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Job Retention Scheme – Some Practical Points

Hopefully you have all received the previous updates sent out on the Job Retention Scheme when information on the scheme was published or being updated, or to provide some clarification when appropriate. We seem to be in a position at the moment whereby the basis of the scheme and the expectations on how it works are, for now, potentially as much as we are likely to get until HMRC have set up or close to opening up their portal system. HMRC have stated “We expect it [the online service] to be available by the end of April”, and so there is some time before we are in a position where claims can be submitted and therefore the details as to how the submissions through the portal are dealt with is fully clarified.

It is worth at this point, however, being mindful of the information stated as required for the claim, which is:

• your ePAYE reference number
• the number of employees being furloughed
• the claim period (start and end date)
• amount claimed (per the minimum length of furloughing of 3 weeks)
• your bank account number and sort code
• your contact name
• your phone number

The above is relatively straight forward information to obtain. However, from a practical point of view it makes sense to ensure the information is being summarised and collated on an ongoing basis as the pay details for the payroll are prepared and run rather than needing to collate information retrospectively when a claim wants to be made.

For clients we run the payrolls for, to help with this we are ensuring we identify furloughed workers pay separately from staff pay where they are not furloughed to ensure it makes the amount of furlough pay easier to identify.

Another consideration from a practical perspective we have come across is clients asking what amount to process through the payroll reports, which hasn’t been specifically stated in the HMRC information, i.e. just the reduced 80% where only recoverable furlough payments are being made to staff, or the 100% original wage figure. Our view is that the amount being paid to the employee is processed through the payroll. Where only 80% of pay is being paid to staff, that is what is shown on the payslip. If 100% is being paid, this is shown, but we are separating out the 80% for the furloughed claim and the residual 20% incurred by the business. This means that your payment file produced from your payroll software matches what you do want to pay out to staff.

Note also that only one claim can be submitted every 3 weeks. The guidance states “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.” Hence, for weekly payrolls, a claim every 3 weeks could be made. Businesses may want to think whether this is appropriate for their circumstances, or whether, for instance if there were monthly and weekly paid employees who are furloughed, one claim after the monthly run as well makes more sense. For monthly payrolls, one claim per month would be made.

All businesses should ensure that they retain the workings for the amount they are claiming. A rolling working should be maintained given the claims are likely to extend over more than one pay period. It should be remembered that the Employers National Insurance and minimum Auto Enrolment employer pension contributions on the furloughed pay should form part of the amount to be claimed.

Fixed monthly or weekly paid staff should be straight forward to deal with calculating the amount of the claim, although given a claim can be made if a furlough period is for 3 weeks, a monthly paid wage will need to be apportioned if an employee is furloughed for 3 weeks only. For employees whose pay varies, remember the rules are:

• If the employee has been employed (or engaged by an employment business) for a full twelve 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.
• If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
• Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.

Hopefully the above provides some areas for businesses to think about with regard to the administration of the Job Retention Scheme. As things evolve further in particular with the HMRC portal, we will provide further details. The link for the full details from HMRC is https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

If anyone does have any queries on the above, or need any assistance with your payroll or calculations, please do not hesitate to contact us.

Andrew Baggott
Managing Partner

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Clarke Nicklin House, Brooks Drive, Cheadle Royal Business Park, Cheadle, Cheshire, SK8 3TD. Registered Number OC309225.
The firm is registered to carry on audit work in the UK & Ireland. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001178544. The professional rules applicable are the Audit Regulations and Guidance which can be found at www.icaew.com/regulations, and the International Standards on Auditing (UK and Ireland) which can be found at www.frc.org.uk/apb/publications/isa.cfm.