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The UK’s Job Retention Scheme: how are contractors affected?

22/04/2020
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Because of the impact to businesses caused by the need for social distancing measures to prevent the spread of coronavirus, the UK government has implemented a new job retention scheme that will fund workers who are put on leave or “furloughed” through the duration of the pandemic. Those who are unable to work their normal jobs remotely can expect to receive 80% of their wages up to £2,500 a month from the government. 

But how does it affect contractors? 

Because the scheme is new and unprecedented, understanding how your situation fits can be confusing. Since Fircroft work with thousands of temporary workers around the world, it’s important for us to do everything we can to help. If you are unsure about your rights, please contact your Fircroft representative.

Here is what we know currently about how the Job Retention Scheme works:

Employers are responsible for making the decision to furlough staff and for making the arrangements for employees to be paid through the scheme by HMRC’s online portal. Employers will receive a cash grant with which to pay their furloughed employees 80% of their ordinary wage. Once employers have made a successful application, the government expects to make payment within six working days.

To qualify, an employee must have been working for the company prior to the 19th March and must be stood down for a minimum of 3 weeks. Employees who are stood down temporarily are entitled to a monthly payment equivalent to 80% of their monthly earnings up to a maximum of £2,500.

So a worker who averages £2,000 a month will be entitled to £1,600 gross pay from the scheme.

At this time the government has set the scheme to run until the end of June, though it could be extended following further developments. It’s thought that two-thirds of UK firms will be using the scheme.

All permanent and contingent workers who are able to work from home are being asked to do so and be paid in the usual way.

Here’s how it affects contractors:

Temporary PAYE workers

 Temporary PAYE workers can be asked to be furloughed by an end client who intends to re-engage the worker in the future. As with permanent employees, the PAYE worker must be stood down for a minimum of 3 weeks to qualify.

The worker will be entitled to a monthly payment equivalent to 80% of their average monthly earnings up to a maximum of £2,500.

It’s important to note that a furloughed worker can not undertake any other work, or they will not be eligible for payment through the scheme. A PAYE worker who has been issued notice by the end client is not considered furloughed and is therefore not eligible for the job retention scheme. 

Umbrella workers

 Those working under a contract of employment for an umbrella company are eligible in the same way as PAYE workers. The umbrella company will be responsible for setting up payments to furloughed umbrella workers through the Job Retention Scheme.

PSCs (Limited Company workers)

If you are a PSC operating a PAYE scheme then you may still be covered by the Coronavirus Job Retention Scheme and can make an application now as an employer.

However, if you are not operating a PAYE scheme then there is a separate scheme for self-employed workers. You can access the self-employment income support scheme if they have lost income due to COVID-19. This scheme will not be available to claim until May, with payments due early June 2020.

The scheme will allow self-employed workers to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 a month. You will need to confirm to HMRC that your business has been adversely affected by coronavirus, and demonstrate that you would otherwise be trading at this time. You must also have submitted a Self Assessment tax return for the tax year 2018 to 2019.

Contact Fircroft for support

The schemes put in place are subject to change and Fircroft will endeavour to keep up with the latest developments for the benefit of our contractors. Our specialist teams will contact you when needed and will do everything we can to provide the best support. 

Tags: Engineering
Recent Comments
Was working through a umbrella company and now have been laid off due to Coronavirus they say they can’t pay me using furlough scheme until clarification from gov is this correct
stephen rennie, 12 May 2020
Can a company keep you on furloughed and employ sub contractors to do the same job
Mike, 25 June 2020
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