All Posts By

Bob L

NI and Pension Calculations For Furloughed Workers

National Insurance for Furloughed workers in July

There are changes proposed with the way employer’s National Insurance is calculated for the period of July.  The proposal is more in line with the original guidance issued up to the 20th April.

The secondary NI threshold is taken and divided across the number of calendar days in the period, it is then multiplied by the number of furloughed days.  This value is deducted from the furlough payment, and the claimable employer’s NI is then 13.8% of the remainder.

Secondary threshold for NI = £169 per week or £732 per month for July 2020

Employers should still take the employment allowance into account where necessary.

For example:  An employee is on furlough of £300 per week and is paid 2-weekly.  They are furloughed for the whole of a two-week period in July, are NI category A, but also receiving a top up of £100 per week.

£300 x 2 = £600 total furlough pay

£600 – £338 = £262

Maximum employers NI to claim = 13.8% of £262 = £36.16

The National Insurance on the £100 is disregarded for the claim, unlike at the moment where the claimable amount can actually increase.

For workers on flexible furlough the equation is the same but using hours instead of days.  This is a little less clear in the guidance but appears to be:

NI threshold for period / usual number of hours in that period = NI threshold per hour

NI threshold per hour x number of hours furloughed = threshold available for furlough pay

Furlough pay – available threshold = furlough pay subject to NI

Furlough pay subject to NI x 0.138 = Employers NI that can be claimed where applicable.

From 1st August the employers NI can no longer be claimed anyway, so this only needs to be managed for one month.

 

Employer’s Pensions for Furloughed workers in July

For the employer’s pension that can be claimed for furloughed workers in July there does not appear to be any changes from June other than they have a separate section in the guidance.  This proposal is similar to the NI in as that it is similar to the initial proposals before 20th April, but then in the more recent changes was already moved to this anyway.

Take the relevant lower threshold for qualifying earnings and divide it by either days for a part furlough period, or hours if flexible furlough.  You then multiply this by the number of days or hours furloughed to get the threshold to deduct from the furlough pay.

The lower qualifying earnings threshold is £120 per week, or £520 per month.

The maximum employers auto-enrolment pension to claim is either the actual amount or 3% of the furloughed workers wage, whichever is lower.

For example: Monthly paid employee furloughed for whole period paid £2000 furlough pay and £1000 top up.  The employers pension contribution is £90

2000 – 520 = £1480

3% of 1480 = £44.4

£44.4 < £90

Therefore, for this employee £44.4 can be claimed in July for the employer’s pension contribution.

From 1st August the employer’s pension contribution can no longer be claimed.

Flexible Furlough

Flexible Furlough Pay

As part of the Coronavirus Job Retention Scheme from 1st July 2020 workers can return to work on reduced hours whilst remaining furloughed.  Where the flexible options is used and an employee is returning to work on reduced hours you must know the hours usually worked as well as the hours worked this period.  This is not so straightforward, but HMRC have been quite specific with how they want this calculated for furloughed workers.

Usual hours worked / the period over which those hours are worked = average per day

Average per day x number of hours in the pay period = the total usual hours worked

If the total usual hours worked is not a whole number then round up.

Eg Monthly paid worker on 37 hours per week in July

37 / 7 = 5.29

5.29 x 31 = 163.99

164 hours usually worked in July

(this is not the equation we would typically use to work out average monthly hours!)

It is more complex where an employee works variable hours but still possible if you have the information to hand.  The first part of the equation could be total hours / 300 days for instance.

You can deduct the number of hours worked in the pay period from the usual hours to give the furlough hours that can be claimed.

The amount that can be claimed is the usual process of calculating the 80% grant amount and applying caps as necessary.

Grant amount x (furlough hours / normal hours) = the furlough grant to claim

It looks like hours should always be used and not days, there is no guidance for how to calculate flexible furlough payments using day rates.  Again records should be kept.

HMRC have a few examples with the flexible calculation available here.

Furlough Pay Changes 1st July

Furlough Pay Changes 1st July 2020 (CJRS)

There have been several changes announced for the Coronavirus Job Retention Scheme coming in from 1st July.  The July is a threshold, and it looks like claims will not be able to cross June and July, or July and August.  There is also going to be a new template released for employees with over 100 employees furloughed.

Claims for July will not be able to be submitted until into July, and all claims for June must be completed by 31st July.  Probably the biggest change for July is that furlough is to become flexible, so employees can return to work on a part time basis and remain on furlough for the rest of their usual hours.

To qualify for furlough pay from July there is the added criteria that the employee should have been furloughed for at least three weeks between the 1st March and 30th June.  In July the employer can still claim employers pension and National Insurance, but the calculations have moved back to the original proposals prior to 20th April.

Announcements have also been made that from 1st August employer’s National Insurance and Pension can no longer be reclaimed, and the grant will be reduced from 80% from September.  The term minimum furlough pay has also been used, probably in anticipation of when employees are to be furloughed beyond September the employer will need to contribute.

The requirement to keep good records has been noted again, but also HMRC have added some reassurance:

“Choose the calculation you think best fits the way your employee is paid. For example, if you pay your employee a fixed regular salary, use the calculation for fixed pay amounts. HMRC will not decline or seek repayment of any grant based solely on the particular choice of pay calculation, as long as a reasonable choice of approach is made.”

The Calculations from 1st July

(as anticipated from the information provided on 12th June!)
This is subject to change, and last time everything changed in the week that the claim portal went live, however this time there is far more detail and examples have been provided.

For fixed salaried employees that are not using the flexible return to work you can use the salary and multiply by 80% to get the furlough grant amount.  If greater than the monthly or weekly caps then the grant amount is the cap.

Grant amount / the number of days in the month = Daily furlough pay

Daily furlough pay x number of days furloughed = furlough grant

Where the pay varies you can use the corresponding period last year or an average from last tax year.  Using the previous period can be complex where the periods do not align exactly, and we would suggest caution if you chose to do this.   There are examples available from the Government’s website as noted above

Calculating Employers Pension Contributions for Furlough Pay

Calculating Employers Pension Contributions for Furloughed Workers

Update 6.5.2020

Where an employee is in an auto-enrolment pension scheme there is a maximum amount that can be claimed for employers pension contributions, which is the contribution made or 3% of qualifying earnings, whichever is lower.

Where an employee is furloughed for the whole pay period the calculation is straightforward and as originally indicated:

3% of (Furlough pay – lower earnings limit) = the employer pension based on qualifying earnings

If you have a negative value it is converted to zero and nothing can be claimed.

The lower earnings limit for this tax year is £520 per month or £120 per week.  Where there is only furlough pay for the whole pay period, there is no top up, and the pension scheme is already based upon qualifying earnings you can simply lift the values from our reports.

If the pension scheme is on a different basis, such as total earnings, or there is some top up pay, then the calculation needs to be used.

If the furlough pay is only for part of the period then the lower earnings limit needs to pro rated as previously discussed.  See the Government CJRS website for further details:

https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme#work-out-how-much-you-can-claim-for-employers-pension-contributions

Update 24.4.2020

There has been another change!  The lower earnings limit can now be apportioned if the furlough pay is not for the full period.  If it is furlough pay for the whole period then the calculation remains the same.

https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme

Update 20.4.2020

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/880099/Coronavirus_Job_Retention_Scheme_step_by_step_guide_for_employers.pdf

(Please read the latest guidance before making a claim, HMRC are using a pro-rata for the NI calculation rather than their original guidance, but have used the below for the pension)

 

If your pension scheme already uses qualifying earnings, and your employees are only receiving furlough wages then the pension contributions will be simple to lift from the payroll reports.  Where things get more complex are when workers have a combination of furlough and non-furlough pay, or your pension is calculated on an alternative basis.

“Employer pension contributions that are paid on the subsidised furlough pay, up to the level of the minimum automatic enrolment employer contribution. The maximum level of grant for employer pension contributions on subsidised furlough pay is set in line with the minimum automatic enrolment employer contribution of 3% on qualifying earnings. Grants for pension contributions can be claimed up to this cap provided the employer will pay the whole amount claimed to a pension scheme for the employee as an employer contribution.”
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme 17.4.2020

Although salary sacrifice pension schemes will again need to be dealt with separately, it would seem likely that a proportion of the pension contribution can be claimed against. CJRS also states it is for auto-enrolment schemes, so where an employer pays into a private pension that may well not be covered.

Because there is an upper limit to the amount of furlough pay only the lower band needs to be considered, and because it is only the employers contribution we do not need to take into account the tax treatment of the scheme.  If you want to know more about qualifying earnings used in auto-enrolment pension contributions see here

The lower level is £520 per month, or £120 per week, for this tax year and was £512 per month, or £118 per week for the 19/20 tax year.  The pension is calculated on the portion above this lower level.

For example:

Month 1 payroll (April), monthly pay frequency:

Furlough pay = £2500

2500 – 520 = 1980

1980 x 0.03 = £59.40

This would be the maximum that could be claimed for that employee according to the current guidance.  It should be noted that the amount claimed cannot exceed the amount contributed by the employer.

If an employee has furlough pay below the lower limit then no contributions could be claimed for, and negative values would be zero.

For example:

Month 12 (March), 2-weekly payroll

Furlough pay = £200

200 – 236 = 0

236 is used as this is twice the weekly lower level for the 19/20 tax year.  There is no employers pension contribution that can be claimed.

Care should be taking when looking at you pension contributions as some pension companies use very misleading terminology.  Beware banded and un-banded descriptions and if there is any doubt contact your pension company.  The government will be using the definitions used by The Pensions Regulator.

We will be working on a report with a calculation for employers National Insurance and a pension value for qualifying earnings for a pay component with Furlough in the description, this may well not be available by Monday and will probably only function in the current pay period.  Where employers have chosen more complex pay arrangements for their employees we are anticipating providing the raw data for them to feed into the spreadsheet or whatever was designed.  The payroll .csv should already work for this perfectly well.

Useful links:

https://www.thepensionsregulator.gov.uk/en/employers/new-employers/im-an-employer-who-has-to-provide-a-pension/declare-your-compliance/ongoing-duties-for-employers-/earnings-thresholds
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Employers National Insurance for Furloughed Workers

Calculating Employers National Insurance for Furloughed Workers

Update 6.5.2020

Now the dust has settled there is a little more clarity.  If an employee is furloughed for the entire period claimed, then the employers NIC that can be claimed can be calculated as originally indicated:

13.8% of (Furlough Pay – Secondary Threshold) = Employers NI

If an employee is only paid furlough pay then the values can be taken from our reports without need for further calculation.  If the pay has been topped up you will need to apply the calculation.  The secondary threshold for this tax year is £169 per week or £732 per month.

BUT if an employee was only furloughed for part of the period then you can use the pro rata calculations as previously described by HMRC

For further details see the Government CJRS website – https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme#work-out-how-much-you-can-claim-for-employer-national-insurance-contributions-nics

Don’t forget to factor in Employment Allowance if your employers NI does not normally go above this and you are eligible, in this case you would not be claiming the employers NI as you would not be paying any.

Update 20.4.2020

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/880099/
Coronavirus_Job_Retention_Scheme_step_by_step_guide_for_employers.pdf

(Please read the latest guidance before making a claim, HMRC are using a pro-rata for the calculation rather than their original guidance)

From the latest guidance (200416 Calculating the CJRS – step by step v1.1):

“Simplified calculation guidance for employers whose employees all have the same weekly pay period with only a single payment date and who choose a claim period equivalent to a pay period that is entirely within the period 1 March and 31 May 2020

Step 0 – Identify qualifying furlough days
Identify all qualifying furlough days for all employees based on:
(a) who has already been furloughed, and
(b) for which employees there are firm plans for furloughing.

Step 1 – Identify furloughed employees who have been paid in the period
Identify all employees who have been or will be paid who have at least one qualifying furlough day in the pay period.

Step 2 – Calculate gross pay grant per employee
For each employee identified at Step 1, the amount of grant entitlement is the lowest of (1) and (2):
(1) [£576] x number of qualifying furlough days in week / 7
(2) 80% x weekly reference pay x number of qualifying furlough days in week / 7

Step 3A – Calculate Employer’s NICs grant per employee
For each employee identified at step 1, calculate the amount of employer NICs that would have been due on the outcome of step 2.
If there is no employer’s NIC due on the employee the amount is zero (i.e. apprentices under 25, category H, employees under 21, category M, and employees under 21 who can defer NI because they’re already paying it in another job, category Z).

Where NICs are due, for each pay period partly or wholly within the claim period, you will need to perform the following calculations:
iv) Calculate the daily employer NICs due:
employer NICs due on the employee in the pay period / number of days in the pay period
v) Calculate amount of employer NICs due in the claim period:
daily employer NICs in the pay period x number of days within the pay period which are also in the claim period
vi) Employer NICs due on the pay gross pay grant, within the claim period:
Employer NICs due in the claim period part of the pay period x gross pay grant for the claim period part of the pay period / total gross pay in the claim period part of the pay period

It is necessary to apply step iii) where the employer has chosen to top up the furlough pay beyond pay required to be paid to the employee under the CJRS.
Where NICs are due the secondary threshold is £719 per month for payments up to 5 April 2020 and £732 per month for payments from 6 April 2020.

Step 3B: Calculating the grant for Employer NICs per employee
Sum the amounts calculated for each pay period in step 3A.

Step 3C – Restrict overall Employer’s NIC grant to the amount due for the payment
Sum all of the amounts calculated at Step 3B for a particular payment. If the total is greater than the total employer’s NICs for the pay period (after employment allowance), less any amounts previously claimed in Employer’s NIC grant for the pay period then restrict the amount of grant to the amount of employer’s NICs relating to the payment.”

The key part is that a pro rata calculation is being used rather than the thresholds as below.  So effectively for the furlough period:

Total employers NI due x Furlough pay / total gross pay.

This is likely to be a little more generous that the expectation of deducting the threshold as per the original guidance.

 

Calculating NI for Furloughed Workers (original published text)

With many companies using Furlough Pay for their employees and planning to claim via the Coronavirus Job Retention Scheme, we thought it would be useful to provide some notes on calculating employer’s National Insurance.  If an employee only receives Furlough pay then the payroll reports will provide the value to use, but if there is a combination of pay then a manual calculation will be required.

There are two methods, they will give slightly different answers but both are accepted by HMRC.

  1. Table Method
    This is a little old school now but if you want to calculate this way then the tables are still available. You can find this year’s here.
    If you do not know how to use the table method then now is not a good time to learn and you are probable better to go with the calculator method
  2. Calculator Method
    This method will make more sense to most people, and means calculating the amount due on the portion of the pay above a threshold.

NI category

This is important.  If an employee is category H, M or Z then there will be no employer National Insurance on Furlough pay.  Foreign Nationals that do not pay National Insurance are probably exempt from the scheme anyway.

Calculator Method

Employers National Insurance Contributions (NICs) are at 13.8% above the secondary threshold.  The secondary threshold for the 20/21 tax year is: £169 per week or £732 per month.  For the 19/20 tax year the thresholds were £166 per week or £719 per month.

It is also possible to check calculations for this tax year on the HMRC website, and this would be wise before making any claim.

If an employee has their furlough pay calculated as £2500 per month, they are NI category A, and they are on a monthly pay frequency, then the calculation for April is as follows:

2500 – 732 = 1768

0.138 x 1768 = £243.98

If that employee has the furlough pay calculated as £500 per month, then the calculation for March is as follows:

500 – 719 = 0  (you cannot have a negative value)

No Employer’s NICs to pay

If you were on a fortnightly or 4 weekly pay frequency you would use 2 x £169 (£166) or 4 x £169 (£166) for the threshold.

 

If a company is making up to full pay it is likely they will be liable for the NICs on the top-up portion, which will be 13.8% of the whole top-up amount.  This is a little unclear but is our understanding of the process.  This is no longer valid, see example above.

National Insurance is not straightforward, there are bands and different rates.  By capping the amount the Government has actually simplified this a little.  Where a company might need to manually calculate the NICs is where the employee is paid an amount greater than the 80% furlough or the employee is only furloughed for part of the pay period.

If an employee is only receiving furlough pay the total will be easy to pull from payroll reports; the Gross to Net for instance.  Where the total pay is made up of furlough and non-furlough components a calculation will need to be made outside of payroll.  Within payroll it is the total pay subject to NI that is used for calculations, there is no concept of different priorities of pay component.

When furlough pay was announced by the government we expected the gross amounts for the employees to be entered, and then the portal would calculate the overall total, but this now does not appear to be the case.  The burden has been placed back to employers to calculate the amounts, and record and store the basis of these calculations.

We will be working on a report with a calculation for employers National Insurance for a pay component with Furlough in the description, this may well not be available by Monday and will probably only function in the current pay period.  Where there is a more complex pay arrangement the payroll csv should contain all the raw data required.

For those of you that have asked about whether there is tax and employee NICs covered you should bear in mind these are deductions from the employee gross pay, so they will be covered by the furlough grant.

The pension if applicable will be covered separately, but there is a facility within the grant process to claim back employer’s pension contributions.  Employee contributions are again deducted from employee gross pay, so would be covered by the grant.  Salary Sacrifice is different, if you have a salary sacrifice pension you will need additional guidance from your pension adviser.

 

Useful links:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/876953/2020_to_2021_National_Insurance_contributions_Tables_A__H__J__M_and_Z.pdf
https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2019-to-2020
https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2020-to-2021
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
http://nicecalculator.hmrc.gov.uk/Class1NICs1.aspx
https://www.gov.uk/national-insurance-rates-letters/category-letters
https://www.gov.uk/national-insurance-rates-letters

Tax & National Insurances Rates 2020/21

Tax

In England and Wales the tax rates remain the same as in the previous year, with Scotland making some changes coming into effect on May 11th.  The personal tax free allowance remains at £12 500 (1250L tax code)

NICs

The National Insurance bands have changed however, which will result in less deductions and higher net pay for many employees. The primary and secondary thresholds have moved apart however, so employees and employers will start to make contributions at a different level.

Student Loan and Statutory Payments

The details and links to further information can be found here, together with further information on Student Loans, Statutory Payments etc.

Furloughed Workers

25.3.2020

Coronavirus Job Retention Scheme (Furloughed Workers)

We are getting a number of enquiries about this at the moment, and there are a lot of details we just don’t know.  There also seems to be some conflict between some of the announcements and Government’s official guidance.  Here are some key points:

  1. This scheme is not for employees working from home
  2. This scheme is not to replace SSP
  3. All UK employers are eligible for this scheme
  4. This is where the current coronavirus pandemic would otherwise mean a worker could be laid off and issued a P45 eg bar staff or a gym instructor.
  5. If a worker would be laid off and issued a P45 then they could be classified as a Furloughed Worker instead.
  6. There will be a mechanism for employers to claim back costs against the gross pay of furloughed workers
  7. There will be a portal for employers to report furloughed workers earnings
  8. The full details of when, how and for how long are not available

We do not know if an employer should determine an amount to be 80% of the wages and then be able to claim back that full amount up to a £2500 cap, or the employer will pay a furlough wage and then be able to claim back 80% of that amount up to the £2500 cap.

The basic principle is to support employers to keep people employed but at home where they would otherwise lose their job.  At the moment current advice suggests:

  1. Pay the furloughed worker
  2. Record the furloughed workers and the amounts paid
  3. Claim when you are able via the Government Portal

 

What we need for payroll:

Furloughed workers costs are not reclaimed via payroll; there is no flag in the RTI to mark an employee as furloughed with HMRC.  We suggest the following for our clients:

  1. Give us the details of the furloughed worker and to stop all other payments
  2. Give us the amount of furlough pay
  3. We will pay these amounts on a new pay component line using Furlough in the description.
  4. We can put these workers in a new cost centre FURL if you wish.
  5. Your payroll reports will then contain the details and amounts for the Furloughed Workers

Please see the Governments website for further details of the support available for employees in the current crisis:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

 

Update 1.4.2020

The Government have been updating their website, so please have another look if you are planning to furlough workers: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

A few more details have been clarified:

  1. Employees who are shielding in line with public health guidance can be placed on furlough.
  2. “You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.” 

    So you can claim the 80% wages + Employers NI + Employers AE Pension up to 3%
    (The 3% pension appears to be limited to 3% on the amount above the lower limit of qualifying earnings so above £520 from 6th April)

  3. There is guidance on what to do if an employee’s pay varies
  4. “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.”
  5. The portal for making claims will be available towards the end of April, this has been moved up the page so clearly HMRC are getting a lot of enquiries about when it will be ready.

 

Update 14.4.2020

The Coronavirus Job Retention Scheme information has been updated and there are a few more points to highlight based upon questions we have been receiving:

  1. You can claim for regular payments the employee would receive, this would not be limited to salary
  2. You cannot claim for discretionary bonuses (including tips)
  3. If there is a salary sacrifice scheme or benefits in kind the reference salary used for the furlough calculation should disregard these amounts.
  4. It is unclear whether the whole salary sacrifice pension payments should continue to be made by the employer – speak to your pensions adviser
  5. It may be possible for furloughed employees to leave the salary sacrifice scheme and join a conventional scheme – again speak to your pension adviser

Please read the Government website for the latest information.  We have also been asked for a template for furlough letters – there is one available from ACAS here

Coronavirus Covid 19 Updates

Coronavirus Updates

As the pace of change has been so quick, moving forwards we will bring service updates together onto this page.

Open hours:  W are currently operating on normal working hours.  During the COVID 19 pandemic please send your payroll instructions early and allow extra time for processing

4.8.2020

The spreadsheet to help with claims for furlough for the month of July has an error, we have taken the sheet down and will be uploading a revised version shortly.  We also need to amend the csv sent with your payroll reports, we aim to have this work completed by the end of today. Now complete – see here for the new version.

This month has less working days, meaning payroll processing will be compressed, please send your instruction early where possible and allow for extra processing time.

27.7.2020

A reminder that all furlough claims for June and earlier must have been completed by this Friday, 31st July.  July is a unique month for furlough and claims cannot span either side, so it is likely that it will not be possible to combine August with July for claims either.  From August it will no longer be possible to claim for employer’s National Insurance or pension contributions.

6.7.2020

We have uploaded a spreadsheet to help check furlough claims made for the month of July, you are welcome to download a copy here

30.6.2020

We have updated the flexible furlough spreadsheet to fix and error with the formula in column H.  You can find a copy here.  The hours in the work pattern is causing some confusion, as it is the number of hours worked in each cycle, which includes days off.  This means if you work a 40 hour week, it is 40 hours every 7 days not 5 days.

16.6.2020

There are several changes anticipated on the 1st July with the CJRS, and further details were announced on Friday.  We have highlighted in more detail a few of the changes here, but some key points:

  • July is to be treated separately and claims cannot cross this month
  • Flexible furlough arrives, with workers allowed to remain furloughed whilst working reduced hours
  • Workers must have been furloughed for a period of at least 3 weeks prior to 1st July to qualify for furlough payments from this point
  • There are changes to the amount of employers NI that can be claimed where there is additional pay
  • From 1st August no employers NI or pension can be claimed
  • From 1st September the employer will be expected to contribute to furlough pay

9.6.2020

We have updated the furlough pay spreadsheet to add a check for the 13.8% of grant NI cap.  There is a lot of information coming out at the moment but all is subject to change, so we will hold on publishing anything further on the developments with furlough pay until next week

3.6.2020

We have received a notification that there has been another small change in the CJRS calculation for employers National Insurance.  This will not affect many people but there will now be a cap of 13.8% of the gross pay grant for the NI element of the CJRS.  This will be on the HMRC calculator and we will update our spreadsheet as well.

If you are preparing a file with over 100 employees for a CJRS grant, HMRC have provided an example template where they have simplified the data requirements slightly.

The details on the calculation for part time + furlough, to be introduced from 1st July, are due to be announced on the 12th.  Past experience of CJRS suggests it would be unwise to speculate what these will be, and even the announcement on the 12th is unlikely to hold the same information and instruction and what will be used in July.  We will be sending another email once more information is available together with some of the other items to be aware of this tax year.

22.5.2020

The online portal for companies with fewer than 250 employee to reclaim COVID-19 related SSP will be open from 26th May.  There are few additional details at the moment, just a reminder to hold onto the evidence and have it available when the claim is made – https://www.gov.uk/employers-sick-pay/help-with-sick-pay

Due to the latest changes in the furlough pay guidance, from this point on we are switching to calendar days for mid-pay period furlough dates.  Although HMRC have said they will accept the fairer system of using working days for workers with an annual salary, there have been issues where a worker is only furloughed for a day or two of the pay period immediately followed by a claim.  This will not affect those workers furloughed for the whole pay period.

21.5.2020

We have had a few questions regarding RTI and furlough pay and some of the HMRC guidance has been a little ambiguous.  There is nothing in the RTI that differentiates furlough payments, they are reported in the same as any other payment.  A payment is report via RTI, and this should be recorded in your records that it was related to furlough pay.

There has been some clarification in the guidance about payments that can be used in the reference pay for the furlough pay calculation.  Non-discretionary payments can be considered – https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme#ndp

The changes in the way that NI and pension payments were to be apportioned where there was a mix of furlough and non-furlough payments in the same pay period, meant that we withdrew the reports we were preparing.  We have a csv now available on request, which can be dropped into this excel document.

This is an aid to calculating the totals where you have a mix of payment types, but you may need to add extra details depending on the complexity of your payroll.  You do not need the specific csv, you can also use the payroll csv but this is a little less convenient.

If you have a salary sacrifice scheme you should already have spoken to your pensions provider.  This is a far more complex arrangement for furlough pay, and other salary sacrifice arrangements should also be taken into account.  Our calculations would not work directly if there are salary sacrifice schemes in place.

6.5.2020

There have been some further updates and clarification within the furlough pay guidance, as well as a note of caution if the calculator is to be used for employees with an annual salary.  The examples of how to calculate the NI and pension where an employee is furloughed for the whole period are in line with the original guidance, but we would still recommend just using the totals as outlined in our reports.  There have also been updates for company directors and employees receiving maternity allowance, although we imagine company directors will be featured in further updates.

If you are making a claim and you are also claiming Employment Allowance (now £4000 from April) then you need to ensure you do not claim too much employers National Insurance. ie don’t claim if you were not going to pay anyway.

We have update our guidance on NI and Pension calculations as some people have been making this more complex

Employers NI contributions

Employers Pension contributions

29.4.2020

We have differing reports of how straightforward the CJRS grant application has been.  The pattern seems to be where employees are furlough for the whole pay period, and the pension is based on qualifying earnings the application is far easier.  We have been seeking some clarification and reassurance from HMRC this morning and they have confirmed that the calculations below can be used for monthly workers as they are based on the average monthly salary.  However they also said “HMRC is aware in some instances that the calculator figure is not always matching up with figures calculated manually and they are looking into it”.

One thing we were told to watch for was the start date of the furlough period, so this must be a common issue in the first round of applications.  It is the date the furlough starts not the start of the pay period that is required.

We have also had it pointed out that there is no evidence of the calculation when the HMRC calculator is used, so it would be a struggle in a future audit to show what values were entered and how the results were calculated.  Again, please make sure you keep good records especially if this is your preferred method.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/881314/PPN02_20-Contingent-Workers-Impacted-by-Covid-19-April__1_.pdf

This is some information about a specific sector, but was one of the first available government sources so we expected the principles to be carried across even if some of the logic is not quite there.  They talk about working days used to calculate furlough pay, and for monthly paid workers, but then it gets complicated when it is capped at 20 days, so four weeks = 1 month.  It is not really surprising there is a certain amount of confusion.

We expect further guidance to be forthcoming about the NI and pension pro rata.  The original guidance indicated that a relatively simple calculation would work deducting a lower threshold and then a percentage of the remainder but this was changed last week  (as previously mentioned!).  The report we had developed was unfortunately withdrawn, as once it was no longer possible to consistently provide indicative pension and NI values it lost its value.  For clarification we are not able to hold the furlough dates in payroll, and there is no furlough indicator in the RTI that is returned to HMRC.

24.4.2020

We have been extremely busy and it seems likely over 80% of our clients have at least some furloughed employees.  We are very stretched but we are turning around your payrolls and have nearly completed the month.

There have been more updates to the Government CJRS guidance, some helpful and some less so.  Some of their calculation examples are poor, and will be pulled down, so if you are reading and it is not making sense do not panic.  The way the furlough pay is calculated and pro rata calculations made is not industry standard for salaried monthly employees, and so some caution needs to be used if you are not used to pro rata calculations.  You have three choices:

  1. Use our calculations, based on 260 working days per year for a five day worker
  2. Use your calculations (there are other standard methods accepted by HMRC)
  3. Use HMRC calculations based on the number of days in the month

The important thing is to be consistent, and remember to keep good records.  For your information the standard daily rate calculation we use for a monthly salaried worker, working 5 days per week, is as follows:

Monthly Salary x 12 / 260

If you use our calculations then submit to our totals, pro rata the pension and NI if necessary, and do not use the HMRC calculator.  If you use the HMRC calculator be careful and keep good records as potentially you will introduce error with varying pay each month for salaried workers.  If they are furloughed for a full month 80% of the normal monthly salary would seem more sensible and more robust against challenge.

The guidance on pension calculation has also changed, and now the lower level for qualifying earnings can be prorated where only a part of the period is furloughed.  Furlough pay is becoming more complex.

In the guidance on qualification there is some clarification on the join date for an employee to qualify, they need to have joined and been reported on an RTI submission by 19th March.  If you have a monthly payroll and your pay date is after the 20th March then the employee should be on the February payroll to qualify, the start date does not matter if they were not reported in the February payroll.  We report to HMRC either the day before pay day or on pay day, or the reporting is late.

We also have a small number of clients who report that HMRC claim they do not exist.  We do not know the cause of the issue and so far it has not been resolved, but we will post the solution if we find one that is useful.

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme

20.4.2020

There is a step by step guide now available – https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/880099/Coronavirus_Job_Retention_Scheme_step_by_step_guide_for_employers.pdf – which gives examples of what HMRC expects.  This is the first time they have released anything like this and should be read before submitting a claim.  The period referenced is for March where there was some salary and some furlough, and the pro-rata method HMRC has used will not necessarily work in all scenarios and it should be noted HMRC are using slightly different methods for the pension and the national insurance.

There is now a calculator HMRC have released to help calculate the 80% furlough pay – https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme

17.4.2020

The CJRS portal has been promised to be open on Monday, but there are still further updates to the guidance.  If you are planning to make a claim on Monday there may be some manual calculations you will need to make, or you may be able to take values directly from your payroll reports.  We have some notes on National Insurance and Auto-enrolment Pensions to help but it is possible the requirements will change again.  If you have more than 100 furloughed employees you will need to construct a file to upload, but the file requirements are really quite vague at the moment and are another thing changed today.  Remember, you need to keep records for 5 years.

14.4.2020

The lockdown has not ended but given the short weeks we will be continuing but rotating staff as necessary.  Please send your payroll information early and allow us extra time to turn it around.  At the moment we are planning to close on Thursday 30th April and Friday 1st May, and will remain open otherwise.

HMRC have sent out a slightly ambiguous email regarding the Coronavirus Job Retention Scheme, and we have had a number of enquiries.  There have been no confirmed details released yet, but it is clear HMRC are preparing even if everything is subject to change.  There are a few items to give you for now:

  • We are an RTI filing agent only, we do not interact with HMRC on your behalf for other services
  • It is now confirmed that the claim will be made outside of payroll, and you must keep good records.
  • We expect to produce reports and/or data to aid with the claim, but we do not know what will be required or how much we will be able to provide.

6.4.2020

Welcome to the new tax year!  We have all payrolls in the 20/21 tax year now and we are available on Monday to Wednesday this week, but plan to close on Thursday.  There have been more updates to the furlough information, and record keeping is mentioned so please make sure you follow the guidance.  There has also been an update on how the claims may work for SSP for those organisations with less than 250 employees, and record keeping is mention again: https://www.gov.uk/guidance/claim-back-statutory-sick-pay-paid-to-employees-due-to-coronavirus-covid-19

1.4.2020

We shall be closed tomorrow and Friday and will re-open on Monday 6th April.  The last few payrolls of this tax year will be completed shortly.  There are more updates becoming available regard the Coronavirus Job Retention Scheme and furloughed workers, and we have some updates here.

27.3.2020

We are monitoring the BACS submissions this morning, but HMRC have sent further details regarding furloughed workers: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

You will need to read through yourself but a few key points:

  1. You pay the employee the 80% or £2500 cap, and claim this from the government.
  2. You can choose to top this up if you wish
  3. Vulnerable workers that have to self isolate can be classed as furloughed workers
  4. The scheme should be up and running by the end of April

26.3.2020

There is now an FAQ available answering a few questions regarding the funding available for business – https://www.businesssupport.gov.uk/faqs/

We shall be closing shortly and we shall be available again on Monday 30th March.

25.3.2020

We have published a few notes on Furloughed Workers as there seems a lot of confusion with the limited amount of information available.  Please see here

24.3.2020

We are in the office and are very busy finishing payrolls, but we need to look at reducing our contact hours, and increasing our staff’s ability to stay at home. We are going to close for the day on Friday 27th March.

For the weeks commencing 30th March and 6th April we shall be open and operating as normal Monday to Wednesday but closing for Thursday and Friday. We will return to full open hours on Tuesday 14th April following Easter. This is the plan for the three weeks of the increased lock down, but we may need to extend or amend our hours.

If we make BACS payments on your behalf these will continue as normal, but you will need to make sure you still have staff that can monitor and interact with your company’s BACS portal.

We also continue to request that payroll information comes to us early, and changes are kept to a minimum. Our turnaround time is likely to be slower than usual.

23.3.2020

“HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.”

We are getting a lot of enquiries already this morning, but we do not have any details either.  It appears this will be claimed separately to PAYE via an online application, probably in a similar or the same portal as SSP.

Small and medium sized businesses will be able to reclaim SSP for sickness absence due to COVID-19.  There are some more details coming through on the eligibility but still no details of the claims process.  We will be able to pay SSP and determine an employee has earned above the lower earnings limit, but we currently have no way of differentiating when the SSP was coronavirus related.  Employers need to make sure they maintain good records as the claims process is unlikely to involve PAYE.

The are further details on the provisions the Chancellor has announced available here:  https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

19.3.2020

All services and deadlines are operating as normal.  Some contingencies have been activated to cover staff absence due to self-isolation, but there is still adequate staff levels.  We have asked all our clients to send payroll information to us as soon as possible and avoid late changes.  We are concerned with what is approaching over the coming few weeks.

 

Payroll Planning advice

The global coronavirus pandemic has produced a novel and unprecedented challenge.  We are in a strong position with two separate sites, and the ability to work on all payrolls from either without interruption.  With the uncertainty that exists with external factors, and the possibility we may all have reduced available staff, we have the following additional notes:

  1. Make sure we know your contacts that may be sending us payroll information
  2. Make sure your contacts know what is required, such as your payroll reference and the information that is sent for payroll each period
  3. Send final instructions as early as you can, and avoid subsequent changes as much as possible
  4. Send all your instructions together, use your payroll reference, and avoid multiple emails and subject lines such as “this month’s payroll”.
  5. If your payroll is very stable and you want us to process several weeks or months together then please let us know.
  6. We will send emails, use Twitter and update this page if there are any changes to our service
  7. The following changes may be introduced:
    1. Earlier hard deadlines: We may enforce an earlier deadline to send us the payroll information prior to pay day.  In this situation we may have a three-day turnaround, which may mean you miss pay day if you submit late.
    2. If you want to make changes these may have to wait until the following pay period, you should be prepared to make an approximate net payment yourself and report it to us for the following pay day
    3. We may move to a shift pattern, with reduced hours at each office. This may mean it would be less easy for you to speak to the team processing your payroll
  8. The following worst-case scenarios have been considered:
    1. If you have no one able to send us a payroll instruction you have the following options:
      1. Make net payments yourself based on the previous pay period. Report these to us with the gross pays when you are able.  You could make these payments multiple times if necessary, and we can catch up at a later date.  We would expect HMRC to be understanding in these circumstances and it is likely they will have offered guidance.
      2. If we make BACS payments on your behalf you could instruct us to repeat the prior month. This situation is less ideal as we would be creating a payroll and making RTI submissions which would need correcting at a later date.
    2. If the country is on compulsory home isolation, and we are unable to access either of our offices, we will not be able to process payrolls. In this situation you would need to make approximate payments to your employees and then report these to us together with payroll information.  If we make payments via BACS it would be possible to send us a file for us to make BACS payments, and again we would be able to report to HMRC at a later date.  You would be able to use the data in your payroll csv and a simple header file we would provide if this became necessary.  You should also make sure you are familiar with your banks bulk payment facility as this may be simpler.
    3. We cannot process payrolls and produce BACS files if we cannot get into an office, we can remotely send BACS payments if necessary. Email support will also be maintained remotely, as well as providing service updates.
  9. If you have no one able to provide us any information or access your prior payrolls, and we are unable to access the office, you will need to do whatever you have prepared for in that situation. As a rough guide if you know the gross amount and deduct a third that is a reasonable approximation of the net to pay the employee.  We have occasionally reported multiple tax periods for clients before, so this is perfectly possible.  If a large proportion of our clients are affected however, it would take a while to bring everyone up to date.  We would expect HMRC to be understanding in these circumstances, and they would probably have already offered guidance for this situation anyway.

 

Coronavirus Update 16.3.2020

Last week the Government raised the UK risk status to high and moved from the containment phase to delay.  The peak of the outbreak has been predicted to be next week.  At the moment we are still operating as normal, still have spare capacity, and are in as good a position as we can be.  Given the speed of change however we urge as many companies as possible to send their payroll information in now, so we can have a maximum number of payrolls completed by the end of this week.

Over the following two weeks we may be operating as usual.  We are anticipating the possibility of reduced hours however, hence trying to complete as much work prior to this period of high risk as possible.  The end of the tax year does add complexity, and we will let you know if this is going to be affected by the coronavirus outbreak at the end of March.

SSP is payable from day one where employees self-isolate because of Corvid-19 symptoms, and this is also going to be claimable from the Government.  There are no details yet, but we suggest everyone records the SSP taken as well as reporting to us, as there are no changes within payroll software or RTI submissions yet.

We will keep you updated as the position changes.

National Minimum Wage April 2020

The National Minimum Wage April 2020

Although there is a chance there will be some changes announced on March 11th the National Minimum Wage rates have already been confirmed.  These rates apply to work after the 6th April and are an increase on the previous year of around 6%, although some age ranges are a little above and below this.

Minimum Wage Rates from 6th April 2020

Employee Age Range

Rate

Aged 25 and over (National Living Wage) £8.72
Aged 21 – 24 £8.20
Aged 18 – 20 £6.45
Under 18 £4.55
Apprentice Rate £4.15

 

The minimum wage applies to workers in the UK, and takes into account the basic pay or salary as well as other payments or deductions.  Salaried staff are also considered for the minimum wage, it is not just hourly paid workers.

National Minimum Wage calculations are not always straightforward, and there are some further notes available here.

To find out more information see here