The government has provided a little more guidance on the coronavirus job retention scheme. They have said:
Furloughed workers
If your employer cannot cover staff costs due to COVID-19, they may be able to access support to continue paying part of your wage, to avoid redundancies.
If your employer intends to access the Coronavirus Job Retention Scheme, they will discuss with you becoming classified as a furloughed worker. This would mean that you are kept on your employer's payroll, rather than being laid off.
To qualify for this scheme, you should not undertake work for them while you are furloughed. This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month.
You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to.
If your salary is reduced as a result of these changes, you may be eligible for support through the welfare system, including Universal Credit.
We intend for the Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary.
We can hope that there will be some clarifications on this today, but as it stands these rules are deeply troubling, most especially for small businesses. They are perfect for large retailers and restaurants that are now shutting down, and they will help the employees of small businesses that do by chance survive this crisis. But there remain massive holes in what is being proposed that need to be addressed, although I welcome the fact that ‘all employment costs' are referred to, which must mean national insurance and the currently wholly wasteful mandatory pension contributions are covered.
But the bug problems aware:
1) The employer still has to agree to do this scheme;
2) There is still no clarity about what happens if the employer does, despite the scheme, go bankrupt during the coronavirus crisis;
3) The ludicrous requirement that the employee do no work, meaning that companies trying to keep some parts of their systems going can get no support, is retained: this will have to change if the government wants the supply-side of the economy to survive this crisis;
4) The position of owner directors looks to be very difficult: if they have to work to, at the very least, ensure that the payroll is processed (and that would seem inevitable) then they cannot, apparently, be furloughed, and as such be subject to the scheme, which is absurd if they have lost all their income. And they could end up in a worse position than the self-employed as a result, which is ridiculous. This government's idea that those who run companies or are self-employed come from a privileged, and otherwise leisured class who can rely on other income for their support has to change, and very rapidly.
I hope we get more information today.
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It also seemingly means that an employer is left in a position where they have to pile all the work onto one individual. That individual receives their normal pay, whilst the remainder of the staff get 80% of their pay for doing nothing! Who wants to be that individual?
Point 4 above is very relevant to the businesses I have supported as an adviser for the last 40 years.
If you run a business you don’t switch off. There is no respite from the anxiety that you will lose your business, lose your income and lose the cherished investment in time and money that has been applied over many years to establish your business.
The Treasury needs to co-op individuals that have a much more pragmatic point of view. The measures announced thus far have the potential to ease these anxieties, but do not have the thought-through, detailed planning required to actually get the schemes, particularly the Coronavirus Job Retention Scheme working as it could.
Here’s my suggestions for expanding the scheme:
1. Director shareholders baseline income is generally made up of three parts: salary, benefits (company car etc) and dividends. I don’t want to engage in the argument that dividends are a device to avoid NIC, the fact is HMRC and regulation allows directors to structure their remuneration in this way. Directors earnings should therefore be the composite of these three numbers. In this way, most directors will be able to claim the £2,500 in CJRS.
2. I agree with Richard that if companies can maintain their systems – keep their accounts up-to-date, review emails, keep insurance cover running – then directors or key staff need to able to attend to these tasks, albeit as home workers, without prejudicing their entitlement to CJRS.
If these two basic amends are made this would make the scheme more accessible and more likely to help businesses keep things ticking over until the present isolation strategies can be relaxed.
If this is not done, the law, once again, is inviting anxious business owners to break the law in order to survive. This is not a winning strategy for government or small businesses.
Agreed Bob
Submit to the Treasury Select Committee I suggest
Richard,
I would happily make a submission but I cannot see how to do this. The Treasury website is “dense” – do you have a link I could use?
Bob
Here
https://twitter.com/commonstreasury/status/1240620040803803136?s=21
Agreed. I’m concerned as my position fits no pigeon hole – I am a director of a limited company, and am the sole employee. So I am unable to claim job retention? I have no business premises (I’m a chauffeur) so cannot claim a small business grant? I work within the hospitality and leisure sector fo have no work and have had none for 7 days now. I will also be ineligible if support is offered for self employed…..
Check as the rules are announced is all I can say
I have the ear now of my local MP’soffice and an enquiry has been submitted to the house of commons library – watch this space
Thanks Richard. I have made my submission.
I know it’s nit picking in the scheme of things but I wish they wouldn’t use terms like “furloughed” – what the hell does that mean?
At this time of all times we need plain, clear English – or if you are going to use those terms at least have them described in following parenthesis, but preferably don’t use them at all.
It’s a US legal term not previously really used here very much
I’ve been wondering if the banks could play a role in passing funds to the employed and/or self-employed. This occurred to me when I read about one of the schemes proposed in the US, where bank cards are issued to those who are eligible. The cards are topped up monthly by the banks, who would be passing on funds from the central bank. This may also help with the plight of owner-directors, most of whom are well-known to their business bank.
The idea seems worth considering because the mechanisms are in place already. Decisions on eligibility remain problematic, especially for the self-employed and owner-directors as you have covered in forensic detail.
I’ll declare a particular interest in owner-directors, as I’m involved with such a company as its unpaid secretary. The company is already suffering badly because its customers can no longer afford to pay. The company employs only 13, and will have to furlough the majority before long. As you’ve pointed out, this may soon make it difficult to keep the business afloat and our remaining customers will suffer.
Contractors employed by the company will also be badly affected. Many of those contractors work for firms which rely on our sector for a significant part of their income. It’s a kind of symbiotic relationship, which I suspect is more true in Scotland for our sector and, as a result, those firms are likely to become insolvent. For now, their employees may also be furloughed but, as you’ve also pointed out, its uncertain what will happen to them when the firms go down. Our firm is obviously affected because their services are no longer available. This is like a virus spreading, and needs swift action to slow down the spread – just like the real virus.
Anyone who thinks owner-directors are parasitic should think about the direct and indirect employment provided.
I think the US model is weak – many do not have bank accounts and lots of people have more than one
So easy to abuse….
I wonder if you can help me in respect of CJRS if you have a state pension but still work although you pay tax you don’t pay National Insurance will you still be eligible for 80% of your salary. There is no guidance on this issue on HMRC website
It is likely that the pension will not impact the CJRS payment so long as the employer puts you on it
Your other income is not their business
what is the position with any furloughed people who may be in receipt of a pension on top of their salary ? do they still qualify for the scheme?
Not seen any guidance yet on how the hours of zero hours people will be calculated in order to work out the 80% allowance.
Zero hours is likely to be average pay
I do not think other earnings e.g. pensions will change anything
Hi, could you clarify the following as there seems to be mixed messages flying around from different advisers etc.
The company can remain ‘active’ in trading and still access the Job Retention scheme regardless of their size and nature of business as long as the employee(s) they’ve marked as furloughed do not work in any capacity?
Thanks,
Correct
I’m self employed with an income of £24k. I run my own payroll bureau and am working day and night to support nearly 100 businesses and all of their employees. My partner works, I live in a rented house, I work from home so have no rateable premises. Under the current support packages, my entitlement is £0. Yet every employee I run the payroll for is entitled to £2,500 per month. It’s ludicrous. Would I be able to change my status from sole trader to a ltd company as of this month and put me on the payroll, so I am therefore classed as an employee?
But then you’d have to furlough yourself and kill the business
Yes I know, that was more of a safeguard in case my clients didn’t pay me and my income dropped significantly. Just panicking a bit I suppose. But my accountant clarified it wouldn’t be the best move. Also I believe on Wednesday there will be a further announcement with income protection for the self employed now, at 80% of income averaged over the last 3 years, with a cap of around £2,900 per month. I’d rather keep my business going though of course, I’ve put blood, sweat and tears into building it all by myself. And hopefully my clients will still need me, so I’ll be an essential cost. Especially if they need help with the job retention scheme.
You’ve heard more than I have
Also, as far as I understand the CJRS, the 80% would be applied to your earnings as reported through PAYE for February. Can you confirm that is correct Richard?
Maybe, but it also says as per contract….
I think that it’s the contract and maybe average pay that will be the basis
All this half baked scheme has done is made life far more complex. We are an events focused business but with other revenue streams. We now have a potential scenario whereby the people we ask to go furloughed and do nothing will earn more than those they we ask to take a pay cut and help us dig ourselves out of the mess! Scheme needs to allow people to work to save their jobs/business.
Agreed
Dear Mr Murphy,
please are you able to clarify if the money provided under the job retention scheme for “furloughed” workers is a loan, or a grant both of which will need to be repaid or simply a straight subsidy with no strings attached. Other facilities are loans I noted. The wording on the HMRC website is not clear.
thank you
This one is a straight grant
I just want some clarification,
If you are getting 80% from your employer can you then get a part time job in a supermarket to top up that wage?
The rules have not been announced but since your employer could not have stopped you doing this I really cannot see why not – but the rules may not be that logical
Dear Mr Murphy
Can you please clarify “all employment costs” is this salary plus say car allowance, therefore including BIK in the total salary to be apportioned.
kind regards
It is payroll costs + NI + pension
So if the costs went through the payroll, yes
Remember there is a cap on salaries…
I wonder if some self-employed could be helped by utilising HMRC’s working tax credit and pension credit systems already in existence – by increasing the limits available to be claimed when existing earnings cannot be achieved?
No – wait until a scheme is announced – I hope it will be better than that
Hi,
I started a new job on 6-3-20 after serving a months notice, and was told today that as I wasn’t on the payroll from 28-2-20 I am not eligible for the job retention scheme. I have had no break in employment for over 14 years. It is likely that my employers will be closing temporarily, furloughing all employees, except me.
Is there anything I can do to appeal or suchlike? This was not something I could foresee 6 weeks ago when I gave in my notice…
No one is absolutely sure what the rules are as yet – just hope
Presumably there is nothing to stop an owner director from increasing their salary (rather than the minimum + dividends) in April and then furloughing to qualify for the rebate?
We do not know what the rules will say
Do you know if the 80% from the government will be subject to tax i.e. is it £2500 gross or Net? Also do you know if as a sales person with a company car who has been Furloughed and therefore unable to use the company car do I still pay tax on that or should I inform HMRC that I no longer have the car?
This one I can answer: payments will be taxable
The company should tell HMRC you no longer have a car, but so too can you
Hi Richard,
As someone who would normally pay tax at 40% would the government grant also be taxed at 40% or at the lower basic tax rate?
No, not if that was all the income you had
I want to know if there any restrictions on the worker requirements, like I’ve only been employed for 1 month, am I still entitled?
How does this affect temporary workers, especially those who had already been made redundant in the weeks running up to this?
I am sorry: we simply do not know yet
The draft Coronavirus bill has a section covering self-employed workers and statutory self-employment pay. If the bill goes through as it is the self-employed will have their own version of the 80% pay, based on a monthly average taken from their last 3 years subject also to a cap at just over £2,900pm.
The government will change that
There is no way that provision as drafted can work
Hi Martin! Do you know if the bill has provision for limited company directors in which we’re also the only employee? Thanks!
The Bill amendment has, as I have noted already, no chance of becoming law
Hi Richard, I saw your previous post stating this. However, i was just interested in whether anything was even being asked for in the bill regarding Limited company directors in which we’re also the only employee.
Thanks, Richard, for this article. It’s the only useful information i’ve found that’s addressing those in my situation.
Can you see the links in my post this morning
Hi is tax and ni taken of the £2500
Thanks
Yes
Hi Richard
If my husband looses £500 a month gross due to the £2,500 CAP, will he be eligable to apply for universal credit to top up his wage, if his company is not willing to cover the additional 20%
Thanks in advance
I cannot tell you
Sorry – but that is not something I can do
As one of three directors with no share holding of a Ltd company dealing with sales & lettings. A small number of employees are need to stay within the business to continue to provide property management being the collections of rents and distributing to clients, maintenance etc and help ensure the business survives.
My question is can any of the directors be furloughed?
We don’t know
Sorry
Whilst we are waiting for details, can an employee work elsewhere??
We don’t know
We are a husband and wife estate agency. Joint directors paying ourselves a regular salary through PAYE.
Are we eligible to claim the 80%, for one or both of us?
We have no business coming in. Viewings on clients properties are banned and there is no customer demand either.
In the meantime, we have contracts with the property portals that need to be honoured unless we cease trading.
So we need to make a tough choice fairly soon.
Our business was successful, but only been going two years and reserves were still being built up, so we can’t hold out for long.
Any advice would be greatly appreciated.
Thank you.
We simply do not know as yet
Sorry
I wish I did
Thank you Richard.
Payroll payments
Please could you clarify for employees on excess of £30k, do they get £2500 LESS 80% ie £2000 or is the £2500 their new Gross.
If their gross is reduced to £2500 can the employer reclaim all of this £2500 or only 80% of it?
Employers NI & Employers Pension?
Does the £2500 refund include this or will this be payable in addition to the £2500 ?
Thank you
£2,000 is what will be paid by the government
No one knows about NI etc. We will have to wait and see, interminably
My husband and I are directors of ltd company paying Minimal PAYE.
All our money is tied up in stock which obviously we can’t sell.
There is no money coming in at all because we can’t trade. Can’t sell the stock.
How can the government help other workers but we can’t claim anything.
Any help would be most appreciated.
Thank you
Please see my blog post this morning: I cannot help
For company directors who are the only PAYE employee, would it be possible to have a tax amnesty on withdrawing from dividends; basically allow us to make a large withdraw to tide us over without charging the 33% tax that normally kicks in over a certain sum.
To stop big companies taking advantage by trying to move very large sums in order to avoid tax there could be an upper limit of around 100k and/or a criteria based on annual turnover; only those companies below a threshold of perhaps 150k qualify)
With the government giving away money to most of the workforce and tomorrow likely to help out the self employed, director/employees who use a limited company to contract themselves out for tax purposes (there are thousands of us working in the media) may well be totally left out.
Surely, the absolute least the government could do is allow us to live on our own money without being penalised.
You do realise that no one is going to have any sympathy with you?