Furloughed workers

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Updated 31 March 2020 – see section in RED below for latest information, and FAQs towards the bottom of the page.

The Government has stated that “Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis

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

(HMRC states that..) You will need to:

  • designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)

(HMRC states that..) 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.
If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.

The Government has now issued more detailed guidance about how this scheme will work with regards to payments to employees – please see the following website:

GOV.UK – Coronavirus Job Retention Scheme Guidance

 

HM Government also have a Business Support FAQ page which may answer some of your questions.

How to enter payments to furloughed workers in Payroll Manager

There is currently nothing within the RTI specifications that indicate to HMRC that an employee is a ‘furloughed worker’, and HMRC systems will not be aware of what is ‘furloughed’ pay and what is not (The FPS simply shows what the ‘gross’ pay is for each employee). For this reason is does not matter which columns you use to enter pay for these employees. However, it is possible (and advisable) to create your own, custom (‘Furloughed Pay’) column, and to use this to record payments, rather than using the ‘Basic’ or ‘Hourly’ columns during periods that the employee is away from work. This will enable you to report separately on the total amount of furloughed pay at a later date. To do this, please follow the steps below:

To create a new addition column

1. Go to the ‘Pay Details‘ screen and click on the ‘Additions‘ tab.

additions

2. Click on the ‘blue spanner‘ symbol in the column heading furthest to the right (this column may be labelled ‘User-defined’, ‘bonus’, or something else, depending on your use of the software).

blue spanner

3. A box will appear. Tick the next available ‘used‘ box, enter a suitable description (e.g. ‘Furloughed Pay’), and tick the ‘taxable’, ‘NIC-able’ and ‘Pensionable’ boxes as appropriate. Click ‘OK

add new column

4. The ‘Pay Details’ screen will now display your new column, into which you can enter the appropriate payment.

enter furloughed pay

Please note that you should enter whatever amount the employee is actually being paid into the software during these periods.

In addition to this, you could if you wish use the ‘Notes’ column on ‘Pay Details’ screen to record the fact that the employee is being paid as a ‘furloughed worker’ during this period.

e.g.

furloughed note

FAQS

Q1. How much pay should I be entering? 100%, 80% , or something else?

A lot of people have been asking us how much pay they should be entering into the software. The Government have said that they will reimburse 80% of an employees wage cost, up to £2,500 per month.

Some employers may choose to continue to pay their employee their ‘normal’ salary whilst furloughed (i.e. 100% of their pay). Others may decide to pay 80% of their ‘normal’ salary, and so will be paying a lower amount. Whatever is decided between the employer and the employee, it is important that you enter the actual amount paid into the software.

Example: If an employer normally pays an employee £2000 per month (before the deduction of tax & NIC), but comes to an agreement with the employee to pay them 80% of their normal pay whilst furloughed, then the figure to enter into Payroll Manager will be £1600.

The GOV.UK Coronavirus Job Retention Scheme guidance for Full and Part-Time salaried employees states that:

“For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.”

Q2. But if I ‘normally’ pay £2000, but only pay £1600 when the employee is furloughed, won’t HMRC only reimburse 80% of the £1600 figure, i.e. 80% of 80%?

No. HMRC will not be using RTI returns that you send whilst an employee is furloughed to determine what an employees ‘normal’ pay is. Whilst HMRC have not yet released full details of how payments will be reimbursed (see question below) they will be basing the 80% on what the employees ‘normal’ pay was, or should have been, and not on the amounts the employee actually received whilst furloughed.

Again, The GOV.UK Coronavirus Job Retention Scheme guidance for Full and Part-Time salaried employees states that:

“For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.”

So you may expect the amount of reimbursement to be based on the February 2020 salary for such employees.

Q3. How much should I pay someone whose pay varies?

The GOV.UK Coronavirus Job Retention Scheme guidance for  ‘Employees whose pay varies‘ gives full details on how their pay should be calculated.

Q4. How to claim these payments back from HMRC

The GOV.UK website https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-business states that HMRC have not yet determined how the scheme will operate. This guide will be updated as and when the Government release further information.

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