Job Retention Scheme
Since the announcement of the Job Retention scheme there have been a lot of questions surrounding, how and where you apply as well as how to process your employees payments based on this scheme.
Service Launch
HMRC are ready to launch on 20 April. Soon businesses will be contacted to advise you on what you need to do. We here at Exchange Accountants can support you during this process.
Please contact us on info@exchangeaccountants.com if you require any assistance with your applications.
Businesses, and agents that are authorised to act on behalf of clients for PAYE matters, will be able to claim. However, file only agents, including Payroll Bureaus, will not be able access the service due to data protection reasons.
Businesses will need the following information on each of their furloughed employees:
- National Insurance number
- Salary, National Insurance and pension contribution information that allows business to calculate the claim amount.
A Working Example
The first step is to work out the base wage.
For those employees with a steady salary you don’t need to take an average of the salary, it’s just what the salary was for February excluding any overtime or bonuses.
For staff whose hours vary you can use
· the same month’s earning from the previous year
· average monthly earnings from the 2019-20 tax year
Once you have the base wage as calculated above for example, £1,000, you then process 80% of this (£800) through the RTI payroll as a gross salary. Tax, Employees National Insurance and Employee Pension contributions are taken of this as normal so let’s say these add up to £250. You therefore pay the employee £550 (£800 -£250) and pay the £250 over to HMRC and the pension company as normal.
In addition you will have to pay over the Employers NIC (say £80) and Employers pension element say (£24) to the pension company. Your business is therefore out £904 (£550 to staff, £250 to HMRC for EEs NIC and Tax and £104 (£80 + £24) for ERS NIC and pension.
Once HMRC get their portal up and running you will be able to make a claim for £904 being the total cost of furloughing the employee so there will be no overall loss or gain.
If you decide to pay the staff members their full wage then for the example above you will process £1,000 through the payroll as a gross salary as normal but you will only be able to reclaim £904 back.
There are more complicated scenarios but please feel free to contact us at info@exchangeaccountants.com to assist you further with the calculation.
Holiday Pay and Entitlement During Furlough
We have received a number of queries regarding what happens to holidays during the period of time when an employee is furloughed. Please note that we cannot give legal advice on this matter and urge that you contact your HR advisor or solicitor as the area involves a lot of aspects of employment law and depends on the contract of employment, if one is in place. From reading various guidance and particularly guidance issued by ACAS it appears that the following applies:
- Holiday pay entitlements continue to accrue during the furlough period
- Employees are entitled to full holiday pay for statutory holidays that occur during the holiday period. This is particularly relevant during the upcoming Easter break with Good Friday and Easter Monday forming part of many employees compulsory days off.
- Employees can request to use up their holiday requirement during the furlough period in order to receive full pay for the number of relevant days
- Holiday entitlements can be varied or changed as long as both the employee and employer agree in advance
Penalties
HMRC has also announced that they will consider criminal proceedings against any employer that makes a fraudulent claim including cases were the employees continue to work.
