March 24th – Job retention Scheme/Furloughed workers

Some practical guidance

Let’s not forget that Employment law is incredibly complicated and specialist advice from a qualified professional is always advised – this guidance is an overview to allow you to consider your next steps

What is a ‘furloughed’ employee?

Someone who remains in employment of the business, but is on temporary leave due to the special (current) needs of the business.

How do they become ‘furloughed’?

As we understand it, they can simply be told their status has changed from ‘employed’ to ‘furloughed’

It’s possible their contract may allow for this.

If the contract does not a provide for the employee to become furloughed, you may have to agree to that by way of a separate letter.

What duties does a furloughed employee have?

None, and it’s important that they have none. If they do work for an employer, the employer stands to forfeit the ability to claim the grant (see below).

And if they don’t want to be furloughed or agree to be furloughed?

Then they don’t have to, but the alternative will most likely be redundancy

Why offer furloughed?

Two reasons:

it keeps your team ‘employed’ so that when this mess is over you can re-engage on the same terms as when you left off (can you remember back to the day when it was incredibly difficult to find decent employees?)

the Government has agreed to pay a grant (capped at £2,500 per employee, per month) to cover 80% of the cost of employment.

What about the 20% not covered by the Government?

The employer has the option to top up if they are so able.

Does that mean the employee will get a minimum of 80% of their gross salary?

Yes, i think so. As long as the employees pay plus on costs fall under the £2,500 cap

Are furlough payments taxable?

Yes, in exactly the same way any other income received from an employer

How is the ’normal’ salary calculated?

I’m guessing it will be an average of, say the last 3 or 6 months salary

Is it too late to bump up salaries so that I can claim the highest amount amount?

 I would think so.

I’m a director, can I become furloughed and claim the 80%?

Possibly, but this needs careful thought

> furloughed means ‘do nothing’ – is that practical?

> most businesses will still have daily/weekly needs (including payroll)

> most importantly we all want to ensure we have a business and an economy to come back to, some directors will have no choice, but for many I would imagine there is a lot to do and ‘doing nothing’ is not really an option.

Ok, I understand, how do I claim the grant from the Government?

It will be claimed through a new Portal on the HMRC site (that is currently ‘under construction’)

How soon will the cash start flowing to cover these furloughed costs?

Current indications are that we won’t see any cash until the end of April

That seems a long way away but I’m guessing the thought process is; most employers have committed to their March Payroll, the next month’s payroll being April.

This will impact employers of weekly paid staff sooner.

Cashflow support may be available through the Coronavirus Business Interruption Loan Scheme (a whole different subject)

Summary

The Government’s intention here is to keep as many people employed as possible, and by opting to treat them as furloughed (temporarily putting them out to pasture until the milk lorry turns up again), the Government has agreed to pay 80% of the employment costs.

So for the employer, (unless they wish to top up) it should be cost neutral. It’s also a grant and non repayable.

And for the employee it’s significantly better than being made redundant.

Clearly we don’t have all the facts neither do we purport to be ‘employment experts’ so there are holes in this and we will fill them in as and when we can.

 

The Team

I’m delighted to report that the whole of my team are taking this matter very seriously. They are all safely tucked up in their own homes and we are all working full time, not only fulfilling your normal accounting requirements as regards filing VAT returns and getting accounts to Companies House, but also helping you decipher whatever queries you may have following the Government’s proposals for financial assistance. Additionally we can help you with cash forecasts, budgets etc etc.

Clearly, the work load has trebled for us, but it is precisely what we have all trained for and we are fully here to help.

Please contact us with any queries you may have.
  • Landline – 01326 660022
  • Mobile/What’s App/Text – 07779799995 – Mike Hutchinson
  • Zoom – ID 205-677-7765 – Mike Hutchinson