Ok, here we are. New guidance published last night. I'm a bit crabby today as I've been up since 6am trying to digest it all for you. And, of course, hoping it doesn't all change again next week 🙈
[If it does, I'll let you know]
This email is solely about the FURLOUGH scheme (the new self-employed scheme will follow in the next few days - the guidance for this hasn't been published yet) so if you don't have a payroll scheme in place, you can get back to your breakfast.
Remember, if you have a limited company and employ yourself, you should read this.
I'll try and keep this email as short as possible, but there's a lot to consider and this is far from exhaustive; every employer will have different circumstances so please book a Covid call (link at the bottom) if you need more info.
The Golden Rule
You can't furlough ANYONE or pay less than their FULL salary, without their agreement. The furlough scheme is an agreement between Employer and Government. It DOES NOT override your employee's contract, which I'd be fairly sure makes NO reference to paying 80% of their salary and telling them to stay at home and watch TV.
Whilst getting 80% of my salary and being told to stay at home might sound like a winner for your staff - it's certainly better than being laid off - when the furlough scheme ends, there will be a new breed of no-win-no-fee employment lawyers ready to take you to court on behalf of your employee's "lost 20% wages".
Harsh, but that's the reality. And with nothing in writing, all you'll get it an ice-cold can of "I told you so".
So, if you're unsure about what you need to do, please speak to an HR professional. I can put you in touch with someone if you need it.
Can I Claim Furlough This Time?
Broadly, if your business has been affected by Covid, and you had staff on your payroll before the 31st October, you can make a claim.
There's no definition of 'affected' so the onus will be on the employer to show either reduced turnover and/or increased costs which affect the business.
This is NOT an opportunity to claim free money for the fortnight when Jim in the office has a holiday. Or that week where you close for Christmas.
Which Staff Can I Claim For?
- Anyone who was paid before 31st October 2020 (and a valid RTI submission made). This includes Directors of their own limited companies.
- You MUST have a valid agreement in place with the employee for their agreeing to be furloughed BEFORE the date of the furlough claim (or, at the latest, the 13th November).
- The scheme is NOT designed for those on sick pay or who have been told to isolate. However, if other conditions are met, you can furlough these staff, but can't claim SSP and Furlough for the same employee.
- If you are not furloughing your entire staff, make sure you don't leave yourself open to DISCRIMINATION claims in how you choose who to furlough. Again, that's an HR issue - please don't ask an accountant(!).
££ How Much Can You Claim?
Employers can claim 80% of the usual hours lost [calculation of "usual" would fill a book on its own...get your accountant to work this out for you] for staff working less than normal.
Remember, the furlough scheme is FLEXIBLE, so you could decide to ask staff to work reduced hours rather than zero. This may also help protect you from discrimination claims if, say, you asked all staff to work 50% of their hours rather than furlough half the workforce entirely.
You must actually pay the staff at least 80% of their wages whilst on furlough - you can choose to top it up to 100%, but there's no obligation from the gov't on this. And of course, for hours they DO work, you must pay whatever they are entitled to receive.
Do bear in mind that you'll still need to pay employer's NIC and pension contributions (if applicable) on all payments, and there's the time and cost of preparing the claim for each employee. So overall it's still a cost to the employer - not the "free ride" that Martin Lewis [who?...Ed] thinks it is.
You can ask staff to take holiday whilst on furlough. You'll need an agreement in writing from them, and for holiday time you must pay full wages. But, it saves them accruing a ton of holiday whilst on furlough which you've got to pay for once they finally come back to work. In other words, the gov't will be paying for 80% of their holiday NOW rather than you paying 100% of it when the furlough scheme ends. Plus having the staff out of the office when you might need them most.
If you have staff who have been furloughed since the spring then, with the scheme extended to March, we could well see people with a whole year's holiday allowance to take as soon as furlough ends!!! That could be expensive for you!
What Can Staff Do On Furlough?
Good question. Generally, nothing. No work. No 'checking their email'. No work calls. No speaking to suppliers or customers. There are a few exceptions:
- Volunteer work, for unconnected organisations
- Take up other employment, with your permission, again for unconnected organisations
- Studying and training. This is probably the most important one if you have staff who are undertaking professional qualifications. They can continue to study whist on furlough.
TIP: If they are due to start studies in the new year, why not try and bring that forward to now so that you can claim furlough for them whilst they are at home with their books.
Can I Claim Furlough Money And Keep My Staff Working?
Obviously not. Two reasons:
1) It's illegal. At the least, I'll be asking you to find another accountant. At worst, I'll be sending our disengagement letter to you "c/o HM Prison Service"
2) Under the new Furlough scheme, employees will be notified in their Personal Tax Account that their employer has made a claim on their behalf. And they will be invited to 'blow the whistle' if you've been a naughty boy or girl 👮♂️
I must say this is a cracking idea from HMRC, and hell hath no fury like an employee who finds out s/he's been working their socks off and their boss has ben claiming furlough behind their back.
We're starting to see HMRC compliance checks on the first round of furlough claims, so it won't be long until HMRC start asking you to prove your claim this time round. By law, they require you to record the following as part of your claim, and keep it for SIX YEARS:
- Amount claimed per employee per period
- Your backing calculations to support the claim, including 'usual hours' and 'actual hours' for flexible furlough claims. [I would strongly recommend asking staff to complete timesheets as evidence for periods they are under flexible furlough].
- Copy of furlough agreement signed and dated by employee and employer - must be dated BEFORE the start of the furlough claim.
What about that £1,000 bonus in January?
Nope. That's cancelled. Sorry. I think we might see something replacing it once the furlough scheme ends, but for now, send back the champagne.
How Do I Claim?
The claim portal is now live BE AWARE that the deadlines for claiming are now quite thin - it's JUST 14 DAYS after the month-end. So for example, your November claim must be accepted by 14th December else you'll be out of pocket. 😱
Payments will normally be in your company bank account in a week. This does still mean you'll need to make sure you can cover your wage bill before the claim arrives.
If staff are on 'full furlough' then you can go ahead and claim as soon as your payroll is submitted. However if any are on flexible furlough then I would recommend you wait until the month is over, unless you are 100% sure in advance of the hours they will have worked. Amending a claim is an absolute pig.
Can My Accountant Claim For Me?
Yes. And with the greatest respect, it's probably a good idea. The calculations are very complex, especially for those who work variable hours or get overtime/bonus payments. If HMRC enquire into claims in the new year, you might need to repay some of it, but you will not be able to reclaim anything from your employees.
We will be charging a flat £20 per employee, per claim, to prepare and submit claims on behalf of clients. This isn't a service we are expecting to profit from - this should just about cover our wages - and if you would like me to sort your claim I need us to both agree to these three conditions:
1) You'll tell me BEFORE the end of the relevant month if you are intending to make a claim so that I can ensure we have enough capacity to hit the tight deadline for you. If we don't hear from you we'll assume you don't need to make a claim (or are doing this yourself).
2) You'll confirm within FOUR days of the month-end, the total hours worked per furloughed staff member. Earlier if possible.
3) We'll send your claim schedule for approval and will again ask you to confirm by email within FOUR days of receipt whether you approve this for submission.
As with any other submission to HMRC, we don't process it until we have your authority.
We're expecting to be inundated with requests for help here, so the more notice you can give me, the better. Thank you.
As you know, we don't normally take on new clients after 31st October, with the exception of those we've already been in discussions with or genuine distress cases. This means that by pure coincidence, I will now have less demands on my time and will be able to talk you through the support you might be able to get.
If you'd like our help going forward, please take the steps to book a Covid support call to talk about your business. Otherwise I'll sit back and relax in the warm fuzzy glow of knowing you've got everything under control.
There's no charge for a call itself. Book a call here.