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Helpful Information for Our Clients: Coronavirus Job Retention Scheme | PayCheck Ltd
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Hot off the press! We bring you the latest update from the HMRC on the Coronavirus Job Retention Scheme and how your business can claim!

Pay Check's Summary:

We've spoken to hundreds of clients this week with our interpretation, so the below includes comments in brackets of whether this is an update to earlier information, no change or a confirmation

  • There will be a new portal to make your claim, it will be up and running by end of April (No change)
  • Furloughed Employees can not work for the business during this paid time (No change)
  • Only Employees on payroll before 28/02/2020 will be eligible, Joiners after are not eligible at this time (Update)
  • The employer must inform the employee of the change to contract and the employee must agree to the terms. Proof of this communication must be kept to be able to claim (Update)
  • The employer will receive a Grant to cover the costs of the lower of 80% of regular wage or £2.5k - whichever is lower, plus associated ER NI and ER Pen (min regulation contributions only) (Update)
  • For full and part time employees - actual Salary before Tax as of 28th Feb, should be used for calculation of 80% (Update)
  • For varied pay employees - use the pay in the same month of the previous year or the average monthly earnings over the 19/20 tax year. This would be pro rata if not worked for the full year (Update)
  • Employee to pay Tax, NI and Pension on the Furlough Pay as usual (unless opted out or not pensionable) (As previously confirmed)
  • Furlough Pay to be reported under a relevant adjustment (Confirmed)
  • Employees have the same employment rights whilst on Furloughed Pay as they do working (No change)
  • The employer remains liable for the ER NI and ER Pen (Confirmed)

The employer should work out the 80% Salary and then add on the ER NI and ER Pen to make a claim for (Updated)

Summary of Payroll Scenario:

If an employee normally gets £3000 per month, 80% will be £2400.

That’s the figure you process under a Furlough Pay Adjustment and will be subject to Tax, NI and EE Pen (if not opted out and scheme rules apply). Your business can then claim, £2400 plus ER NI and ER Pension (Min Contributions, no enhanced percentages), through the HMRC portal to be announced by End of April. If your business needs financial support before this, you need to seek further advice.

What can Pay Check do to support this process, and what do we need from our clients?

All of the information you need to calculate the furlough pay has already been provided in your payroll reports.

If you need Pay Check to provide further reports to aid your assessment, we can provide a standard year to date report. There is normally a charge for this work but for the next few weeks we will offer this free of charge. Please note you will also be receiving a YTD report in the next few weeks anyway as part of our year end reconciliation processes.

If you need custom year to date report writing we will assess the level of work required and let you know if there will be any additional charge. We are extremely sensitive to the situation we all find ourselves and would keep any charges to a minimum, only to cover the additional time that our team members need to work to complete said work.

Once you have decided to furlough employees, please provide calculations based on your analysis and Pay Check will process these as requested.

We will assume that you have made the mandatory contractual changes with your employees.

Please remember that any furlough pay information should be provided on an excel spreadsheet with employee codes, names and furlough adjustment amounts.

If your employees are hourly paid and we manage your holiday accrual, you must provide us with the hours relating to the furlough pay so that we can report the hours and holiday as usual on your payroll reports and the payslips.

We can not guarantee in any event that you will receive the compensation or reimbursement from the UK Government that you may expect - applications for the grant are out of our hands.

We can guarantee that we will continue to keep you informed on any changes that are reported.

Full Detail from HMRC page below:

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. HMRC expect this to be up and running by the end of April. It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19).

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Who can claim

Any UK organisation with employees can apply, including:

  • businesses
  • charities
  • recruitment agencies (agency workers paid through PAYE)
  • public authorities

You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme.

Employees you can claim for

Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:

  • full-time employees
  • part-time employees
  • employees on agency contracts
  • employees on flexible or zero-hour contracts

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

This scheme is only for employees on agency contracts who are not working.

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.

Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.

Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.

You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.

If your employee is on unpaid leave

Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.

If your employee is on Statutory Sick Pay

Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.

Employees who are shielding in line with public health guidance can be placed on furlough.

If your employee has more than one job

If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.

If your employee does volunteer work or training

A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay

Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.

If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.

Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.

If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.

The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.

Work out what you can claim

Employers need to make a claim for wage costs through this scheme.

You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.

At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.

We will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.

Full time and part time employees

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.

Employees whose pay varies

If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

  • the same month’s earning from the previous year
  • average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.

Employer National Insurance and Pension Contributions

All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.

You can claim a grant from HMRC to cover wages for a furloughed employee, equal to the lower of 80% of an employee’s regular salary or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.

You can choose to provide top-up salary in addition to the grant. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).

National Living Wage/National Minimum Wage

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.

Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

What you’ll need to make a claim

Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

To claim, you will need:

  • your ePAYE reference number
  • the number of employees being furloughed
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 weeks)
  • your bank account number and sort code
  • your contact name
  • your phone number

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

Claim

You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.

What to do after you’ve claimed

Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.

You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.

You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.

When the government ends the scheme

When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).

Employees that have been furloughed

Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.

Income tax and Employee National Insurance

Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.

Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.

Tax Treatment of the Coronavirus Job Retention Grant

Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

Published 26 March 2020

Wishing all our clients the best throughout this unprecedented time and rest assured that we will continue to deliver key payroll services.

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