Coronavirus Job Retention Scheme – Updated Guidance and Considerations
The government has updated the details relating to the Coronavirus Job Retention Scheme. They have issued clearer advice for directors, provided detail on employees undertaking voluntary work and have also provided more information on benefits in kind and salary sacrifice schemes. NEIL MOON, Director of Tax, picks out the updated guidance in this article.
Guidance for company directors
One or more individual company directors can be furloughed if decided by the board and formally endorsed as a decision of the company. A note of the decision and action taken should be kept in the company records.
Furloughed directors may carry out statutory obligations for their company, but must do no more than is necessary for that purpose and should not do work they would perform in normal circumstances which generates commercial revenue or provides services.
Employees undertaking training or volunteer work
A lot of employers and employees have been asking if furloughed employees can work as volunteers. This is allowed and encouraged, but only if the voluntary work does not provide services or generate revenue for – or on behalf of – your business.
As long as they comply with public health guidance, an employer can agree to find other work or volunteering roles for an employee while they are furloughed.
This might be an ideal time for furloughed employees to undertake training. Again, it is allowed and encouraged. However, any training cannot provide services to, or generate revenue for, your business.
How much and what you can claim
HMRC will reimburse 80% of furloughed workers' wage costs, up to a cap of £2,500 per month.
If an employee is only furloughed for part of the three-month period (which could be extended depending on the length of the pandemic), the employer can only claim back for the period for which they were furloughed. Claims start from the date the employee finishes work and starts furlough and not when the decision has been made.
Once the decision has been taken, the employer needs to tell the employee in writing their status is changing to furloughed.
The employer still needs to pay National Insurance and pension contributions on behalf of furloughed employees, but you can claim these back. Additional non-mandatory National Insurance or pension contributions cannot be claimed back.
It is also worth taking note that to be eligible for the grant, employers must confirm in writing to their employee that they have been furloughed. A record of this communication must be kept for five years.
Benefits in Kind and Salary Sacrifice Schemes considerations
When making a salary claim, it should not include any of the non-monetary benefits provided to employees. This includes taxable Benefits in Kind, such as company cars and private medical insurance and any benefits through salary sacrifice schemes (including pension contributions).
For example, if the salary of the employee was £40,000, but £5,000 was paid into the employee's pension as a salary sacrifice, the reference salary becomes £35,000.
In normal circumstances, employees cannot switch so easily out of a salary sacrifice scheme unless there is a life event. HMRC has confirmed that COVID-19 counts as a life event that could justify changes to the arrangements of the salary sacrifice, but the employment contract would need to be updated accordingly.
National Minimum Wage Considerations
Furloughed workers who are not working can be paid 80% of their salary, even if this would fall below the National Living Wage (NLW), National Minimum Wage (NMW) or Apprentices Minimum Wage (AMW). Employers will not be required to make any extra payments to meet any minimum wage rules.
However, any employee undertaking training whilst furloughed must be paid in accordance to minimum wage rules for the hours spent training. If the furlough payment is not enough to meet the minimum wage rules for all the hours the employee undertakes training, the employer must pay the additional wages.
Minimum furlough periods
If you place any employees on furlough, they must be furloughed for at least three consecutive weeks. They must be taken off furlough as soon as they return to work.
Employees can be furloughed multiple times and each separate time must be for a minimum period of three consecutive weeks.
Working for a different employer
If any of your employees on furlough find other work, they are permitted to work for another employer provided their contract allows it. This applies until you take them off furlough and they return to work for you.
If you are hiring someone who is furloughed from another company, they should complete Statement C on the P46.
It is also worth noting that to be eligible for the grant, employers must confirm in writing to their employee that they have been furloughed. A record of this communication must be kept for five years.
If you are finding it difficult to claim back furloughed staff wages, we have a dedicated team that will assist with this when HMRC provides the facility to do make the claim. To save you time and to give you peace of mind, contact us on 0115 955 5500 or email enquiries@pagekirk.co.uk.