CORONAVIRUS – latest update 20/04/2020
ADVICE FOR EMPLOYERS
The HMRC Portal has gone live today so that where you have employees who are furloughed, you may now make a claim for the Coronavirus Job Retention Scheme (CJRS) grant for reimbursement of 80% furloughed employees’ wages (up to £2,500 per month).
There is new updated guidance effective today from Gov.UK as well as HMRC and here are key sites you need to consider. HMRC have issued some step and step guidance which provides a flow chart and some examples of how to calculate how much you claim which can be found here: https://www.gov.uk/government/publications/coronavirus-job-retention-scheme-step-by-step-guide-for-employers.
However – there are multiple ways to determine how much to claim and rather than cover off all of these, the below guidance highlights a few things to consider, which it is hoped are of help.
Making a Claim
Previous guidance has detailed the basics of making a claim and what you require to do so. The link on Gov.UK is here: https://www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme
However in essence, if you have an “authorised” Agent (not just a payroll bureau) then you should speak to them about doing this for you. If you do please make sure you ask them to provide you with the calculations they used – you need this in case you are audited by HMRC later.
If you intend to claim by yourself, make sure you have all the information prepared in advance as each submission must be completed within 30 minutes as the current versions does not have a “save and return” facility. Again, make sure you keep your calculations on how you worked out your claim.
Note: You will need to make sure you have your Government Gateway ID and Password issued when you applied for PAYE online or you will not be able to make a claim.
HMRC have provided guidance on how to calculate the 80% of your employees wages and provided an online calculator to do this – note however that it only works with standard weekly or monthly payments and if there are any exceptions, or top-ups then you will have to calculate the amounts manually: https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme
However, there also appears to be some inconsistencies in how you may have previously calculated a day’s pay for an employee. Normally, annual salary would be divided by 260 to get the rate of a day’s pay, or for weekly employees paid a regular amount by dividing the total weekly amount by the number of days they work, usually by 5 days i.e. 40 hours per week = 8 hours per day.
HMRC have determined the maximum claimable day rate as the amount paid to be divided by the number of days in the month including weekends. So the maximum day claimable for March is £2,500 ÷ 31 days = £80.63 and April is £2,500 ÷ 30 days = £83.34 per day. This may cause an issue where you are using a mixture of monthly, weekly and daily rates of pay to calculate the amount claimed.
This does not align with the normal means to calculate a day’s pay rate and you should decide whether to follow HMRC’s guidance or what is appropriate for your employees and their contracted terms.
As per the guidance issued on 20th April 2020, HMRC have stated you should choose the calculation method that best fits your employee and that they shall not “decline or seek repayment of any grant based solely on the particular choice of pay calculation, so long as a reasonable choice of approach is made” – make sure you retain your calculations and reasoning so you can justify this at a later date.
Dates of Furlough From and To
Previous guidance indicated that the start and end dates of furlough were to be used and a single payment claimed. Clarity on this matter indicates that each claim period should be around your monthly payroll and should be around or shortly after this.
If you are claiming across multiple pay periods, then calculate for each and add them together so you make a single claim for the whole amount such as March and April’s amount to be claimed in April. Please do not claim too far in advance i.e. do not claim May 2020 in the claim made in April 2020. If you miss the payment, claim in the next pay run, but be aware you are still obligated to pay your employees at the rate agreed with them.
Note that HMRC are indicating it will take 6 days to have your claim checked and paid direct to your bank account so you must ensure you submit your claim in adequate time for this.
You cannot amend your claim so you need to make sure you claim for the correct amount.
What you can Claim for
In essence when calculating what you are claiming for you can include:
- basic wages
- non-voluntary overtime
- non-discretionary fees and/or commission fees
- piece rate payments
Generally, you cannot claim for discretionary payments such as tips, bonuses, commissions, non-cash payments OR benefits in kind such as company cars, salary sacrifice schemes (including pension contributions ) – that reduce an employee’s taxable pay.
For clarity re overtime payments consider whether the employee can refuse to carry this out – if they cannot refuse and must do the overtime, then this is included in the calculation.
HMRC Audit of Claims
HMRC have made it clear that they will review claims over the next 2 years, therefore it is critical that you document your reasoning behind furloughing of your employees so that you can justify this at a later date.
It is highly recommended that you collate this information now and not try to do it later.
Things to put in place now:
- all letters and correspondence to and from employees
- you must have the employee’s agreement to be furloughed, so a signature or email from them is required
- your method of and the actual calculations used to calculate the grant claim – note if you use your Agent to do this, make sure they provide you with the information for your records
- what steps if any did you take to consider any delay in furloughing some or all of your employees
- document when you decided to furlough each of your employees and why, bearing in mind the actual guidance states
“if you cannot maintain your current workforce because your operations have been severely affected by coronavirus (COVID-19), you can furlough your employees and apply for a grant that covers 80% of their usual wages up to £2,500 per month, plus associate Employer National Insurance contributions and pension contributions up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised pay”.
Considerations as to whether or not you and your employees are eligible should include:
- you were one of the companies instructed to close by UK Government and had no choice but to close: https://www.gov.uk/government/publications/further-businesses-and-premises-to-close
- did the supply-chain impact your business such that you could no longer operate
- was there such a substantial downturn in revenue that lay-offs or redundancies, in normal circumstances, would have to be considered
- there was no way you could continue to operate your business, even from home
- it wasn’t possible to maintain the safety of your workforce, even with Safe Working Arrangements and protective processes in place
- your employees have been told they MUST NOT carry out any work or service that could generate revenue for your business whilst on furlough, and have agreed to this
Update re Holidays during Furlough
The UK Government are still reserving the right to keep the matter relating to holiday whilst on furlough under review, however recent guidance has indicated:
- Employees may take holiday whilst on furlough, however you MUST pay those days at their full 100% rate of pay
- Bank Holidays are included within this and must be paid at 100% of salary
- Emergency legislation allows the carry over of up to 4 weeks of untaken leave for up to 2 years, if the employee has been unable to take their holiday due to the impact of COVID-19
- Employers can determine when employees take holiday based on the business needs provided at least twice the notice is given for the number of days to be taken
- Therefore, Employers may be able to require their employees to take holiday during furlough provided they paid 100% of wages to the employee for those days
It is likely that the CJRS will be in force for some time as UK Government is keen to ensure there is scientific evidence to support a return to normal working life.
It is probable given the extension of the furlough grant scheme that this may not occur as soon as everyone would like. It is therefore imperative that you encourage your employees to only leave their home for essential purposes, and if this includes work, then they take appropriate measures to minimise the spread of the Coronavirus, as until we are advised to return, we must stay at least socially distanced.
If your business is continuing to operate, or is considering returning some or all of its workforce back to work, then please contact us to discuss how best to do this, so that you have appropriate safe working arrangements in place.
This advice is being reviewed and updated regularly and is currently in line with HMRC, UK Government and ACAS guidance as updated 20th April 2020.
Should you require any further advice or guidance please call us on our usual HR number of: 01325 488425 or email: email@example.com