Here is May’s issue of the Newsletter.
In this issue we will be covering:
- Coronavirus Job Retention Scheme
- Links to guidance
- Holiday pay
- Starter checklist
- Scottish rate of income tax
- Form P7X
- New Taxable Pay tables
- Direct Earnings Attachments
As you would expect, everyone’s focus at the moment is on COVID 19 and how businesses will work through the issues this has brought about.
It is no surprise that as the portal for making a reclaim under the Coronavirus Job Retention Scheme (CJRS) opened on 20 April and there were 67,000 claims in the first 30 minutes. The cost of claims under CJRS up to 12 May was £10 billion.
Here are some of the key points:
- To qualify the employee must be on furlough for a minimum of 3 weeks and must not carry out any duties of the employment during that time.
- If the employee is on reduced hours or reduced pay they do not qualify for the scheme.
- NMW and NLW are not relevant to the CJRS scheme as no work is being carried out.
- You can bring employees back from furlough into work at any time, if you wish. But you can only make a reclaim under the scheme if the employee has been furloughed for at least 3 weeks each time.
- Maximum claim is 80% of salary up to a maximum of £2,500 per month per employee plus employers can reclaim secondary NI contributions and employer’s pension contributions up to 3% under auto enrolment.
- Employers should include any contractual payments such as car allowance but not benefits in kind or conditional payments. See guidance for further details.
- Employees must be on the payroll by 19th March which means they must by on an RTI submission on or before that date. If, for example, they joined on 10th March and were paid on 25th March and the RTI submission was sent on 25th they do not qualify.
Here is an extract from the guidance on Gov of who qualifies as there has been some confusion over the change in qualification date which was moved from 28 February 2020 to 19 March 2020:
“You can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020.This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020. Employees that were employed as of 28 February 2020 and on payroll (i.e. notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for the employer after that and prior to 19 March 2020, can also qualify for the scheme if the employer re-employs them and puts them on furlough”.
One of the most important changes that has been made to the CJRS by the Treasury in their Direction to HMRC is that employers must have a written agreement with their employees to be furloughed.
Originally the guidance stated that it was sufficient for employers to simply notify employees that they would be furloughed.
Now employers are being advised to ensure that not only are employees notified but actually agree to be furloughed. This can be done in the form of a letter or an email. Employers will be required to retain records for 5 years.
However, HMRC’s guidance issued on 20 April 2020 does seem to contradict this.
“To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years.” (Emphasis added).
If you decide to adhere to HMRC’s guidance that the employee does not have to agree in writing, it would be advisable to print off a copy of the guide and ensure it is dated and retained as part of your records.
Part pay period calculations
One issue that has caused problems regarding the guidance and claiming the grant under CJRS is that part pay period calculations should be based on calendar days and not working days.
If HMRC’s original guidance had mentioned this, then employers could have included this in their furlough agreement. Calculations for a day’s pay based on calendar days maybe contrary to what is set out in contracts of employment or HR policies.
One solution adopted by employers is to calculate furlough pay in accordance with company policy in order to pay their employees. Then reclaim the amount due as calculated by HMRC’s calculator (based on calendar days) and to suffer the loss on the difference.
To reclaim 80% of salary etc grant under the scheme you must do this through HMRC’s portal and not via the Employer Payment Summary (EPS). The portal was opened on 20 April 2020 and according to Gov.uk offered a full service.
Employers can only make a claim once every three weeks but can claim in advance.
Employers with more than 100 employees will need to provide more detail in their submission to HMRC:
- Claim amount per furloughed employee
- Claim period for each furloughed employee
You will also need to upload the claim information in one of the following formats:
Amendments to guidance
We advise members to keep a close eye on Gov.UK website for any changes to CJRS. We have included some useful links to guidance below.
In particular the link to CJRS Collections provides a dedicated page on Gov with links to all the CJRS guidance.
The CJRS scheme was due to be open initially from 1 March until the end of May but this was extended to 30 June.
However, the Chancellor has now extended the scheme to the end of October with provisions for employees to return to work part time and still remain within the scheme from 1 August 2020. See the link below under the heading of “Guidance” for details on the extension to the scheme.
Further detailed guidance is due out at the end of May.
Step by step guide for employers: https://www.gov.uk/government/publications/coronavirus-job-retention-scheme-step-by-step-guide-for-employers?utm_source=e0c0b00f-15ae-4443-a5ee-0a9ea0f9278d&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate
The Pensions Regulator has also issued guidance on their website regarding COVID 19 including pension contributions for salary sacrifice schemes.
There are links on TPR’s home page: https://www.thepensionsregulator.gov.uk/
Here is a link both versions of the Treasury’s Direction on 15 April and the update to the scheme on 20 May 2020. The Direction was originally 12 pages long but the new version issued on 20 May is 17 pages and includes a number of new sections.
Statutory Sick Pay
The Coronavirus Statutory Sick Pay Rebate Scheme will repay employers the current rate of SSP that they pay to current or former employees for periods of sickness starting on or after 13 March 2020 that are connected to COVID 19.
The repayment covers up to 2 weeks of SSP (not 14 days) beginning with the first (qualifying) day of sickness, if an employee is unable to work due to:
- They have coronavirus (COVID 19) or are showing symptoms
- They cannot work because they are self-isolating at home
- They are shielding in line with public health guidance (from 16 April 2020)
- Employees do not have to provide a doctor’s fit note for you to make a claim. They can self- certify for the first seven calendar days as usual. If their sickness exceeds 7 days then can download a NHS 111 online fit note.
This scheme is in place until possibly November 2020 if the Government deem it necessary and applies to:
- full-time employees
- part-time employees
- employees on agency contracts
- employees on flexible or zero-hour contracts
For further details go to: https://www.gov.uk/guidance/claim-back-statutory-sick-pay-paid-to-employees-due-to-coronavirus-covid-19
Small and medium size employers (less than 250 employees on their PAYE reference scheme as at 28 February 2020) can reclaim two weeks SSP for each employee sick due to COVID 19. The HMRC portal for reclaiming SSP is due to open from 26 May 2020.
Annual Leave Entitlement
New guidance on holiday pay entitlement and holiday pay during the pandemic was published on 13 May 2020 on Gov.uk and a link is provided below.
The guidance applies to England, Scotland and Wales
Guidance for Northern Ireland can be found at:
The important points to remember are:
- An employee can take annual leave during furlough and it does not break the 21 day minimum furlough requirement.
- The employer must pay full pay for annual leave but can reclaim 80% under the CJRS if the employee is also on furlough.
Calculating Holiday Pay
With effect from 6 April 2020, if an employee has no fixed or regular hours, their holiday pay will be based on an average of their pay over the previous 52 weeks. For example, if they carried out work on a casual basis on a zero-hours contract or shifts that change without a fixed pattern.
ACAS has issued guidance on how to calculate holiday pay under the new rules and this can be found at: https://www.acas.org.uk/checking-holiday-entitlement/calculating-holiday-pay
New Starter Checklist
Don’t forget there is a new version of the starter checklist which should be used from 6 April 2020.
Scottish Income Tax Rates Change
The Government froze the tax rates and thresholds for 2020/21 for the start of the tax year. HMRC instructed employers to carry forward 2019/20 tax rates into 2020/21.
However, the Scottish rates of Income Tax agreed by the Scottish Parliament were different to those used in 2019/20. These rates should be applied for paydays on or after 11 May 2020.
The form P7X (2020) confirms that there are new rates and thresholds but does not state the amounts or the payday to which they apply.
You can view or download the P7X here: https://www.gov.uk/government/publications/p7x-tax-codes-to-use-following-the-budget
All rates and thresholds including the new Scottish rates can be viewed on Gov at:
New Taxable Pay Tables which include the new Scottish rates which apply for pay days on or after 11 May 2020. Please note the tables are dated April 2020
Direct Earnings Attachments (DEA)
There are changes to DEA deductions due to the Coronavirus (COVID-19).
The DWP are writing to employers to ask them to temporarily stop benefit debt repayments. You should not make any DEA deductions to your employees’ pay in April, May or June 2020. Employers will be advised by the DWP if this will be extended.
This temporary cessation only applies to DEA’s and not to other types of attachment orders.