This weekend (4th April 2020) the Government issued further guidance and clarity on the Coronavirus Job Retention Scheme, here’s a summary:
Eligibility has been extended to individuals who are not necessarily employees in employment law terms but who are paid via PAYE including:
As expected, Directors can be furloughed, but the guidance does state that the decision to furlough a Director should be considered and documented as a formal decision of the company (board minutes) and the Director notified in writing.
While the guidance acknowledges that a Director has statutory duties which are separate from their employment obligations, it does not give a great deal of additional information. It simply states that “they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provide services to or on behalf of their company” which leaves a lot of scope for interpretation, and so I would say Directors should act with extreme caution if undertaking any activity for the business while furloughed. This will be particularly important for individuals within a PSC.
You can only claim from the date an employee physically stops working.
As noted previously you can claim for your Employers National Insurance and Pension Contributions. However, this does not extend to an amount paid because you choose to “top up” an employee and also does not cover pension contributions that are above the mandatory employer contribution. If you have a pension scheme which varies from the workplace automatic enrolment scheme, then you will need to continue making the appropriate contributions and so this may result in a shortfall in your payment from the government under this scheme.
There is now confirmation that overtime, fees and compulsory commission payments can be included in the claim. So for workers on variable pay where you can claim for the higher of the amount paid in the same payment period last year or the average of the payments in 2019/2020, you can include overtime. However, any payment which is “discretionary” such as a bonus or non contractual commissions and non cash payments must be excluded. Again this leaves room for interpretation and so isn’t hugely helpful, particularly in respect of commissions.
BIK and Salary Sacrifice Schemes will not form part of the amount you can claim. Importantly HMRC has agreed that COVID-19 is a life event allowing employees to opt out of a salary sacrifice arrangement but you will need to agree this with the employee and amend their employment contract.
For further details on the Job Retention Scheme, including FAQ and a link to a downloadable letter template, please click here.