The Government has announced a huge package of support for small businesses to help them through the Coronavirus (Covid-19) crisis. One of the key measures introduced is the Job Retention Scheme. In principal, this grant will provide 80% of wages for employees not working, up to £2,500 per month. However, there are quite a few boxes to tick to receive this grant and the funds may take some time to come through.
We have put together a list of what you will need to consider below:
- Those members of staff furloughed must not work for the employer during their period of furlough.
- The period of furlough is available from 1 March 2020 (so can be backdated) – however this can only be implemented once the furlough has been communicated to staff and they have stopped working.
- It will last for at least three months and will be extended if necessary.
- It will be available to all employees who have been on the payroll since 29 February 2020 (so anyone joining after this date will not be eligible).
- All UK businesses are eligible.
- The payment made will be a grant – so this will not need to be re-paid in the future.
- The grant will be paid either as 80% of wages up to £2,500 wages, as we understand it the amount will need to cover employers’ NIC and pension contributions as well.
- A new online system is currently being built to enable the grant to be paid to employers.
- Employees will be paid as usual through payroll by the employer using Real Time Information (RTI) so system reporting will continue as normal.
- HMRC will administer the scheme with employers submitting information through their new online system (currently being built).
As this system may take some time to be put in place, employers will need to fund this themselves for the time being. There are several funding options available if you need to source cash in the short-term to cover these costs, please do get in touch to discuss these.
XYZ Limited employs Mr Smith at an annual salary of £24,000 so £2,000 per month. Mr Smith has opted out of auto-enrolment.
Each month, he receives net pay of £1,665 after deducting PAYE of £191 and NIC of £144 (employees). XYZ Limited pay employers’ NIC of £174.
The grant available to XYZ Limited will be as follows:
80% of £2,000 + £174 = £1,739.
XYZ Limited would need to decide if they would top up Mr Smith’s salary in order to ensure it was not lower than previously.
There are several HR considerations around this such as changing the status of designated employees (subject to employment law, and depending on the employment contract), may be subject to negotiation. Our HR Partners at Adastra can provide you with all the support you need to put the correct HR contracts into place you can get in touch with them on 0330 113 0925 quoting ‘Clear Vision’.
If you need support with the payroll side of things, please get in touch. We can help ensure you have the correct procedures in place and take the stress of payroll away from you.