Coronavirus Job Retention Scheme

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme is open to all employers who had created and started a PAYE payroll scheme by the 28th February 20. The scheme is currently due to run for three months and can be back dated to 1st March 20.

Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly costs, up to £2,500/mth, plus the associated employers NI and minimum automatic enrolment employer pension contribution on that wage. The employee’s wage will be subject to usual income tax and other deductions.

An employer can choose to top up an employee’s salary beyond the 80%, but this is up to the employer and at their own cost.

Fees, commission and bonuses should not be included when calculating the pay for a furloughed worker.

HMRC are currently working on the portal which will be used by employers to claim the grant, though this isn’t available yet. The first payments are expected to be made at the back end of April 2020.

Employers should discuss the scheme with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process.

Who can claim?

Any UK organisation with employees can apply, including:

  • Businesses
  • Charities
  • Recruitment agencies (agency workers paid through PAYE)
  • Public authorities

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

The government expects that the scheme will not be used by many public sector organisations. For further information click here.

Which employees can you claim for?

Furloughed employees must have been on your PAYE payroll on the 28th February 20, and can be on any type of contract, including:

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

If an employee was made redundant since the 28th February 2020 they can be rehired and will then be covered by the scheme.

An employee, when furloughed, cannot undertake work for or on behalf of the organisation. This includes providing services or generation revenue.

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

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

If an employee is on sick leave or self-isolating they should get SSP, but they can be furloughed after this. If an employee is shielding in line with public guidance they can be furloughed.

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.

For detailed guidance when an employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay please click here.

How do you calculate furloughed workers pay?

HMRC will cover the lower of 80% of an employee’s regular wage or £2,500/mth, plus the associated employers NI and minimum automatic enrolment pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.

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%.

How do you calculate furloughed pay for variable pay workers?

If an employee has been employed for a full 12 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.

Will the scheme cover additional workplace pension contributions?

Employer 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).

How do you claim?

HMRC are currently working on the portal which will be used by employers to claim the grant, though this isn’t available yet. The first payments are expected to be made at the back end of April 2020.

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.

To read the full detailed guidance please click here!

The government hasn’t released all the information on the Coronavirus Job Retention Scheme yet. We will update the page as and when further information is released.

What is re-enrolment?!

If you are reading this post, you are probably one of the many employers who have been receiving letters from The Pensions Regulator regarding re-enrolment. We certainly have received many emails from our clients asking, “what is re-enrolment?!”

Re-enrolment is part of an employer’s workplace pension duties which has to be completed once every three years on or around the 3rd anniversary of the companies staging date.

Once you have selected your re-enrolment date within the 6-month time-frame (three months either side of your third anniversary staging date) you have two duties to complete. Firstly, during the usual assessment of employees during the payroll process any employees who have opted out previously, but are eligible on the chosen re-enrolment date, will have to be re-enrolled into a qualifying workplace pension scheme. If the employee has opted out within the last year, they are exempt from having to be re-enrolled. It’s worth noting once the employee has bene re-enrolled, they are allowed to out opt again as they had done previously.

If an employee is due to leave employment before the re-enrolment process has bene completed the employer can choose whether to re-enrol the employee or not.

If you are unsure of your re-enrolment dates The Pensions Regulator has a handy tool. Clicking here will take you to the tool.

The second part of your re-enrolment duties is to complete a re-declaration of compliance with The Pensions Regulator. All employers, whether they have had to re-enrol employees, have to do this within 5 months of the third anniversary of their staging date. Failing to file the re-declaration of compliance before the deadline can result in fines from The Pensions Regulator so it’s worth making sure you are compliant.

To file your re-declaration of compliance please click here!

Please feel free to get in touch if you have any further questions about re-enrolment, or anything to do with workplace pensions and payroll.

New Bereavement Leave Law – Jack’s Law

Under new laws due to come in from April 2020, parents who lose a child will now recevie two weeks’ paid bereavement leave. This will be known as Jack’s Law.

“Under the new rules, people who have been employed for at least 26 weeks will be entitled to a minimum payment of up to £148 a week during their bereavement leave, depending on the level of their salary.”

To see the full story on the BBC click here

10 questions new employers have about payroll!

1. What is a PAYE scheme and do I need to operate one?

PAYE stands for Pay As You Earn, which simply means tax is calculated and deducted from earnings when the earnings are paid. Most employers will have to operate a PAYE scheme, whether this is done themselves or handled by outsourcing to a payroll bureau.

If you pay yourself or any employees below the Lower Earnings Limit (LEL) (£512/mth tax year 19/20) you don’t need to operate a PAYE scheme provided no employees have another job or receive a pension.

In the scenario where you’re operating a PAYE scheme and you then take on an employee whose gross pay is below the LEL then they will need to be included in the PAYE scheme.

2. Checking the employee has the right to work?

It’s important you check a job applicant’s right to work in the UK before you employ them. This can be done by either checking the applicant’s original documents or check the applicant’s right to work online if they give you their share code.

Please visit www.gov.uk/check-job-applicant-right-to-work to help you carry out the necessary checks.

3. What is the National Minimum Wage and National Living Wage?

Nearly all workers are entitled to the National Minimum Wage and if the worker is 25 or over they will be entitled to the National Living Wage. The rate received depends on the age of the worker and whether they are an apprentice. The National Minimum/Living Wage is based on the hourly rate a worker is paid.

You’re not entitled to the National Minimum/Living Wage if you are a director or self-employed.

The current rates are as follows;

Year25 and over21 to 2418 to 20Under 18Apprentice
April 2019£8.21£7.70£6.15£4.35£3.90

4. What is auto enrolment?

Since the introduction of workplace pensions all employers must automatically enrol all eligible employees into a qualifying pension scheme like NEST and offer a workplace pension scheme to those employees who do not qualify for automatic enrolment.

Auto enrolment is a very large subject, and one which can’t be ignored because The Pensions Regulator isn’t slow in handing out penalties to employers who don’t comply.

Essentially auto enrolment can be broken down into three parts;

  • Provide a pension letter to employees within 6 weeks of their start date
  • Assess employees and enrol any eligible employees automatically
  • File a declaration of compliance with The Pensions Regulator

Once these initial tasks are complete employees need to be assessed each pay period and the necessary action taken depending on their status.

We handle pension set up and administration for NEST, The People’s Pension & NOW Pensions. If you use a different pension scheme please let us know as we might be able to help.

For further reading it’s worth going to www.thepensionsregulator.gov.uk/en/employers

5. Who pays the employee?

We perform the calculations based on the earnings you supply, provide you with payslips, a payroll summary report, a P32 report (taxes due to HMRC) and perform the pension administration. You pay the employee(s) net earnings and the employer and employee taxes to HMRC based on the figures we provide.

6. How do I pay tax to HMRC and when?

The easiest way to pay HMRC is to use internet banking. The payee details are;

Account name: HMRC Cumbernauld

A/C no: 12001039

Sort code: 08 32 10

Reference Example: 123AB12345678 plus a 4 digit suffix

The reference always starts with your Accounts Office Reference, which identifies your payroll so HMRC know which payroll scheme to allocate the payment to. Although it’s not mandatory it’s a good idea to add the 4 digit suffix to the Accounts Office Reference when you make a payment because this identifies the tax period you are paying. The first 2 digits identify the tax year and for tax year 2019-20 the first 2 digits are 20. The last 2 digits identify the tax month where April 2019 is tax month 1 so the last 2 digits are 01, May is 02 and so on. So for example the taxes for December 19 (tax month 9) is 2009.

The payment deadline is 22nd of the month after the tax month end. So the tax month end for December is 5th January so the deadline to pay the taxes is 22nd January.

7. What is the pay period and earnings period?

The pay period and earnings period are important to set out from the start of the payroll. The pay period is when you pay your employees, e.g. if you pay your employees weekly than the earnings period is weekly, if you pay employees monthly than the pay period is monthly and so on. Employees must receive a payslip every time they are paid and must receive a payslip by law on their pay day or shortly before, but not after.

The earnings period relates to when the money was earnt, this is particularly important if an employee is paid for variable hours worked. If for example we have an employee paid monthly on the last day of the month and works variable hours, you would want to have an earnings period that gives you time to collate the information, process the payroll and get the employee(s) paid. You may have an earnings period of the 25th-24th each month, therefore any hours worked between those dates will be paid on the last day of the month.

8. What information do you need from an employee to set them up on the payroll?

To be able to set an employee up on the payroll we would require;

  • Name
  • Address
  • NI number
  • DOB
  • Start date
  • P45 or complete a starter checklist form which can be found online at HMRC

9. Does every employee need to receive a payslip?

Yes, simply every worker paid must be given a payslip no later than the day they are paid. If an employee works variable hours the payslip needs to show the hours worked. The employee needs to be able to understand the amount they’ve been paid and how that relates to the work they’ve completed.

10. What is the NI Employment Allowance?

If entitled to the NI Employment Allowance the first £3,000 of employers NI (Class 1) is waived. Entitlement depends on several criteria, the main one being the company employees a non-director who earns above the secondary threshold. If you are a single director company, you will not be eligible to the NI Employment Allowance. There are further criteria for a company to be entitled, please see the link below for further reading;

www.gov.uk/claim-employment-allowance

If the company is eligible during the tax year, you will be able to claim up to the full £3,000 Employment Allowance. Furthermore, if you become no longer eligible during the tax year, you can continue to claim for the remainder of the tax year and then turn off the eligibility from the start of the following tax year.

There are further changes coming in from April 2020. Employers with a total secondary NIC bill over £100,000 (this is from the previous tax year) will no longer be able to claim the NI Employment Allowance.

The NI Employment Allowance will have to be claimed each year by submitting an RTI.

NI Employment Allowance will operate under the de minimis State Aid.