Understanding the new Job Retention Scheme
The Covid-19 furloughing programme is moving into a new phase, writes Page Kirk's Director of Tax, NEIL MOON. Here's how to make sure everything is done by the book.
On 1 July 2020, the new Coronavirus Job Retention Scheme opens. From this date, employers will be able to bring employees back to work on a flexible basis and claim funding for the hours they haven't worked. It's important to note, however, that under this new scheme, employers will only be able to claim funding for staff who were furloughed for at least three weeks up to 30 June 2020. (The previous scheme closes on 31 July and all claims for periods up to 30 June must be submitted by this date.)
How does the new scheme work?
Claim periods must start and end within the same calendar month and must be for at least seven days. The only exception to this is where the claim period includes either the start or the end of the month. If a pay period includes days in more than one calendar month, it will be necessary to submit separate claims covering periods that fall into each month.
If an employee is flexibly furloughed, employers will need to calculate the staff member's usual working hours; record the number of hours actually worked; and also keep a record of the number of furloughed hours for each claim period.
This calculation will vary depending on whether the employee works a fixed or variable number of hours.
Summary of the new Coronavirus Job Retention Scheme
July – from 01/07/2020
- Employers can bring furloughed employees back to work for any length of time and any shift pattern and can claim for the hours not worked,
- The Government will continue to pay 80% of wages up to a cap of £2,500,
- Employer's NI and pension contributions will also still be covered by the government,
- Employers must pay employees for the hours worked.
August – from 01/08/2020
- The Government will continue to pay 80% of wages up to a cap of £2,500 per employee,
- Employers will have to cover the costs of employer's NI and pension contribution for the time the employee is furloughed.
September – from 01/09/2020
- The Government will pay 70% of wages up to a cap of £2,187.50 per employee,
- Employers will have to cover the costs of employer's NI and pension contribution for the time the employee is furloughed,
- Employers will also have to top up the employee's wages 10%, so they receive at least 80% of their usual pay, up to the original £2,500 overall cap,
- The cap is proportional to the number of hours furloughed e.g. If the employee is furloughed for 60% of their usual hours, then the cap is 60% of £2,500.
October – From 01/10/2020
- The Government will continue to pay 60% of wages up to a cap of £1,875,
- Employers will have to cover the costs of employer's NI and pension contribution for the time the employee is furloughed,
- Employers will also have to top up the employee's wages 20% so they receive 80%, up to the original £2,500 cap,
- Again, the cap is proportional to the number of hours furloughed.
Employers are still able to top up employee wages above the 80% limit if they wish.
Record-keeping requirements
Employers must keep a copy of all records for six years, including:
- The amount claimed and the claim period for each employee,
- The claim reference number for their records,
- Their calculations, in case HMRC need more information about their claim,
- Usual hours worked, including any calculations that were required, for employees they flexibly furloughed,
- Actual hours worked for employees they flexibly furloughed.
If you need more information or would like help with your Job Retention Scheme applications, please contact a member of our team on 0115 955 5500 or email enquiries@pagekirk.co.uk.