Coronovirus – Paying The Staff Wages
This is based on information that was released by the Chancellor on Friday 20 March 2020.
Coronavirus Job Retention Scheme (CJRS)
How to retain your staff. When you can’t pay them.
The Government has announced new measures about how they’re going to support jobs for the businesses across the UK.
It’s called the ‘Coronavirus Job Retention Scheme’ (CJRS).
HMRC will reimburse 80% of your staff wage costs – up to a cap of £2,500 per month.
This is a reimbursement scheme. Therefore, the you will need to outlay the money to pay your staff and then claim it back from HMRC.
It will be backdated to March 1st 2020 and be open initially for at least three months but extended ‘for longer if necessary’.
Before continuing I need to explain – the premise of this scheme means categorising the status of your employees as ‘Furloughed’.
What does ‘Furloughed’ mean?
If your boss puts you on Furlough it means that you’re on mandatory suspension from work (usually) without pay. You are kept on payroll however – so technically you still have your job.
It’s usually used as a cost-saving measure when the business can’t afford to pay their staff but doesn’t want to lay you off.
For the coronavirus this has been applied on a wide-scale and several global employers like airlines and major hotel chains have ‘furloughed’ their workforce within the past 2 weeks.
As an employee this poses some rather burning questions about the security of your job and your employee rights. Go here to read the Citizen Advice guidelines.
If you’re a Business – Here’s What You Need to Do
Firstly, sit down and look at your financials. Plan this out. Do a cash-flow. Figure out how much you could realistically afford to pay them if your income is restricted and factor in that it could be 2-3 months before you see that money back again.
If you feel shaky about how to do a cash flow, don’t be shy – call or email us.
Secondly, give your wonderful accountant a call; double check the payroll details. Tell them what your plan is. They may be privvy to some key information and have some suggestions for you.
Your accountant is there to hold your hand through this.
Procedure on how to apply:
Step 1 – Decide who you’re going to apply this to. The affected staff will be your ‘furloughed workers’.
Step 2 – Send them an email notifying them of this change.
We’d recommend stating in this email that changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
Step 3 – You have to tell HMRC. An online-portal will soon become available. They’re working on it.
Once your submission is made, you (should) be advised on what to expect next. We don’t have more information at this time. We strongly recommend checking the official HMRC guidelines here.
When Will we receive the Reimbursement?
There are no official dates yet. The initial guidance suggests the scheme will be paying out by the end of April at the latest. (But consider that they may prioritise certain business sectors over others).
When you sit down to do your planning for this, it might be worthwhile doing your cash-flow on a ‘worst case scenario’ just in case.
This scheme is going to be overloaded the second it comes online – so get organised, line up your ducks – make sure you’re prepared for when you get to the front of the queue.
Questions about PAYE, National Insurance and Pensions
There are a heap of “what happens if” questions about this. Call your accountant – they will help you.
Francis Clark accountants have written an excellent blog which tackles a lot of queries here.
HMRC official guide to Coronovirus is here
How We Can Help You
We are specialists when it comes to helping businesses sort out their financials. We are here to help you with cash-flow forecasts, budgets, planning, VAT and generally sorting out your paperwork.
We are not accountants. We’re business support services.
Give us a call or send us an email if you need some help getting your business through this – 01326 727 112