Flexible furlough, payroll and making a claim
After the initial rush of firms trying to understand how the Coronavirus Job Retention Scheme worked and the amounts that could be claimed, the next challenge was applying it to payroll.
The original scheme already presented a number of challenges: understanding the legal position, making sure what you’d agreed with each individual had been accurately translated to payroll and those making furlough claims – particularly if individuals had spent part of a payroll period on furlough or if you were going to top-up beyond the Government contribution. Not to forget the further complications of taking holiday and those on variable pay.
Our advice in mid-March was to prepare for payroll early. Spreadsheets across the country were no doubt being built, checked, double checked and triple checked – and had many scratching their heads. Including us, if we’re honest.
Start your payroll early this month
With flexible furlough starting this month (from 1 July), it has become even trickier to calculate the furlough claim and to get it right. So again, we say get the spreadsheets out and prepare for payroll early this month.
Start communicating with those responsible for managing furlough and those responsible for payroll and furlough claims, to make sure they have all the information they need well in advance.
For our guidance on the rules for the new flexible furlough scheme, click here.
Our top 5 tips
What to look out for – both for the old scheme and the new one:
- Gross pay: Make sure that the gross pay you are running through payroll reflects the actual gross pay you have agreed to pay anyone on furlough – this is particularly important if they earn over £37,500 and you are topping up.
- The amount which can be claimed per day: This capped amount changes depending on the number of days in the month, so this will be slightly lower in July than June.
- Employers NIC: Remember, you can only claim Employers NIC on furlough pay – not any top up or amounts paid whilst working on flexible furlough. You’ll need to break those elements down and claim accordingly.
- Pension contributions: Whilst a number of employers pay percentage contributions on earnings from zero, the statutory requirement is on earnings above the lower earnings limit, which for 2020 is £6,240. You can only claim employer contributions on earnings above that amount. Also, beware salary sacrifice – this adds another layer of complexity.
- Holiday pay: Employees are able to take holiday whilst on furlough, if they do, those days should be paid at their normal rate of pay – but remember that you can still claim the furlough contribution to that day’s pay.
The government has also launched a new calculator which can help you calculate your claim, including flexible furloughing up until 31 August.
Above all else – keep clear, understandable records of all of the detail of how you have calculated pay and relevant furlough claims. And good luck.