Coronavirus Job Retention Scheme Guidance Updated
06 April 2020
On 4 April 2020, further details relating to the Coronavirus Job Retention Scheme were published by HMRC, and many of the questions that have recently been raised by payroll professionals have been addressed.
Understandably, many queries have been raised relating to which elements of pay can be reclaimed back from HMRC, and the new guidance does provide some further information. There has been clarification that an employer may reclaim 80% of regular payments that an employer is obliged to pay to their employees. This is inclusive of wages, any overtime already completed, fees and compulsory commission payments. This is a substantial change from the original guidance, which stated that commission and fees could not be included. The update confirms that discretionary bonus payments (including tips), commission and non-cash payments should not be included.
The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary. Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.
The guidance confirms that student loans and Apprenticeship Levy should continue to be paid in the normal fashion, and that the grant from the government will not cover these costs.
Salaried company directors can be furloughed and can continue to perform statutory duties only. This differs to other furloughed employees who cannot carry out any work at all for the employer who has placed them on furlough. The same rules apply to individuals who are directors of their own personal service company (PSC), as those applied to company directors.
Further confirmation has been provided in relation to the National Living Wage (NLW) / National Minimum Wage (NMW) and Apprentices Minimum Wage (AMW). As already stated, furloughed workers, as they aren’t working, are not entitled to those rates and, if 80% of their pay brings them below this rate, it does not matter. However, the increase to rates from 1 April 2020 must be observed for payment for any hours spent in training. The employer will need to pay the additional amounts not covered by the grant, to ensure NLW/ NMW /AMW are paid for any training hours. The same applies to apprentices for any time they spend training.
HMRC has agreed that COVID-19 counts as a life event and is reason enough to allow individuals to make changes to salary sacrifice arrangements, as ordinarily, employees cannot switch freely out of a salary sacrifice scheme unless there is a significant life event. The contract of employment needs to be updated accordingly.
Although the CIPP wholeheartedly welcomes the further guidance on the Coronavirus Job Retention Scheme, there will inevitably be many more questions that payroll professionals will have.
The CIPP will continue to update its members via News Online and various social media platforms, to keep them as informed as possible.
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