Coronavirus Job Retention Scheme FAQ’s

  • What is the scheme for?
    The Government have announced the Coronavirus Job Retention Scheme to protect employees who would otherwise have been made redundant or laid off in the current crisis. The scheme enables them to come back into the business as soon as the business is able to bring them in.

    The scheme is open to all UK businesses and will last for 3 months, though they have stated it will be extended if necessary.

    How does it work?
    If an employer is being affected by the current crisis they must assess their current workforce. If only some of the workforce are to be furloughed the employer must be able to demonstrate that decisions have been taken on a fair and logical basis, ie the need for that part of the business has reduced or paused.

    Once the assessment has been made the employer must seek agreement from the affected employees. Furloughing is a change to the contract of employment and therefore the agreement should be in writing.

    If employees have already been laid off this decision can be backdated to 1st March 2020.

    ALL furloughed employees must have been on the payroll as at 28th February 2020.

    Furloughed staff cannot do any work in the business.

    How to run the payroll?
    HMRC will cover 80% of the furloughed employee’s pay (subject to a monthly limit of £2,500), plus the associated Employer’s National Insurance Contributions and mandatory Auto Enrolment Pension Contributions.

    An employer may choose to “top up” the remaining 20%, however if this is done for one, it must be done for all furloughed employees.

    The payroll is run as normal- reducing furloughed employees down to 80%- and submitted to HMRC as usual.

    How to reclaim?
    HMRC are currently setting up a portal to facilitate the claims. This is expected to be in place by the end of April.

    Are company directors eligible?
    There has been some confusion over this, however current guidance suggests that if the business ceases to trade temporarily this is allowable for all directors. However, they must undertake no duties whilst they are furloughed. Obviously, for companies with one director, this may be difficult to do in practice.

    Where a company has more than one director, it would certainly be possible to furlough all but one, leaving them to deal with any company administration in the interim period.
    It is also worth noting that the scheme will only cover 80% of the declared salary, not any dividend income.

    What’s the smallprint?
    • Whilst furloughed, an employee must not undertake any work for the business
    • A period of furlough must last for a minimum of 3 weeks but you can furlough the same multiple times as long as each period is 3 weeks or greater
    • Annual leave entitlement and any other employee benefits continue to accrue during furlough
    • The funds received are a grant not a loan so not repayable to HMRC
    • Payments to employees should be made as normal, HMRC will then reimburse the employer

    Author Profile
    Owner and Managing Director at Mollan & Co

    I'm the owner and Managing Director of Mollan & Co Accountants. I'm a skilled and efficient accountant with more than 20 years of experience in the industry.

    I developed valuable skills in commercialisation through my work in the science and technology department at the Scottish University. Then, in 2002, I formed my own internet-based marketing company, producing and distributing 360° virtual reality tours for the Scottish tourism sector.

    I now use my commercial skills, expert tax knowledge and first-hand experience to help other businesses grow and flourish through strong accounting practice.

    Our success at Mollan & Co is directly related to the success of our clients.