Updated 8 April 2020

The Chancellor has announced a ‘Coronavirus Job Retention Scheme’ to encourage businesses not to make people redundant.

All employers – large or small – will be able to contact HMRC for a grant to cover 80% of a salary (up to £2,500 a month – just above median income) for each worker who is granted leave of absence but still employed by the company.

The scheme, which will cover everyone on PAYE, will be backdated to 1 March and will be open for at least three months. The Chancellor said there will be no limit on the amount of funding available.

The Government have announced that the scheme will launch on the 20 April. 

How to access the scheme

You will need to:

• Designate affected employees as ‘furloughed workers,’ and notify your employees of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation

•  Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

Help for Directors of Limited Companies

On 26 March The Chancellor announced details of a new package of support for the Self Employed. See our article on this here..

However, this does not include owner/directors of Limited Companies who may receive their income as a mixture of dividends and salary.

We are awaiting further guidance from HMRC about whether directors of companies, where the employees are already furloughed, and the business has effectively paused trading, can apply for assistance under the Job Retention Scheme, as Companies Act does not strictly class all directors as employees. However, even if this is approved, then the element owner/directors could claim would be limited to 80% of their salary element, not their dividends, and still be subject to the maximum of £2,500.

There is still also the support offered through the benefits system.