Further clarification of the scheme
Helpfully on Saturday further guidance was published on the .GOV website about the scheme. This latest guidance answers several outstanding questions including:
1) Confirmation that it is open to any business regardless of circumstances. You do not have to close or to be on the brink of bankruptcy to claim under the scheme.
2) Employees can be furloughed if the purpose is to enable them to care for children or others. Therefore, if an employee is struggling with childcare and working from home, for example, then they can ask you to furlough them and if you agree you can claim back 80% of wages. It is of course your decision to furlough someone but if they are struggling you may want to consider this option.
3) Not just ‘Employees’ are eligible under the scheme. It therefore covers the following people, as long as they were on the payroll – PAYE – on the 28th February 2020:
a. Office holders – including Directors.
b. Salaried members of an LLP.
c. Agency workers.
d. Limb (b) workers, i.e. those who are not quite employees but are not self-employed.
4) Company Directors can be furloughed as long as they are not undertaking any work for the Company. Although Directors can still fulfill their statutory/legal duties, as long as they do no more than would reasonably be judged necessary for that purpose.
Furloughed Directors need to proceed with caution and ensure that they are not undertaking work, beyond their legal duties, in the furlough period.
5) Agency workers can be furloughed by the agency as their deemed employer.
6) Confirmation of the furlough must be in writing to the employee and a record kept for 5 years. This is extremely important in respect of your legal obligations to the employee in any event but now it has been confirmed as a requirement you must ensure you have written to each employee, including any Directors who are furloughed. An email copy will be fine as long as you store it appropriately.
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7) When calculating what to pay you can include regular payments such as overtime, fees and commission payments where they are contractual, and you are required to pay them.
8) Discretionary bonuses, tips and commission payments and any non-cash payments are excluded from what you can claim back under the scheme.
9) Benefits in kind and salary sacrifice schemes should not be included when calculating the reference salary for the payments to employees.
10) The apprenticeship levy and student loans should be paid as normal and these cannot be recovered under the scheme.
11) Employees can be furloughed more than once as long as each period is more than 3 weeks.
I know from talking to many employers this was an important consideration as it will enable them to bring back staff to fulfil particular pieces of work or cover and then furlough again. It will also enable you to rotate the furlough among the workforce to provide fairness if necessary.
12) With your permission employees can obtain new temporary employment in the furlough period and it will not impact on your ability to claim for them.
If the permission to get another job whilst employed by you is not already contained in their contract of employment, then it is at your discretion to agree.
If an employee is on a zero-hour contract, then you should not refuse a request or seek to stop them working elsewhere during the furlough period as this would likely be contrary to the laws providing additional protection for zero hour employees.
13) Finally, the guidance deals with the tax treatment of the grant you will receive. It states that:
Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.
Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
Any questions about how you will need to report it and tax implications are best left for your accountant! If you do not already have an accountant or yours is not particularly helpful in this time, I highly recommend Jeri Williams and the team at Smooth who have been working tirelessly to stay on top of and communicate the impact of these changes.
You can also read the full details here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Please remember that this a brand new area for all of us (me included) and whilst we are doing our best to stay on top of the guidance and apply it to existing employment law, until the full regulations/law to implement the scheme are published not all questions can be answered.