Furlough leave: Can your business claim?
LAST UPDATED 10.00AM 26 March 2020
As a business owner, you might be wondering what support is available to cover wage costs. You might have heard about the Coronavirus Job Retention Scheme and the term furlough leave. The UK government announced a raft of schemes to alleviate the impact of COVID-19 and one of those is the job retention scheme. But can your business claim?
So that you don’t miss out on the support you need, we’ve outlined what is meant by furlough leave, who can claim the grant and how to do it.
What is furlough leave?
Furlough is really an American word meaning ‘leave’ or ‘sabbatical’. So, in real terms, furlough leave means employees need to be sent home without work. It doesn’t mean employees who continue to work from home rather than their normal place of work.
Who can claim it?
All UK employers are eligible for this scheme, whether a sole trader, partnership, limited company, limited liability partnership, charitable or not-for-profit business. You must designate workers as ‘furloughed’ (sent home without work) and inform both them and HMRC.
HMRC will reimburse 80% of wage costs, up to £2,500 per month (which is the figure being paid to the employee, not the normal wage). The notes so far suggest that this includes employers’ NIC and pension contributions. This will operate for at least three months and will be backdated to 1st March. The first set of grants should be paid no later than the end of April.
Employees are eligible if they were on the payroll as of 28 February 2020.
How do I apply?
If you intend to use the Coronavirus Job Retention Scheme, you will need to:
- discuss it with your employees. Explain they will become classified as a furloughed worker, which means they remain on the payroll, but will not be able to do work for you during this time. We believe they can continue with their studies however.
- submit information to HMRC about the employees that have been furloughed and their earnings via a new online portal.
Remember, you need to follow UK Employment Law and the employees’ contracts. So, decisions around furloughed employees may be subject to a period of negotiation before agreements are made.
Do I have to pay the remaining salary?
It’s not compulsory to pay the remaining 20%, but if you are able to cover the remaining salary costs, it’s going to keep your employees happy.
The scheme requires you to pay the employee through payroll, using the Real Time Information (RTI) system as usual. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll should continue as normal.
Further guidance on furlough leave
Given the pace of coronavirus developments, HMRC’s online portal isn’t currently up and running, but things are changing daily. HMRC is working urgently to set up a system for reimbursement and will set out further details on the information required.
Businesses can look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. This is a conditional phrase which may relate to existing funds available to the employer.
During challenging times such as these, your accountant can provide you with fantastic support, both personally and for your business.
At THP, we’ve set up two dedicated pages on our website for you:
- Business related advice for SMEs and the Self Employed
- Matters that relate to you and your personal finances
As the government releases more details of their proposals, we’ll be on hand to help you understand what it means, and share our knowledge and advice. HMRC is continuing to update their website with information on the other business proposals available, such as the Business Interruption Loan Scheme.
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