Paying Furloughed Employees
Article ID: 2025245 Last updated: 27 March 2020
The UK governement has issued more detailed guidance about how this scheme will work, including how to apply and how to calculate furloughed pay.
27 March 2020 - Must read: Claim for wage costs through the Coronavirus Job Retention Scheme
26 March 2020 - General: COVID-19: Support for businesses
This is a dynamic situation and information is constantly 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 pay roll, 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. HMRC will set out more details shortly.
All UK businesses are eligible.
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)
Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.
HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.
Paying Furloughed Employees in AccountEdge
Until further information is available from the government, we recommend paying furloughed employees in the following manner:
1. Create a new 'Furloughed Pay' Wage Catagory
In the main Payroll menu, select the Payroll Catagories 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.
The government will compensate employers for NIC and pension contributions 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 on your own basis until HMRC provide further details about how to do so.
Depending on your company's 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.
- Remove other wage payments and enter a value of Furloughed Pay only.
- Enter a value of Furloughed Pay and reduce other payments so that the employee continues to receive their full 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 Payroll> Activity Summary report that will provide details of your furloughed payments, if required.