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Flexible furlough, payroll and claims: a minefield

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Flexible furlough, payroll and claims: a minefield

When the Coronavirus Job Retention scheme was launched, after the initial rush to understand how the scheme worked and what amounts could be reclaimed – a headache to understand in itself, the next challenge then presented itself in mid-March: applying it to payroll. 

The complexities of the original scheme presented enough challenges; getting to grips with the legal position, and then making sure that the approach which had been taken with each employee was translated accurately to those responsible for payroll and making furlough claims.

Our advice at the time was: start preparing payroll early this month, it’s going to be difficult and there are plenty of potential banana skins. That was particularly the case where people had spent part only of a payroll period on furlough, and of course further complicated by top-up beyond the Government contribution, taking holiday and earning variable pay. 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.

As we head into July, with flexible furlough having started this month, it becomes even trickier to calculate and get right. So again we say, get started early, get the communications going between those responsible for managing furlough and those responsible for payroll and furlough claims, to make sure they have all the information they need. 

For our guidance on the rules for the new flexible furlough scheme, click here and for furlough FAQs click here.

Here are our top 5 tips of things 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 Eers 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 £6240. 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.

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. 

For advice and support on furlough, call us now for a friendly chat about your needs.