Job Retention Scheme:
Detailed information has now been provided by the government on the job retention scheme, to support employers and employees during the current crisis and ensure as many individuals as possible retain their jobs. Full guidance is published on the government website – https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Key points to note are that:
- If you would like to furlough a member of the team they must have been on your payroll as at 28 February 2020, those on agency and zero contracts are included.
- Individuals made redundant after 28 February can be rehired and then furloughed to preserve their job.
- You need to write to your employees to advise that they have been furloughed, include the exact date and stipulate that they are unable to work at all during that period.
- If you have a lay off clause within your employment contract this should be exercised and no consultation or notice period will be required (dependant on how that clause is drafted).
- Where you have no contractual right to lay off or amend pay – this will become a change in the terms and conditions. As such you will be required to agree a variation of contract, in theory to implement this you could undertake a dismissal and re engagement process with consultation, however, this is unrealistic given the timescales involved. If you are dealing with in excess of 20 employees there is an argument that you should be conducting a collective consultation process – we would highly recommend that you discuss this with an employment lawyer to see how this process can be simplified.
- Under this scheme it is stated that employers must pay 80% of wages to the furloughed members of the team, which can then be claimed back from HMRC. Technically, unless you have a specific lay of clause, as an employer you are still liable to pay the 20% unless you have a specific agreement to the contrary with the employee. It is therefore vital that any letters send to employees seek specific written acknowledgement and acceptance of these terms.
- The grant to be repaid to you will include the lower of 80% of wages or £2,500 PLUS Employers NIC and minimum pension contributions.
- The rebate will be based on the employee’s actual salary before tax, as of 28 February 2020. Fees, commission and bonuses should not be included.
- For employees with irregular working hours the reference pay is the higher of average pay for the tax year or the same pay as that received in the prior year.
You do not have to furlough your entire workforce and you can retain some on their current basis if you have work available. However If you wish to furlough members of your team you must now:
- Designate which employees will be furloughed and notify them of this change and when it is effective from.
- Submit information to HMRC about which team members are furloughed via a new online portal. This is expected to be up and running by the end of April.
Self Employment income support scheme:
The chancellor has also announced the preliminary details of a scheme to assist self-employed individuals. The scheme is called the Coronavirus Self-employment Income Support Scheme (CSEISS) and may apply if you have suffered a loss in income due to the current crisis.
A taxable grant will be paid to the self-employed or individuals in partnerships, worth 80% of profits up to a cap of £2,500 per month. Initially, this will be available for three months in one lump-sum payment and will start to be paid from the beginning of June. You cannot apply for this scheme and HMRC will contact you if you are eligible for the scheme and invite you to apply online. Please bear in mind here that there are various scams doing the rounds so never give any personal information out to anyone over the phone.
To be eligible under this scheme you must have:
- have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19
- traded in the tax year 2019-20
- are trading when you apply, or would be except for COVID-19
- intend to continue to trade in the tax year 2020-21
- have lost trading/partnership trading profits due to COVID-19
Your self-employed trading profits must also be less than £50,000 and more than half of your income comes from self-employment. This is determined by at least one of the following conditions being true:
- having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
- having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period
If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return. There some individuals who have not yet submitted their 2018-19 Self-Assessment tax return and to qualify they now have until the 23 April 2020 to do so.
Please also remember that if you are self-employed you will not be required to pay the July 2020 tax payment as this will be deferred until January 2021.
If you have any queries regarding either of the above schemes or any of the other support available contact the team at Wells.