Nigel Morris, tax director at MHA MacIntyre Hudson, has outlined the key points employers must consider when applying for the initiative’s benefits.
Under the scheme, HMRC will pay 80% of employees’ salary who would otherwise have been laid off or made redundant, up to £2,500 per month.
Morris stresses furloughed workers should not undertake any work for the company, including answering calls or emails, to be eligible.
The scheme is open to all businesses until the end of April for staff who were employed from 28 February.
Annual leave will continue to be accrued, no national insurance or pay as you earn (PAYE) tax is due, and changing a staff member’s status is still subject to existing employment law.
Should the business decide later that redundancies are still necessary, Morris advises owners to take legal advice at that stage.
“We don’t yet know whether employees will be restricted from taking on other/new work while receiving a salary under the scheme, but government advice is being updated on a daily basis,” said Morris, warning the scheme is a reimbursement by HRMC and businesses may face cash flow issues in paying workers.
However, the government’s Coronavirus Business Interruption Loan is also available to those businesses.
Morris has advised businesses to set up a specific payroll for furloughed workers so they can easily identify what can be reclaimed.
He has devised a step-by-step guide to businesses looking to apply for the JRS:
- Identify employees “at risk” and earmarked for redundancies
- Work out what was paid to those staff for the last 12 weeks up to the end of February and establish base pay that qualifies for the 80% furloughed grant
- Identify employees where £2,500 cap will apply
- Calculate additional pay required to get to “normal” pay
- Model options to manage any other top-ups outside of JRS
- Identify employees required to remain employed
- Model options for those employees not furloughed, including establishing new “base” pay in line with national minimum wage and employment related loans
- Communicate with all affected employees
- Obtain employee/union buy-in
- Make changes to payroll
- Prepare application to HMRC
- Apply to HRMC
Some staff members may be entitled to statutory sick pay if they are displaying the symptoms of coronavirus, are vulnerable or returned from a high-risk country, or are living with someone with Covid-19.
Morris also added that if a business closes, employees must still be paid unless there is relevant clause in their contracts.
Employers can force staff to take holiday, but they must be given notice of twice the length of the holiday time required.
