Probably the most commonly asked questions for us at the moment surround the furlough payments to employees and the claiming of the Grant from HMRC. This list is not comprehensive, but covers a fair bit of ground. If you do have any questions about this, or something not covered here, please do not hesitate to contact us.
Employer: How do I know how much to pay? What will I get back from the Government? Can I afford to do this?
The grant will cover 80% of your gross employment costs up to a cap of £2,500 per employee per month. This means 80% of the employee’s gross pay (up to the £2,500), plus 80% of your employer’s NIC bill and 80% of any employer’s pension contribution that you would normally make. It’s up to you as the employer if you wish to top this up to their normal pay levels – any extra that you pay (for example a car allowance) won’t be covered by the grant. The employee will have their PAYE, employee’s NIC and their usual employee’s pension contributions deducted from their pay as normal; you will still have to pass this onto HMRC as usual when you run the payroll.
Employer: How do I calculate “gross pay”?
For employees who’ve worked for you for at least 12 months, the gross pay figure is based on the higher of 80% of;
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, you need to pro-rata for their earnings so far to claim.
I’m a director and I pay myself annually. Am I covered by the scheme?
Yes – as long as you were on the payroll at 29th February 2020 and have previously paid yourself in the 2019/20 tax year. You can then pay yourself the higher of 80% of your earnings in the same month in the previous year or your average earnings, subject to the £2,500 cap as above. We are waiting for more guidance from HMRC concerning this as annually paid employees don’t seem to have been considered when the initial information was provided.
Employer: What if someone has only worked for me for a few months?
You can calculate their average pay over the number of weeks or months that they have worked for you and use this figure. The must have been on the payroll submitted for February 2020 (RTI)> See above.
Employer: What if someone started working for me after 29th February?
They won’t be able to be included in the scheme.
Employer: Is this a grant or a loan?
Claiming back money for employees, whom you have furloughed (within the rules as stated) allows you to obtain a grant to cover these costs. So long as you follow the rules of the scheme it is non-repayable.
Employer: I’ve already got employees on SSP or SMP. Can I furlough them?
No – these employees will not be able to be furloughed while in receipt of the statutory payments. They can be furloughed at the end of their period of sickness or parental leave.
Employer: I employ some sales staff. They receive a basic salary and then rely on commissions to increase their basic. Does the grant cover their commissions?
No – the grant will only cover basic gross salaries and excludes bonuses and commissions.
Employer: Does the grant only cover full time staff?
It not only covers full time staff but part time and casual workers.
Employer: If I furlough an employee for a week or so will this be ok?
No – an employee who is furloughed, must be furloughed for a period of at least three weeks and for a maximum of three months (although the guidance suggests this may be extended) to qualify for the grant.
Employer: What if I furlough someone and then I need them to do some work for me?
It is possible for you to ask an employee to come back to work for a period of time, having been furloughed, and then return to being furloughed. However, Furloughing an employee means they must not undertake any duties of their employment. They would have to be furloughed for at least 3 weeks (see above) before they could return and work for you. They could then be re-furloughed as necessary, but for at least another 3 week period up to the three month period initially announced by the Government.
Employer: An employee works for me and also for another employer. Does this matter?
If you furlough an employee, they can undertake work for someone else without affecting their furlough for you. The rules look at each employment individually. If they only work for you and you furlough them, they can also volunteer or do other work without affecting their furlough for you.
The £2,500 limit applies to each employment, so you don’t need to know how much they earn elsewhere.
Employer: I was really worried about cashflow and made some staff redundant before I knew about the grant. Can I do anything now?
Yes – you can. The scheme can also cover employees who were made redundant since 28 February 2020, if they are rehired by their employer.
I heard that the grant will be taxable. Is this true?
Yes – HMRC have stated that payments received by a business under this scheme must be included as income in the business’s calculation of its taxable profits. You can however deduct all employment costs as normal when calculating taxable profits, so it has a nil tax effect.
If you wish to minimise the costs to your business during this period then it is important that you follow HMRC’s rules as regarding the payment of Grants to cover the costs of furloughed employees.
If you have any questions, please do not hesitate to ask.
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