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Unread 26 Mar 20, 12:35 PM  
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#1
munmun
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Join Date: May 10
Furloughed staff - information

A few people have asked how the scheme will work, I received this today from my accountant, I hope it helps, dont shoot the messenger


Rules as set out in official statements

1) Furloughed members of staff must not work for the employer during the period of furlough.

2) Furlough is from 1 March 2020, so is to be backdated. It will last for at least 3 months and will be extended if necessary. Note that while the scheme is backdated to the beginning of March as it is intended to support all those employed then, a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. This will of course be subject to employment law in the usual way.

3) It is available to employees on the payroll at 29 February 2020.

4) All UK businesses are eligible, 'any employer on the country, small or large, charitable or non-profit' to use the Chancellor's words.

5) The scheme pays a grant (not a loan) to the employer.

6) The grant will be paid to the employer through a new online system which is being built for this purpose.

7) The employer will pay the employee through payroll, using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll will continue as normal.

8) Scheme will be administered by HMRC:

Relevant employees must be designated as furloughed employees.
Employers will submit information to HMRC through a new online portal.
As this will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. The narrative used in the information released so far says if your employer cannot cover staff costs due to COVID-19 they may be able to access support. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined, nor whether there is a bar of some description.

9) Maximum grant will be calculated per employee and is the lower of:

80% of wages. The notes published so far, use the phrase wage for all employment costs up to a cap of 2,500 per month. It is our understanding that this includes employers' NIC and pension contributions. Wages will be determined by reference to a defined period (yet to be announced).
2,500 per month.

Example

X Ltd employs Mr A at an annual salary of 24,000, so 2,000 per month. Mr A has opted out of auto enrolment.

Each month, Mr A currently receives net pay of 1,665 which is after deducting PAYE of 191 and employees NIC of 144. On this salary, the employer pays employers' NIC of 174.

The available grant for the employer is the lower of:

(a) 80% of (2,000 + 174), and
(b) 2,500
So a grant of 1,739.

The cash required by X Ltd to furlough based on maintaining the existing salary is 435 per month. It is a matter for employment law whether the employer is required to pay this top up. Discussions with employees may have agreed that the employee has agreed to a different arrangement during their furlough.

Attached to this link is further guidance setting out an extended illustration that includes auto enrolment and provides an example of what to do if your business has been instructed to close by the government. It also provides fuller details on eligibility.

Potential legal issues

Employment law is complicated and you should seek advice from a legal expert where necessary. We have been advised of the following points that you should check before taking any action.

You may not have a contractual right to lay staff off without pay
If you just send employees home because there is insufficient work, your employees should continue to be paid. If they are not paid or there is no contractual right to send them home in the absence of work, then you could face claims for the unpaid wages (breach of contract or unlawful deduction from wages claims) and potentially constructive dismissal claims at some point in the future.

What do I do if my contracts of employment dont include the appropriate clauses?
If you dont have the contractual right to place staff on temporary leave you will need their consent before you place staff on furlough leave. If you unilaterally place your employees on furlough leave, you run the risk of a constructive dismissal claim, (right now the risk of a claim may be low when the alternative is possibly the loss of their job entirely).

Note: Unless you have the right to reduce pay during a period of temporary leave, then you are also obliged to make up any shortfall, and continue benefits during any period of furlough, unless your staff agree to reduced pay (e.g. as an alternative to redundancy).

As mentioned previously, this is the current understanding of the scheme. When more information become available we will send out further correspondence.
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Unread 26 Mar 20, 12:55 PM  
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#2
floridavisitor
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Join Date: Jul 15
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Very helpful thanks
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Unread 26 Mar 20, 01:04 PM  
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#3
salmim
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Join Date: Sep 05

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Thanks for posting.
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Unread 26 Mar 20, 01:31 PM  
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#4
pinkbelle
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Join Date: Sep 03
Thank you for posting.
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Unread 26 Mar 20, 02:10 PM  
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SiandAm
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Join Date: Apr 10
Very helpful. Thank you for posting
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Unread 26 Mar 20, 02:22 PM  
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#6
ClaireNJ
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Join Date: Apr 19
Location: Essex
Originally Posted by munmun View Post
A few people have asked how the scheme will work, I received this today from my accountant, I hope it helps, dont shoot the messenger


Rules as set out in official statements

1) Furloughed members of staff must not work for the employer during the period of furlough.

2) Furlough is from 1 March 2020, so is to be backdated. It will last for at least 3 months and will be extended if necessary. Note that while the scheme is backdated to the beginning of March as it is intended to support all those employed then, a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. This will of course be subject to employment law in the usual way.

3) It is available to employees on the payroll at 29 February 2020.

4) All UK businesses are eligible, 'any employer on the country, small or large, charitable or non-profit' to use the Chancellor's words.

5) The scheme pays a grant (not a loan) to the employer.

6) The grant will be paid to the employer through a new online system which is being built for this purpose.

7) The employer will pay the employee through payroll, using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll will continue as normal.

8) Scheme will be administered by HMRC:

Relevant employees must be designated as furloughed employees.
Employers will submit information to HMRC through a new online portal.
As this will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. The narrative used in the information released so far says if your employer cannot cover staff costs due to COVID-19 they may be able to access support. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined, nor whether there is a bar of some description.

9) Maximum grant will be calculated per employee and is the lower of:

80% of wages. The notes published so far, use the phrase wage for all employment costs up to a cap of 2,500 per month. It is our understanding that this includes employers' NIC and pension contributions. Wages will be determined by reference to a defined period (yet to be announced).
2,500 per month.

Example

X Ltd employs Mr A at an annual salary of 24,000, so 2,000 per month. Mr A has opted out of auto enrolment.

Each month, Mr A currently receives net pay of 1,665 which is after deducting PAYE of 191 and employees NIC of 144. On this salary, the employer pays employers' NIC of 174.

The available grant for the employer is the lower of:

(a) 80% of (2,000 + 174), and
(b) 2,500
So a grant of 1,739.

The cash required by X Ltd to furlough based on maintaining the existing salary is 435 per month. It is a matter for employment law whether the employer is required to pay this top up. Discussions with employees may have agreed that the employee has agreed to a different arrangement during their furlough.

Attached to this link is further guidance setting out an extended illustration that includes auto enrolment and provides an example of what to do if your business has been instructed to close by the government. It also provides fuller details on eligibility.

Potential legal issues

Employment law is complicated and you should seek advice from a legal expert where necessary. We have been advised of the following points that you should check before taking any action.

You may not have a contractual right to lay staff off without pay
If you just send employees home because there is insufficient work, your employees should continue to be paid. If they are not paid or there is no contractual right to send them home in the absence of work, then you could face claims for the unpaid wages (breach of contract or unlawful deduction from wages claims) and potentially constructive dismissal claims at some point in the future.

What do I do if my contracts of employment dont include the appropriate clauses?
If you dont have the contractual right to place staff on temporary leave you will need their consent before you place staff on furlough leave. If you unilaterally place your employees on furlough leave, you run the risk of a constructive dismissal claim, (right now the risk of a claim may be low when the alternative is possibly the loss of their job entirely).

Note: Unless you have the right to reduce pay during a period of temporary leave, then you are also obliged to make up any shortfall, and continue benefits during any period of furlough, unless your staff agree to reduced pay (e.g. as an alternative to redundancy).

As mentioned previously, this is the current understanding of the scheme. When more information become available we will send out further correspondence.
Great advice thank you
Can I ask so if I have no work for 2-4 weeks then it picks up again 🤞the Company can ask me back to work & then the furlong will stop
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Unread 26 Mar 20, 02:34 PM  
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#7
star89
Helping Mickey
 
Join Date: Jan 12
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Can I just ask, if you get the maximum they will pay of 2500, will the tax and NI taken from that be what was usually taken when you are earning more than that (your usual wage tax and NI amount) or will tax and NI be taken at the amount that is usually applicable for a wage 2500?

Does that make sense?

Thanks
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Unread 26 Mar 20, 02:41 PM  
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#8
ClaireNJ
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Join Date: Apr 19
Location: Essex
Originally Posted by star89 View Post
Can I just ask, if you get the maximum they will pay of 2500, will the tax and NI taken from that be what was usually taken when you are earning more than that (your usual wage tax and NI amount) or will tax and NI be taken at the amount that is usually applicable for a wage 2500?

Does that make sense?

Thanks
I think it would be the 2,500 so minus tax & insurance, it would end up roughly 1995 but havent included pensions, I worked it out as Hubbie will be about 750 a month less 😢thats if the firm can still trade in the following months too 😔
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