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New government Coronavirus Job Retention Scheme & what we know so far

The UK Government has announced a series of targeted measures to support individuals and businesses in response to COVID-19. One of these measures is the Coronavirus Job Retention Scheme.

Under the Coronavirus Job Retention Scheme, the Government will help pay private sector employee wages.  To encourage employees to ‘furlough’ staff rather than lay them off, HMRC is to provide grants which will cover 80% of the salary of retained furloughed workers of up £2,500 a month.  The Chancellor stated that “employers can top up salaries further if they choose to”, suggesting employers may not need to pay more than the amount granted for the furloughed employee.

All UK businesses are eligible.  As such, the scheme will be open to any employer in the UK, regardless of size or sector, and will cover wages backdated to 1 March 2020.  Employers must apply to HMRC for the grants. The Government is aiming for the scheme to be up and running before the end of April 2020, with the first grants to be paid shortly thereafter. As of now the scheme will be in place for at least three months but will be extended as needed. The Government has placed no limit on the funding available for the scheme.

Though the process for this is not yet defined, employers will need to designate affected employees as ‘furloughed workers,’ and notify their employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. The Government has said that the grants will be made if an employee is “not working”. Please note that it is unclear whether employees already laid off can be taken back and furloughed.

Employers will then need to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.  Further details on this process and the information required has not yet been made available by HMRC.

HMRC is also working to set up a system for reimbursement as existing systems are not set up to facilitate payments to employers. The Government did not provide guidance on the tax and National Insurance implications of the grant, particularly for employers.  The impact to employee and employer pension contributions is also unknown at this time.

For further information and assistance on COVID 19 please click here and review the government website.

We will determine how this will impact your payroll process when we have additional information.  We will of course keep you updated.

In the meantime, please feel free to contact us at any time whenever you have questions or concerns.