Coronavirus Job Retention Scheme
Upon the mandated shutdown of many UK businesses, the government has been attempting to reassure businesses and employees that they will be supported during the Covid-19 crisis.
One measure that has been announced is a Coronavirus Job Retention Scheme. Detail on this is limited, but here is what we know so far:
Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme is a plan for government to underwrite 80% of the salaries of workers if they have to be temporarily laid off.
We understand that, under the scheme, all UK employers will be able to apply to receive support in paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
What we know so far
We are currently liaising with HMRC and our advisors to fully understand this scheme, and how it can work for flexible workforces operating via umbrella companies.
As of Tuesday 24th March, this is what we know so far:
- HMRC will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 per month.
- HMRC are working urgently to set up a system for reimbursement.
- Existing systems are not set up to facilitate payments to employers. This may not be live until late April.
- Employers will need to designate affected employees as ‘furloughed workers,’ and notify them of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract.
- Employers will need to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).
- The scheme is to be backdated so that it can cover the costs of wages from 1 March 2020. It will initially be open for three months. Employers will then need to see whether or not the scheme is extended.
What does this mean for workers engaged via Umbrella company?
At this stage we understand that all UK businesses can apply for the grant, although the scheme is optional.
However, there is a huge amount of unknowns and much more information is required from government before we can advise clients appropriately. We expect more information later this week.
Administration through PAYE
We believe that the scheme is to be facilitated via the PAYE system and we can therefore assume the amounts involved are likely to be based on what an employer has RTI’d as worker’s pay rather than assignment rate.
Additional employment costs
In addition, due to 80% of workers’ pay being supported whilst on furlough, there are many questions relating to the additional employment cost, such as employers national insurance, pension cost and apprenticeship levy. Clarification on this is vital when roles are facilitated via professional outsourced intermediaries receiving payment from a supply chain for provision of a workforce.
This could potentially lead to a situation where even though the government has made significant steps to attempt to support UK employees, the resulting employment cost impact to a business (that will still exist) could still be too high a financial hurdle to overcome for some businesses, resulting in the potential decision lay off workers vs furlough.
Infrastructure and processes
It is also important to also consider that the framework, technology and HMRC process to facilitate this scheme do not currently exist and are being built as we speak.
Grants based on February income
Finally, we know that grants associated with workers on non-standard or flexible working hours, as the mass majority of contractors are, will be based on income earned in the month of February – possibly on an average of 4 weeks if weekly paid.
This means that, depending on a contractor’s actual assignment activity during February, the PAYE processed may not be representative of annual forecast earnings.
Further clarification to follow
The above clearly highlights the need for urgent further clarification from the government that we hope to receive over the coming days and weeks. This guidance is vital in order to update you, our clients, on the next steps and appropriate action.
What does Liquid Friday plan to do?
For the avoidance of doubt, it is our absolute intention and desire to support furloughed workers during this challenging time, however we urgently need clear explanation from the government as to the actual “how” this will all work in practice.
This is unchartered territory for everyone, but we want to reassure you, our agency partners, that we will do our best to support our contractors and agencies as the situation develops.
We will be providing further communication as soon as we can.