Finally HMRC have released further guidance on how the calculations will work for employees and directors on a payroll scheme.
Employees and directors will only be eligible for this if the scheme was in operation before 28th February and the employees/directors were on the payroll on 29 February 2020. From the date an employee is made furlough they will not be able to work for the company. An employee must remain furloughed for at least 3 weeks ( and therefore can return to work after 3 weeks, work for say a day and then go back onto being furloughed).
The payments to employees will be subject to the normal PAYE, National Insurance and pension contributions, however HMRC will cover the employer national insurance and pension contributions which are meant to be reclaimable (further details to be issued).
If an employee has already had hours/pay reduced they will not be eligible for the scheme as they are still working. Employees on unpaid leave will only be eligible if they were put on leave after 28February 2020. If employees are shielding in line with the public health guide they can be placed on furlough.
You must write to your employees confirming they have been furloughed and for contractual reasons it would be best for them to agree by signing the letter which you then keep a record of.
For salaried employees the 80% will be based on their February 2020 pay (we understand this will be disappointing for directors of companies that receive a low salary and dividend). Fees, commission and bonuses should not be included.
If an employees pay is variable, theirs will be based on the higher of, the same months earnings in the previous year and the average earnings from 2019-20. If an employee has been with you less than a year you can claim the monthly average from when they started working for you.
If the employee started in February 2020, use a pro rata for their earnings so far.
If an employee has more than one job they can be furloughed in both jobs, the £2,500 is a cap to each employer individually.
You can only submit a claim at least every 3 weeks, and it can be backdated to 1 March IF APPLICABLE (they must have stopped working from the date you are saying they are a furlough worker). You claim what has been processed through the payroll and can claim in advance of any imminent payroll runs.
The system to record employees and to make the claims is not yet live but communication can now start with employees. They are anticipating that the claims will not start to be part until the end of April. There is full guidance available HERE
Review supplied by Lakeview Accountants