The COVID-19 Job Retention Scheme – payroll aspects
Justine Riccomini explains the main themes within current payroll related guidance for employers in the Job Retention Scheme (JRS) and how it might work in practice together with the furlough payments claims portal.
The position today on the current guidance is that it was last updated on 4 April 2020. Employers and payrollers should look out for any updates in this fast-changing information dissemination process.
The guidance cannot cover every esoteric scenario and therefore a lot of judgement calls will need to be taken by employers, payrollers and tax advisers alike. HMRC is clearly doing its absolute best to provide answers wherever it can – and to avoid multiple queries being submitted to HMRC by telephone or email, the EPG, which is co-chaired by ICAS’ Justine Riccomini, has submitted a listing of over 120 questions to HMRC’s policy experts to try to obtain clarification on the main stumbling blocks.
As a result of this, more information is now available on who exactly is eligible, how to calculate a claim which will be made through the separate portal (anticipated to be up and running by the end of April) and further clarification on what constitutes “wages”.
HMRC has stated that if an employer is unable to maintain its current workforce because operations have been “severely affected” by COVID-19, and would otherwise have no option but to make its workforce‘s positions redundant, it can furlough its employees.
The scheme is intended to be temporary – in place for 3 months starting from 1 March 2020 – and this will be reviewed later to see if an extension is necessary.
Employers must have:
- created and started a PAYE payroll scheme on or before 28 February 2020
- enrolled for PAYE online - this can take up to 10 days
- a UK bank account
Who can claim
Any entity with a UK payroll can apply. This includes:
- businesses, including Personal Service Companies
- recruitment agencies
- public authorities
How to calculate a claim
It is possible for employers to continue to employ people and furlough others - on rotation if necessary – as long as the furloughed employees are on furlough for a minimum of three weeks.
The employer can claim for 80% of the furloughed employees’ gross wages or salary up to a maximum of £2,500. The employer can also claim for minimum auto-enrolment employer pension contributions which would be payable on the subsidised wage as well as the employer’s NICs value on that amount. See the ICAS fact sheet for further details on whether pay is fixed or variable.
Employers can choose to “top up” the salary and pay the remaining 20% (or more if the employee earns more than the capped earnings figure) each month – but they don’t have to. However, the key thing is that the employee should not be working whilst furloughed.
The payroll should be calculated in the usual way, for working employees and those whose furlough is being “topped up”, this would be at 100% of the usual salary levels as before. Those who are being paid 80% furlough can be paid on the same payroll and when the FPS is submitted, it will show everyone on the payroll, some with less earnings than the previous pay period.
Once the HMRC furlough claims portal is open at the end of April as anticipated, the employer can then claim for this using that mechanism. The furlough pay should equate to that paid through the payroll on the FPS.
Timing of the commencement of furlough
Something new which has come out in the HMRC guidance regarding the timing of the furlough claim is as follows:
“Grants will be prorated if your employee is only furloughed for part of a pay period.
Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to confirming their furloughed status”.
There is a separate section for directors who wish to furlough themselves – but note that ICAS has written to HMRC to ask for clarification on this guidance as it relates to statutory duties under s. 172 Companies Act 2006.
Past Overtime, Fees, Commission, Bonuses and non-cash payments
There is now also some further clarification on what elements of pay can be included in the basic pay calculation. HMRC confirm that: “This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.”
The original guidance issued on 20 March did not contain any information on private individual employers, for example those employing nannies, or on issues affecting personal service companies, directors, apprentices, and businesses in administration.
Self-isolating, shielding, caring and work carried out for one or more employers is also now covered.
There are many considerations and much more clarity is still required, but the position is starting to become a little clearer for employers.