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The Coronavirus Job Retention Scheme

Posted on 27 March 2020

Further to the Chancellor's announcement last week introducing the Coronavirus job retention scheme, and the term "furlough", to help save jobs and businesses in the current crisis, we have now had some further guidance from the Government. It helps clarify a range of issues with which employers have grappled over the past week, but leaves many questions still unanswered. Below we set out a short summary of the key points and our FAQs for employers, which have been updated to reflect the new guidance.

The Coronavirus Job Retention Scheme is a temporary scheme designed to support employers whose operations have been severely affected by the COVID-19 crisis. Under the scheme, employers can put employees on a leave of absence (furlough) and claim 80% of their usual regular salary, up to a cap of £2,500 per month. This will be subject to the usual income tax and other deductions. For employees on full-time and part-time contracts, the salary on which to base the calculation is the employee's gross salary as of 28 February, not including any fees, commission or bonuses. For employees on variable pay, such as zero hours employees, the calculation will be based on the higher of their average monthly earnings or the same month's earnings in the previous year.

In addition, the Government has confirmed that employers can also claim employer national insurance contributions and minimum automatic pension contributions on the subsidised salary. More details on how to calculate this will be published before the scheme is live, expected to be at the end of April.

The scheme only applies to employers that had a PAYE scheme in place on 28 February 2020, and only to employees who were hired before that date.  Employees cannot be furloughed for less than three weeks and can do no work during the leave, other than unpaid volunteering or training. The guidance specifically states that any employee who has been made redundant (provided they are rehired) or put on unpaid leave since 28 February will be covered, and claims can be backdated to 1 March.

See our FAQs for employers for further details of the scheme and other common employment issues affecting employers at the current time.

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