Statutory Sick Pay (SSP)
A UK-based small or medium-sized enterprise (SME) is entitled to reclaim SSP paid for sickness absence due to COVID-19.
Key points to be aware of are:
- the refund will cover up to 2 weeks’ SSP per eligible employee;
- the Government does not require the employee to provide evidence of their illness. If the employer requires evidence for their own purposes, the employee should be asked to request an isolation note from NHS 111 online or, where they live with someone that has symptoms, from the NHS website; and
- the eligible period for the scheme and the mechanism for claiming the repayment have yet to be determined.
For this purpose, a business is an SME where it had fewer than 250 employees on 28 February 2020.
Legislation: Coronavirus Act 2020, s. 39–44
The Coronavirus Job Retention Scheme
It is advisable to check the gov.uk website prior to agreeing furlough with employees & processing payments through the payroll. The legislation has been updated on an almost daily basis since its announcement. The gov.uk information can be found by following:
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Under the Coronavirus Job Retention Scheme (the ‘Scheme’), an employer is able to a claim a grant from the UK government to cover part of the cost of paying the salary of an employee that would otherwise have been laid off (a ‘furloughed employee’).
All UK employers that had created and started a PAYE payroll scheme as at 28 February 2020 are eligible for the scheme. To qualify as a furloughed employee, the employee must undertake no work for the employer (this includes providing no services or generating no revenue for their employer). Only employees that were on the payroll on 28 February 2020 are eligible for the scheme.
Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.
If your employee is on unpaid leave
Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
If your employee is on Statutory Sick Pay
Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.
Employees who are shielding in line with public health guidance can be placed on furlough.
Other issues
Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.
Duration & Claims
The Scheme is open for the three months ended 1 June 2020. It may be extended.
The online service you’ll use to claim is not available yet. HMRC expect it to be available by the end of April 2020.
To claim, you will need:
- 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
You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
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.
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
Calculating the wages payments and the grant recoverable
Current guidance suggests wages are calculated monthly, although this may not be practical or possible depending on some payroll software or pension providers. Further guidance for weekly or fortnightly paid staff is anticipated.
For each month the grant is equal to the lower of:
- 80% of the employee’s basic salary before tax as of 28 February 2020 (an average amount is used where the employee’s hours vary – see below). Basic salary excludes fees, commission and bonuses; and
- £2,500,
Employees whose pay varies
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.
Associated costs (Employers NIC & Auto Enrolment)
The associated Employers’ NICs and minimum automatic enrolment employer pension contributions are also recoverable on that subsidised wage. The employer is responsible for calculating the amount of the grant.
Topping up
The employer may pay the employee more than the amount of the grant; eg the employee’s usual monthly wage. The grant will not cover the additional amount; nor will it cover the associated Employers’ NICs or automatic enrolment employer pension contributions.
Processing payroll
The employer will process the employee’s wages through PAYE, deducting income tax and NICs, as normal. You cannot charge the employee a fee for processing furlough payments. It is advisable to create a separate payment type within your payroll software for furlough payments.
Owner-managed companies & Directors
There is little guidance on Directors of a business being furloughed at the moment.
Many owner-managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme. Such companies must have been paying a salary through a payroll at 28 February 2020 to be eligible for a grant.
A comment from Ben Kerry at the Treasury has stated Directors can only carry out their Statutory Duties in order to claim for furlough payments.
Whist we await further guidance on this area, it would be wise that claims for Director-only companies are only lodged when there is no revenue generated by the business.
THIS GUIDANCE IS ACCURATE AS OF 31 MARCH 2020. SHOULD YOU HAVE ANY QUERIES OR WISH TO DISCUSS ANY IMPLICATIONS PLEASE CONTACT US.