You will no doubt have seen the recent government announcements around furloughing employees’ and the government covering the cost of this for 80% of their usual wages up to £2,500 per month.
It seems pretty straight forward for your own recruitment consultants and internal staff. What wasn’t very clear however is how it affects your temporary / contract workers.
The government released some detailed guidance last night to clarify these points. You can view this at https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Essentially they have clarified that agency workers can be included, as long as they were on your PAYE payroll on 28th February. It also includes temps or internal staff that have been made redundant since 28th February, if they are rehired.
The main points to be aware of are;
- The furloughed employee cannot undertake any work on behalf of the employer while they are furloughed.
- It is only valid for agency workers if they are not working now. They cannot be on reduced hours, reduced pay etc…
- You should write to the affected employee confirming they have been furloughed and keep a record of this. If you have a HR or employment law service such as Citation, Peninsula, Mentor etc you should probably liaise with them on this process. Additionally, if you are members of TEAM, APSCo or the REC, you should utilise the legal helplines to ensure that you are following the correct processes.
- Employees hired after 28th February cannot be furloughed.
- If the employee is on sick leave, they should receive SSP or full sick pay. They can be furloughed after this.
- Employees who are shielding in line with public health guidance can be furloughed.
- The minimum term that you can furlough an employee or worker for is 3 weeks. You will need to assess their client to establish that no work will be available for at least 3 weeks prior to furloughing them.
If you decide to go ahead and offer this to your temporary workers, you will need to make a claim to HMRC to cover 80% of their regular wage or £2,500 per month, whichever is the lower amount. Plus any Employers NI Contributions and minimum auto-enrolment pension contributions that are payable.
The guidance around how to calculate the regular wage for employees who’s pay varies is;
- If they have been employed or engaged by you for a full 12 months, you can claim for the higher of;
- The same months earnings for the previous year
- Average monthly earnings for the 2019-2020 tax year
- If they have been employed or engaged by you for less than 12 months, you can claim an average of their monthly earnings since they started work.
- If they only started in February 2020, use a pro-rata for their earnings so far to claim.
There is of course a cashflow practicality to consider in all of this. You will be expected to pay the furlough payments and wait to receive the grant from HMRC once they have fully opened the scheme. Claims will be backdated to 1st March but you will still need to fund this.
The government have setup a VAT deferral for the next 3 months. This gives you until the end of the 2020/2021 tax year to pay the VAT owed for this period. These funds can be utilised in the short term to make these payments, which can then be replaced when the grant payments come through. There may also be something that your factoring / invoice finance companies are able to do to assist the short-term funding gap.