Daily COVID19 update: 2nd April 2020 – Payroll Furlough Facts – we thought it would be beneficial to bring you the answers to the most common questions you are asking regarding the Coronavirus Job Retention Scheme – Payroll Furlough Facts & the Coronavirus Job Retention Scheme.
Q: Who is covering the employer NI & minimum auto enrolment pension scheme payments if I furlough an employee(s)?
A: If you are a UK business and have furloughed employees the Government will cover employer NI & minimum auto enrolment pension scheme payments.
Q: Can a furloughed employee continue to do any work for the company?
A: As per the new guidance released, a furloughed employee is allowed to do certain activities for the business, as long as that activity doesn’t constitute work, albeit any time spent, needs to be paid as regular salary rather than a furlough payment.
Q: Does a company need an employees agreement to be Furloughed?
A: Yes, a company will need a written agreement that has been signed by the employee to confirm that they understand they have been furloughed and agree to take a pay cut if the employer is not topping the salary up to 100%.
Q: Is the 80% up to a cap of £2,500 of the employees net or gross salary?
A: This has been confirmed as the employees gross salary.
Q: What happens to employees on variable wages?
A: for employees whose pay varies, we now know that the amount that can be claimed is the higher of the following:
- the same month’s earnings from the previous year; and
- average monthly earnings in the 2019/20 tax year
This should exclude any commissions or bonuses. If the employee started work in February 2020, their salary can be pro-rated to come to an average monthly amount.
Q: Does a company have to top up my employee’s salary from the 80% to 100% of their usual salary?
A: No. It is acceptable to reduce an employee’s furloughed wage to 80% of their normal salary.
Q: Can an employer continue to pay 100% of an employee’s salary?
A: Yes, however the company will need to pay the additional amount – either 20% or the amount over the £2,500 cap themselves. They will also need to fund the employers NIC and pension contributions that relate to this additional amount
Q: Do Directors qualify for the Job Retention Scheme?
A: HMRC have confirmed that directors will be capable of claiming a furlough reimbursement in relation to their own salaries, even whilst they continue to fulfil their statutory duties, including preparation of accounts – however this does not include dividends.
Q: Will the employees payments be subject to normal PAYE and National Insurance contributions?
A: Yes employees PAYE and National Insurance will be deducted via the payroll system as normal
Q: How long will the scheme last?
A: At least 3 months, from 1 March 2020, but it may be extended. Furloughed employees will need to have been on February’s payroll to qualify for the reimbursement.
Q: Can a furloughed employee be taken in and out of furlough?
A: Yes but each furloughed period must be a minimum of 3 weeks. For example, an employee could be furloughed for the first 3 weeks in the month, then work for a week, then you can repeat this each month following for the duration of this scheme.
Q: Can an employee get another job whilst furloughed?
A. Yes, there is nothing stopping an employee from getting another job as long as it does not breach the existing employment contract. Ensure they consider notice periods for the new job, it would be better to get a temporary job. Also any employment income from this second job would be subject to PAYE and NIC. If you are furloughed and considering getting another job please speak to your current employers HR team first.
We have published other key points to note for businesses and self-employed during the COVID19 Crisis: please click here to view.
We are here for you during this difficult time & we will keep you updated as the Government releases new information. Our business contingency plan is in place and we will do everything we can to support our clients during this uncertain period, please do not hesitate to contact us here if you have any concerns or queries.
From Team HB
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The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above