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Directors are now eligible under the scheme. So, you can be furloughed and undertake general matters such as emails and your statutory duties. This enables at least some support for directors which is positive news. However, it was confirmed that dividends do not form part of the scheme. Directors usually have a strategy of low salary and dividends to make up their remuneration package. So, this is not good news for Directors.

Further detail has been released on who can claim. The furloughed employees must have been on your payroll on 28 February 2020 and can be on any of the following type of contract:

  • Full-time employees
  • Part-time employees
  • Employees on agency contracts
  • Employees on flexible or zero hours contracts

The scheme also covers employees who were made redundant since 28 February 2020, if they were rehired by the employer.

Further details on how to work out the claim have been announced. We stated earlier that the maximum was £2,500.00 per month. The grant will cover the lower of 80% of an employees regular wage or £2,500.00, plus Employers National Insurance contributions and the minimum automatic enrolment employer pension contributions. Fees, commission and bonuses are not included.

At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500.00. An employer can choose to top up an employees salary beyond this but they are not obliged to under this scheme.

For full time and part time salaried employees, the employee’s actual salary before tax, as of the 28 February should be used to calculate the 80%.

For employees whose pay varies it is more complex. If the employee has been employed (or engaged by an employment business) for a full twelve months prior to claim, you can claim for the higher of either, the same months earning from the previous year or the average monthly earnings from the 2019-20 tax year.

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they stared work.

If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

National Living Wage/National Minimum Wage entitlements are only applicable if you are working. As the employee is not working when furloughed, this does not apply.

Employers should discuss with their staff and make changes to the employment contract by agreement. We would recommend that you obtain professional advice regarding this contract change.

We are now aware of what we will need to claim. This is the following:

  • Your paye reference number
  • The number of employees being furloughed
  • The claim period (start and end date)
  • The amount claimed (per the minimum length of furloughing of 3 weeks)
  • Your bank account number and sort code
  • Your contact name
  • Your phone number

You will need to calculate the amount you are claiming. It seems that this will not be linked to your payroll software and HMRC will not be wanted individual calculations per employee.

You can only submit one claim at least every 3 weeks, which is the minimum length that an employee can be furloughed for. Claims can be backdated until the 1st March if applicable. Further guidance on this backdated claim is required.

The information will be entered into the HMRC portal. No further news of when and where this will be have been announced. The payment will be made by BACS to your account.

From an operational point of view, we are suggesting setting up a new pay field in your payroll software so that it is clear what element is furlough pay. Little guidance has been provided on this matter.

Tax and National Insurance is due on the furlough pay.

Holiday pay will accrue during the furlough pay period. It was announced on Friday that holiday entitlements would we carried forward for two years. This ensures employees will not loose this entitlement. Further guidance will follow on this in due course. It is hoped that employers will have to right to ensure workers are working when most required under the new rules.

In other COVID-19 matters, it was announced on Friday that insolvency rules would be changed to assist companies in financial difficulties. The Government will relax wrongful trading provisions to help businesses in their fight to survive. Further guidance on this will follow.

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