Here’s everything you need to know about furloughing staff, calculating wages and making a claim with HMRC.
On top of the increase in demand for care services, care companies are also having to juggle their staff resources and navigate a minefield of information around the coronavirus job retention scheme and sick pay.
We’ve put together all the information you need on which staff can be furloughed, how to calculate their wages, and how to make a furlough claim with HMRC.
Which care workers could be furloughed?
If you’re unable to maintain your current workforce because your operations have been affected by coronavirus, you can ‘furlough’ employees, which means you’re temporarily laying them off.
This applies to care workers who’ve been identified as ‘high risk’ and need to quarantine in line with public health guidance for 12 weeks, or need to stay at home with someone else who is in quarantine. It also applies to carers who are unable to work from home and whom you’d otherwise have to make redundant.
Employees who are unable to work because they have care responsibilities at home as a result of the coronavirus can also be furloughed. This could apply, for example, to staff who need to look after their children or are supporting a vulnerable live-in relative.
However, an employer can only lay off employees if it’s written in their Employment Contract. If it isn’t covered this contract, you’ll need to use your Employees Agreement in order to furlough them. This should be given in writing to ensure there’s a clear agreement and audit trail.
Once furloughed, the employee must remain so for a minimum of three consecutive weeks for you to be eligible to claim through the Coronavirus Job Retention Scheme.
It’s also important to note that you can only furlough employees who were on your payroll and reported on your RTI submitted to HMRC by 19th March. Employees who started after 28th February but weren’t paid until the end of March are not entitled to be furloughed.
How to calculate wages
To calculate the employees’ wages, you’ll need to calculate 80% of their usual wage up to a maximum of £2,500 per month, or £576.72 per week.
This can be calculated by taking the average of their wages for the 2019/20 tax year or (if less) the period of employment. Alternatively, you can use the corresponding calendar month of the previous year.
You can include overtime payments in these calculations, but not any other benefits or performance-related wages.
If you like or if finances permit, you can choose to top up the 80% to pay the employee their full wage while in furlough, but you’ll only be able to reclaim 80%.
National minimum wage does not apply to furloughed employees; they won’t receive any pay increase until their furlough period ends.
How to claim for staff in furlough
HMRC’s claim portal opened on Monday 20th April. To claim, you must have:
- created and started a PAYE payroll scheme on or before 19 March 2020
- enrolled for PAYE online
- a UK bank account.
If someone else processes your payroll, they may be able to make the claim for you if they’re registered as your agent with HMRC. If not, you’ll need to ensure you’re registered with access to PAYE on your HMRC portal for the business. If you’re not, your claim will be delayed.
Companies with less than 100 employees will need to enter the details for each furloughed employee individually. To do this, you’ll need:
- your employer PAYE reference number
- the number of employees being furloughed
- Names of the furloughed employees
- National Insurance Numbers for the furloughed employees
- Payroll/employee numbers for the furloughed employees (optional)
- your Self Assessment Unique Taxpayer Reference, Corporation Tax Unique Taxpayer Reference or Company Registration Number
- the claim period (start and end date)
- amount claimed (as per the minimum length of furloughing of three consecutive weeks)
- your bank account number and sort code
- your contact name
- your phone number.
There is likely to be high demand for access to HMRC’s portal, so we recommend having all the information ready before starting the claim process.
More details on the claim process and examples of scenarios are now available here on HMRC’s website at: https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme
Do remember though, that the funding received through this scheme is taxable business income so should be included as such in your company or self-assessment tax return.
Whichever approach you choose, you’ll need access to reliable, real-time financial information to help you make a well informed decision. If your current accountant doesn’t provide this data, talk to Fresh Clarity today to find out how we can help.