Paying Furloughed Employees through the
Coronavirus Job Retention Scheme
Article ID: 2025245 Last updated: 28 April 2020
The UK governement launched the Coronavirus Job Retention Scheme and employers can now make claims under this scheme:
27 April 2020 - Claim for wages through the Coronavirus Job Retention Scheme
This information is frequently being updated by the UK government. Please continue to check GOV.UK references wherever possible.
The UK government has announced the following:
Support for businesses through the Coronavirus Job Retention Scheme
Under the Coronavirus Job Retention Scheme, all UK employers with a PAYE scheme will be able to access support to continue paying part of their employees’ salary for those that would otherwise have been laid off during this crisis.
This applies to employees who have been asked to stop working, but who are being kept on the payroll, otherwise described as ‘furloughed workers’. HMRC will reimburse 80% of their wages, up to £2,500 per month. This is to safeguard workers from being made redundant.
The Coronavirus Job Retention Scheme will cover the cost of wages backdated to 1 March and is initially open for 3 months, but will be extended if necessary.
You must have:
- created and started a PAYE payroll scheme on or before 19 March 2020
- enrolled for PAYE online
- a UK bank account
Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities.
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 the online portal (links at the top of this page)
Employers can use HMRC's online portal to claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions (3% of qualifying earnings) on that wage. Employers can use this scheme anytime during this period.
IMPORTANT - HMRC has stated:
"You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
You should retain all records and calculations in respect of your claims."
Paying Furloughed Employees in AccountEdge
In order to help catagorise and report furloughed pay more easily, we recommend paying furloughed employees in the following manner:
1. Create a new 'Furloughed Pay' Wage Category
In the main Payroll menu, select the Payroll Categories button.
In the Wages tab, click the New button to create new wage catagory:
- Enter the Wages Name as 'Furloughed Pay', or a name of your own choice.
- Set the Type of Wage as Salary, even if the employee is hourly paid. This will allow you to enter a wage value more easily later.
- Click the Employee button and tick the employees that are to receive Furloughed Pay. Click OK when done.
Note: Furloughed pay is treated in the normal manner for PAYE income tax, employee and employer NIC's, employee and employer pension contributions, and any other charges or deductions.
In addition to the 80% employee furlough wage, the government will compensate employers for Employer National Insurance contributions and minimum automatic enrolment employer pension contributions (3% of qualifying earnings) on furloughed wages through the Coronavirus Job Retention Scheme portal.
2. Process Pays and Edit Payment Amounts
Use Process Payroll to pay your employees.
When presented with the list of employees to pay, open and edit each furloughed employee's paycheque by clicking the 'zoom' [»] button.
Edit the employee's pay as required.
- You will need to manually calculate 80% of each employee's wages using HMRC guidance, available here.
Depending on your company policy and/or the timing of the commencement of furloughed pay, you will either:
- enter a value of pro-rated Furloughed Pay and pro-rate other payments based on when Furloughed Pay commenced (or ended) in the period.
- zero other wage payments and enter a value of Furloughed Pay only.
- enter a value for Furloughed Pay and enter additional values for other available wage catagories to "top-up" the employee's pay.
For added visibility, edit the paycheque's memo to 'Furloughed Paycheque', or similar.
Click OK and record the paycheques, making all your normal Full Payment Submissions and so on.
You will later be able to produce a the following reports from the Index to Reports:
- Payroll> Payroll Categories> Payroll Summary report
- Payroll> Employee> Activity Detail report
These reports will provide details of your furloughed payments, if required.
3. Recording Money Received from the Coronavirus Job Retention Scheme
The money received as a grant from the government should be recorded as income in your accounts:
- Go to Accounts> Accounts List and create a new income account, for example '4-xxxx COVID-19 Job Retention Grant', or similar.
- When the grant is received into your bank account, use Banking> Receive Money to record the receipt and allocate it to the new income account. You should use VAT Code 'N-T' for this transaction.
This income is taxable (for corporation tax) as any other income.