employee, and having done so review the rules that set out the terms of of the grant to establish if a claim can be made. Clearly, there are many reasons why the employer might wish to align the furlough payment with the terms of the grant reclaim.
Don’t forget holidays at this time. What we all need to be careful of, is allowing our employees to go through an extensive period of furlough only to then return to work and turn on their heels and disappear for two weeks holidays. There are a number of ways you can approach this;
– The first thing to note is that during a period of furlough, holidays must be paid at 100% of the employee salary. That means that if you wish an employee to take some holiday you will be required to ’top-up’ their salary to 100% (assuming you are not paying that already). That means the cost to you as an employer is an additional 20% (if you are currently paying 80%). This is by far and away the ‘cheapest’ way of doing this, but not forgetting that it needs to be by agreement.
– I have also seen one employer top up to 100% throughout the period of furlough in return for an agreement from the employees to take one days holiday for each week of furlough.
As mentioned above, tread carefully in this most dangerous of areas. In fact we are happy to offer you direct access to a specialist furlough helpline at Croner Tax-wise 0844 892 2807, quoting reference CTX00883.
We are really happy to help you with this, please don’t hesitate to get in touch.
Landline – 01326 660022
Mobile/WhatsApp/Text – 07779799995 – Mike Hutchinson
Zoom ID – 205 677 7765 – Mike Hutchinson