Announced yesterday, the key measure introduced is the Coronavirus Job Retention Scheme. Here we answer some of the questions on how it works and businesses concerns.
What does the scheme do?
Employers that are now under temporary pressure can claim a grant to cover employees’ wages that they will need once the coronavirus crisis passes but are currently unable to provide work for.
HMRC will reimburse the business for 80% of workers wage costs, up to a cap of £2,500 per month.
Employers can choose to fund the difference but do not have to.
Employees can no longer work whilst HMRC reimburses their employers
How do I use the scheme?
Employees that you can no longer afford to keep due to the situation will need to be classified as a “furloughed worker”.
If you as an employer intend to use the scheme, you will need to discuss with the relevant employees that they will be reclassified. This change remains subject to employment law and depending on the employment contract, may be subject to negotiation.
The employee must be kept on the payroll rather than being taken off, but will no longer work for you.
A HMRC online portal will be set up, which will require further information on employees that have been furloughed – more detail on this will be released shortly
How long will the scheme be in place for?
The scheme has been backdated to the 1st March – so any employers already affected can claim back the salary costs of any “furloughed workers” to date, and at present the scheme is to run for 3 months.
When will the first payments be made?
At present HMRC do not have a mechanism for making repayments and are setting up a system for reimbursement, but it is expected the first payment of the grants will be in April.
What if I need short term cash flow support immediately to pay the payroll this month?
To bridge the immediate gap, the recommendation from government is to consider a Coronavirus Business Interruption Loan. Our previous straight to the points have covered what is known on them so far, the British Business Bank has detailed eligibility requirements on the loans. More information on them is expected to be released on Monday.
If you are typically in a VAT payment situation, this quarters VAT liability is now also deferred – the intent of this is to also provide businesses with a short term cash flow advantage.
These are unprecedented times and this is an unprecedented measure to protect jobs and business. Should you have any further concerns, please do be in touch as we continue to try to work through this together.