It’s been a crazy few weeks and we think we can all agree that it’s also been extremely confusing and difficult for employers, employees, and the self-employed. Some businesses have had to shut their doors, others have found themselves in a situation where they have had to recruit more staff, and people who work for themselves have sat wondering whether they will get any financial support at all. People are panicking, quite understandably, and confusion about how to get support is buzzing around the internet, so the Dakota Blue team have tried to unravel the latest employment legislation and explain it for you.
Introducing the Coronavirus Job Retention Scheme
In an unprecedented move (goodness how many times have we heard that phrase lately), the government has agreed to pay up to 80% of employee’s usual wage costs up to £2,500 per month per employee.
There are two major stipulations. The first is that the employee must be furloughed. This means that they are still employed but can’t work, a bit like sitting on the bench. The other is that employers must have created and started a PAYE scheme on or before 28 February 2020 and the employee must have been on the payroll at that date. If your business meets these criteria, you are eligible to pay any staff who may have been resting on the bench from 1 March 2020, up to 80% of their salary.
You can claim for all your employees, so this includes full and part time staff, employees on agency contracts, and employees on flexible and zero hours contracts. If any of your team are off on statutory sick pay and are then due to be furloughed, they are also entitled to be included in this scheme. The same principles apply for those on maternity leave. Basically, if you pay them and they can’t work for you because of Covid-19, you can claim!
This scheme covers businesses, charities, recruitment agencies, and public authorities.
The small catch is that employers will need to apply through a portal, which apparently will be up and running by the end of April, this may leave smaller businesses in a financial bind, however many high street banks are offering overdraft and loan assistance to cover staff pay in the meantime. If you are a business who has cash in the bank, it is advisable to keep your team paid for two reasons, firstly you want them to come back to you knowing that you looked after them through the worst crisis in many of our living memories, and secondly, you possibly wouldn’t want publicity like this. There are, after all, some instances where the saying “there’s no such thing as bad publicity” really doesn’t stand.
For more detailed on this scheme at your fingertips, download our handy summary document here.
But I’m self-employed
There has been a lot of speculation about how the government would help the 5 million self-employed people in the UK, but we now have some guidance. It has been announced that those who are self-employed will also qualify for assistance, although the rules around it are different to the Job Retention Scheme.
The government has agreed to provide the self-employed with a taxable grant of up to 80% of their trading profits, up to £2,500 for the next three months. It is important to remember that this is not a percentage of turnover, but is focussed on the profits that you declare to HMRC.
Anyone can apply if they have submitted tax returns for the last three years and have average trading profits of less than £50,000 per year. The government has said that this will be paid in a lump payment in June and that they are providing the opportunity for anyone who hasn’t yet filed their tax return (which was due on 31 January 2020) four weeks to get it filed. There is also the option to sign up for Universal Credit, although recent reports suggest that there is a backlog.
In the meantime, if there is money in your accounts, use it to keep yourself fed and your business running (if you can) in the knowledge that there is financial assistance on its way. Again, many business banking accounts are offering help as well, so it is advisable to check your bank’s website.
And what about Company Directors?
The Chancellor has not given any specific guidance at this point for Company Directors who are generally classifed as PAYE. Many will find it difficult to justify that they are "sitting on the bench" when it is clear someone has to keep the Company running and ensure that their Directors responsibilities are being met. However, rumours suggest that there will be more information provided by government specifically for Company Directors in the coming weeks so we would suggest, hold tight for now and watch this space.
If you need any help and assistance through this time, our team are all working from home and are able to advise you, so please get in touch.