Latest News

The Coronavirus Job Retention Scheme: a guide to furlough leave

Designed to support businesses whose operations have been severely affected by COVID-19, the Coronavirus Job Retention Scheme allows employers to claim for 80% of furloughed employees’ usual monthly wage costs. In this article, Nottingham chartered accountants Clayton & Brewill provides a guide to furlough leave, including recent updates regarding furlough leave for directors and for contingent workers.

The government introduced the Coronavirus Job Retention Scheme in March in a bid to avoid mass redundancies being made by UK businesses that have been severely impacted by coronavirus. Any UK organisation with employees can apply, providing it created and started a PAYE payroll scheme on or before 28 February 2020 and has a UK bank account. The scheme allows employers to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, for up to £2,500 a month.

Eligibility

• Furloughed employees must have been on your PAYE payroll on 28 February 2020.
• Employees who have been made redundant since 28 February 2020 are also covered by the scheme. This is providing they are rehired by their employer.
• Employees on any type of contract are eligible.
• If an employee is working, but on reduced hours or for reduced pay, they will not be eligible for this scheme.

What it means for employees

• When on furlough, an employee must not undertake any type of work for the organisation.
• The employee’s wage will be subject to usual income tax and other deductions.
• Furloughed employees have the same employment rights as before.
• This includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and rights to redundancy payments.

Furlough guidance for directors

The government has confirmed that a director can be furloughed in the same way as other employees. However, they can still carry on the statutory duties as a director, as these do not count as work. If a director receives a salary through PAYE, they are eligible for the support of 80% of their qualifying salary. This is up to the £2,500 monthly limit.

Circumstances will vary, and there is still a lot of uncertainty surrounding furlough leave for directors. Please do get in touch if you have any additional questions, as Clayton & Brewill can provide guidance tailored to individual cases.

Clarification for ‘contingent workers’

The Cabinet Office has published updated guidance confirming that furlough leave can also be offered to off-payroll contractors working for public sector organisations, described as contingent workers in the announcement. It clarifies that the payments apply to PAYE, Umbrella, and Personal Services Company contractors.

What the Coronavirus Job Retention Scheme means for employers

For many employers, the Coronavirus Job Retention Scheme will allow them to retain and continue to pay key members of staff that would have otherwise been made redundant. It means that, when the crisis is over, employers will have an existing workforce ready and waiting to resume work, rather than having to go through a lengthy recruitment process.

Further government guidance on the Coronavirus Job Retention Scheme can be found here.

If you have any questions or need advice on how to pro-actively manage the impact of COVID-19 on your business, please do not hesitate to contact a member of the Clayton & Brewill team, and we will be happy to provide additional guidance.