J&K payroll

Small business payroll service

Covid-19 Payroll FAQ

By

The various grants and schemes announced by the UK government continue to evolve on a weekly – even daily – basis. The graphic below summarises what’s available. Please read – or at least skim – to the FAQs at the bottom of the page.

JRS opened for claims on 20 April.
The scheme will continue in its current form until the end of July, after which employers will be expected to contribute to the wage bill. The rules will also change so employers can able to bring furloughed staff back to work part-time.
You’ll receive the money within 6 working days of making your claim.

Payroll-related help

 

Coronavirus Job Retention Scheme (JRS)

  • This is the 80% grant that everyone is asking about. Only staff employed under PAYE on 28 Feb 2020 will qualify.
    (15 April update – if you took on staff up to 19 March and notified HMRC then you can also claim for them. In practice, unless the person was weekly-paid and was declared on a weekly payroll return on or before 19 March, new starters still won’t qualify.)
  • Understand what furloughing means. It’s all about keeping people in a job.
    If you have good staff that you want to keep, furloughing is the way to go.

    • You must tell your staff that you are furloughing them – here’s a template letter.
      Employees must be completely inactive, so JRS does not apply to employees on reduced hours. Furloughed staff must not provide services or generate revenue for the employer.
    • You can furlough some or all of your workers.
    • You must pay your employee the lower of 80% of their regular wage or £2,500 per month. You can choose to top up an employee’s salary beyond this but that is voluntary and the top-up won’t be reimbursed.
    • 3 weeks is the shortest period for a furlough claim. If you furlough someone for a shorter period, you won’t be able to reclaim the wages. You can bring someone back from furlough to carry out some work, and then re-furlough them (“rotational furloughing”).
    • Staff retain all their normal employment rights including holiday pay, which will continue to accrue during the period of furlough. Equality laws still apply and employers must take care not to discriminate when selecting staff for furloughing.
  • For full and part time salaried employees, the grant paid under JRS will be 80% of the actual salary before tax, plus employers’ NIC and the legal minimum pension contributions.
    Sammy earns £1000 per month before tax (gross)
    Employer’s National Insurance Contribution is £39
    Employer’s pension contribution is £15
    Total monthly cost to the employer is £1,054.
    The grant is payable on this total cost.
    In this case, the employer can claim £843.20 per month (80% of £1054).
    Sammy’s actual take-home (net) pay will depend on their tax code.
  • For employees whose pay varies, including those on zero hours contracts,  the 80% is based on an average of their earnings from the 2019/20 tax year.
  • You should continue to pay your staff. Otherwise you’ll be in breach of contract. So you may have to pay first and then claim it back.
  • The scheme will be open until October, although the Chancellor has said it will change over the summer and employers will have to shoulder some of the cost.
  • Limited company directors, who are employees of their own companies, are eligible.  Whilst furloughed, directors must only carry out statutory duties like accounts and payroll – any commercial or revenue-generating activities will fail the JRS requirements. This includes marketing, and hiring and managing subcontractors so don’t do it!
    Either you are shutdown, or you are providing services and receiving income. There’s no in-between. If the income isn’t enough, that’s a cashflow problem and you should look at CBILS or BBL below.
    We expect stringent anti-fraud measures and we warn all business owners that if they abuse the system, they should expect public naming and shaming for what is, after all, illegal profiteering from a national crisis.
    HMRC has put in place an online portal for employees and the public to report suspected fraud.
    Prosecution and heavy penalties will follow for those who try to rip off the government in this way.

How to Claim under JRS

The claim process is simple. The calculations are not. Things to remember:

  • You can’t claim back the employer’s NI if you are claiming the Employment Allowance.
    (Most small businesses won’t use the full £4000 Employment Allowance in 2020/21. Since they effectively don’t pay employer’s National Insurance, you can’t claim it under CJRS.)
  • If you are topping up the wages above 80%, you can’t claim the entire employer’s pension contribution. Check the calculation guidance for how to work it out – it’s not a flat 80% of the pension contribution.
  • Ditto for employer’s NI, should you be able to reclaim it.

HMRC has released a step by step guide for employers. If you are making your claim yourself, read it carefully and check you’ve got everything you need before you start. You can now save your part-completed claim and return to it later, as it will time you out after a short (c.15 min) period of inactivity.

20 Apr We succeeded in getting some claims registered today, and the actual claim process itself was very simple. Hats off to HMRC!
The same cannot be said for some of the calculations, especially where staff are furloughed partway through a pay period, and/or are in a workplace pension and/or receive employer top-up. Read the calculation guidance several times, get your head round it, gather your figures and start calculating. And hope that HMRC don’t move the goalposts again.

 

Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS)

  • You may have cashflow problems. Speak to your bank. As well as their normal overdrafts and loans, they will be offering Coronavirus Bounce Back Loans (BBL) and the Coronavirus Business Interruption Loan Scheme (CBILS) – a loan that is interest-free for 12 months.
    “To qualify for either type of loan, your business must have a business plan and a borrowing proposal that the lender would accept if it were not for the Covid-19 pandemic. In other words, your business must be viable in normal trading circumstances” [-FreeAgent].

Statutory Sick Pay

Employers can reclaim up to 2 weeks’ Statutory Sick Pay per eligible employee who has been off work because of COVID-19 self-isolating. Claims can be made from 26 May.

  • Other help

    This includes a business rates holiday for retail, hospitality and leisure businesses; deferring VAT payments (but VAT returns must still be filed); small business grant scheme etc. Commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction. The government’s Business Support website now has a dedicated Coronavirus section, detailing all the various financial support packages available. Everything in one place.

  • New! Simple questionnaire to signpost you to the help that you qualify for https://www.gov.uk/business-coronavirus-support-finder

covid19 help

The 80% grant is calculated by referring to a previous pay period (Feb or earlier). Increasing employee wages now has no impact on claims under this scheme

We have clients – from pubs to preschools – that have genuinely lost all their income overnight.

Anyone wanting to take advantage of this national emergency needs to take a good hard look in the mirror.

Frequently Asked Questions

 

How do I get the money to pay my staff?

You must pay your staff upfront and then get reimbursed. HMRC will pay direct into your business bank account.

Will J&K claim for me?

No. We have neither the capacity nor the authority with HMRC to do so for all our clients.

For most of our clients, we provide a filing-only service. This means we can file your normal payroll returns to HMRC, but we don’t have the power to do anything else.

We will of course give you the info needed to make your claim.

What if I can’t afford to pay my staff?

You should seek financial support from your bank e.g. BBL or CBILS.

When do I pay my staff?

Furloughed staff should get their wages on their normal payday. Any changes without their agreement would be a breach of their contract of employment.

Can I backdate it?

You can only backdate to the point that work stopped. E.g. hospitality and leisure businesses closed after 20 March. You must pay staff for the hours that they worked up to 20 March. They are then furloughed from 21 March.

Do I have to furlough everyone?

You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake ANY work for you.
If you have some work available, you may choose to furlough part of your workforce while others carry on.
The point of the scheme is to keep people in jobs who would otherwise be made redundant due to the Covid-19 crisis.

How much do I pay?

You must pay employees the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.

Can my staff work elsewhere?

If they normally work 9-5 for you, they shouldn’t be working for anyone else during those contracted hours. What they do in their own time is up to them.

They may already have another job and they can be furloughed for each job.

A furloughed employee can take part in volunteer work, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.

What about holiday pay?

Furloughed staff continue to accrue holiday. If employees take holiday whilst furloughed, this must be paid at their FULL rate, i.e. topped up by the employer to 100% of their normal wage. This includes Bank Holidays, of which we’ve just had 3!

Together we face an unprecedented situation, one in which 90% of us will do the right things:

              • Don’t stockpile loo roll or anything else.
              • Check on your vulnerable neighbours.
              • Practise social distancing.
              • Wash your hands.
              • Be kind.

heart

Workplace Pensions And You

By

Whether you employ 1 person or 100s – all employers now have workplace pension duties.  Even if you think you won’t need to put your staff into a pension scheme, your responsibilities begin on the day your first member of staff starts work.

There are 3 tasks you must carry out to meet your legal duties.

1. Assess your staff

If your staff meet the criteria below, you must put them into a pension scheme and pay into it.

  • Aged 22 or over (up to state pension age)
  • Earn at least £10,000 a year

2. Inform your staff

You must write to all your staff within 6 weeks of your duties start date. This tells them how automatic enrolment applies to them – regardless of whether or not they are put into the pension scheme.

3. Declare your compliance

Within 5 months of your duties start date, you must complete an online declaration of compliance. This tells The Pensions Regulator how you’ve met your legal duties.

Then every 3 years, you must re-enrol anyone who opted out and re-declare your compliance.

Workie

Workplace pensions are not a one-off effort.

  • Employers (or their payroll agents) must continuously assess the workforce.
  • Exchanging information with the pension provider every pay period.
  • Reconciling and paying contributions.

These tasks will increase the cost of running your payroll.

Fake tax refunds and other email scams

By

Only 30% of small businesses surveyed would think twice about clicking on a link directing them to HMRC


You should think twice.

Scammers regularly send fake emails that look like they are from HMRC, or from banks and other organisations like eBay, PayPal, Facebook and even Royal Mail. They aim to trick you into revealing personal information which they’ll use for fraud and identity theft. It’s known as phishing.

fish and hook

Don’t take the bait

 

Tax rebate

The Self-Assessment deadline is looming so this particular dodgy email is common around this time of year. It says you’ve got a refund of £x due to you, and offers a link to “get your rebate now”.

phishing email

The link takes you to a site that looks convincing to a casual observer – but it’s not the real deal.

Often these messages end up in your Spam folder and you never see them. If they do get to your Inbox, remember HMRC’s golden rule:

HMRC will never send notifications of a tax rebate, or ask you to disclose personal or payment information by email.
If you have any doubt that an email you receive from HMRC is genuine, please do not follow any links, disclose any personal details or respond to it. Please forward it to HMRC at phishing@hmrc.gsi.gov.uk then delete it.

How to spot a phishing email

A 2013 poll found that 60% of UK workers will fall for a phishing scam unless they’ve been trained to spot one.

  • are you expecting the message?
  • is it from an expected source? E.g. if you don’t bank with Barclays, why would they email you about your account?
  • does it ask for passwords or other complete information?
  • hover your mouse pointer over the links – don’t click them! – to check the website that pops up
  • how good is the spelling and grammar? Bad English is a dead giveaway!
Engage your brain!

Imagine the email is someone standing at your front door asking the same questions.

Would you give them this information?

If the answer is ‘no’ then it’s probably a scam.

If you wouldn’t do it on the street, don’t do it online!

Beyond email

It’s not just email – scammers are also using fake text (SMS) messages to reel in unsuspecting victims.

Learn more

Get Safe Online: phishing video

Gov.uk: recognising and reporting phishing emails

Financial Fraud Action: invoice fraud

You might be streetwise, but are you cyber-streetwise?

6 Things Every Employer Should Know About National Minimum Wage

By

This article updated Nov 2018.

1. Key facts about NMW

  • It’s a criminal offence to not pay someone the National Minimum Wage
  • It applies to most workers over school leaving age including casuals, part-timers and agency workers
  • All businesses must comply – regardless of size

2. Who’s not entitled to NMW?

Those not entitled include:

  • self-employed people
  • company directors
  • volunteers

3. Why it matters to employers

If your company has underpaid its workers, the consequences could be severe:

Arrears

You must pay arrears to the worker immediately and you may end up paying more than you would have if you had paid the correct amount to start with. In one instance, a national retailer was forced to make back payments of £193,000 for almost 3,500 workers after it required them to be at work before and after opening hours without pay.

Naming and shaming

HMRC will now publicly name any employer, big or small, who breaks minimum wage law.

Penalties and prosecution

On top of the arrears, employers risk financial penalties of up to £20,000.

Criminal prosecution is rare but the most serious cases can be heard in a Crown Court, meaning that there’s a potential for an unlimited fine.

microscope

Would your business stand up to scrutiny?

4. How is NMW enforced?

HMRC have the power to check your wages at any time – it’s your responsibility as an employer to keep records proving compliance with NMW and you have to keep these for 3 years.  You could be randomly targeted or a worker’s complaint could trigger an investigation.

Out of the blue, our biggest client received a random minimum wage inspection. The HMRC inspectors spent a full day digging into the payroll and payment records.

We dealt with the entire assessment on behalf of our client and were happy to host the compliance team at our premises, where they delved into the current year’s files as well as the previous 3 years, picking staff at random and tracing their wages from timesheet to bank account.

We spent the day making them tea and being quizzed in depth, using paper and electronic records to prove compliance. With a good understanding of the business, we could answer HMRC’s questions with confidence.

The client passed the inspection with flying colours.

5. What is the current NMW?

The rates change in April each year. Rates for previous years can be found at gov.uk.

Age 25 and over 21 to 24 18 to 20 Under 18 Apprentice*
Rate from
1 Apr 2018		 £7.83 £7.38 £5.90 £4.20 £3.70
Rate from
1 Apr 2019		 £8.21 £7.70 £6.15 £4.35 £3.90

*This rate applies to apprentices under 19 or those in their first year. If the apprentice is 19 or over and past their first year they must receive the rate that applies to their age group.

6. Where can I get more help?

A good payroll provider will watch out for NMW compliance issues as part of the service.

  • ACAS 0300 123 1100 (Mon to Fri 8am-8pm, Sat 9am-1pm)

ACAS gives free impartial advice to employers and workers.

Follow this link to report NMW breaches.

This article updated Nov 2018.

Image credit: University of Liverpool Faculty of Health (CC BY 2.0)

RTI penalties delayed for small employers

By

A small reprieve for small employers

HMRC announced a further postponement of RTI penalties – but only for employers with fewer than 50 staff. Larger employers are subject to “in-year penalties” from October 2014, whereas small businesses have until next March.

The move came after extensive lobbying by employers and the payroll industry, worried that HMRC’s systems just aren’t up to the job.

How to avoid HMRC penalties

By

HMRC uses penalties to encourage compliance. There are 2 types to watch out for.

Payment penaltiesmissed payment

Pay on time

There are deadlines for paying your taxes. If you’re late in paying, expect to receive a penalty. You may also be charged interest every day until you pay the bill.

Pay electronically

Cheques can get lost in the post. Paying electronically e.g. via online banking is quick and easily trackable.

Use the right reference

However you pay, always include your accounts office reference, otherwise your money will end up in an HMRC slush fund instead of being correctly applied against your account!

Filing penalties

File on time

You must report Pay As You Earn (PAYE) wages in “real time” – in other words, on or before payday.

Weekly, fortnightly, monthly, whatever. Every time someone gets paid through payroll, you must tell HMRC.

File accurately

That’s why it’s so important that you tell us – in advance – about any changes to your payroll.

You may have to prove to HMRC that you weren’t careless in making an error.

 

More on filing penalties

What to do if HMRC say you owe PAYE

By

Had a letter from HMRC’s Debt Management division? Don’t blindly pay it.

letter from HMRC Debt Management

So far this week, 3 of our clients have called us about letters from HMRC telling them they owe £100s.

All complete nonsense.

And it’s only Tuesday. <Sigh>

1. Check what you should have paid

Ask your payroll provider for a P32. This is simply a list of all the payments that you should have made to HMRC.

For example:

  Pay Period  Amount Due to HMRC for Period
     Quarter 1 total 295.92
     Quarter 2 total 75.48
     Quarter 3 total 112.29
     Quarter 4 total 180.96
Year Total 664.65

2. Check what you actually paid

This means going through your bank statements and finding every payment to HMRC. Note how you paid it: online, cheque, debit card etc. Note down the date that the money left your account, as well as the amount paid.

The total of all your payments should be the same as the Year Total on the P32.

If it’s not, then you either overpaid or underpaid somewhere along the line. Work out when and where.

3. What to look for

Page 2 of the letter is the statement of liabilities – pictured below. Look at the total unpaid amount. Sometimes it’s obvious that a payment has gone astray – if your cheque for £45.32 hasn’t cleared, and the statement says you owe £45.32, job done. Others take a bit of investigating.

Dates are key. I can’t stress that too highly.

Late payments cause the most common problem. When you pay late, HMRC will allocate the payment to the wrong period.

For example, look at the handwritten notes below. You can see that our client pays PAYE quarterly. Accordingly he made 4 payments, which each match the P32 above.

 

HMRC statement of liabilities

 

But now focus on when those payments were made. £180.96 was paid on 7 May. Not only was that late – it should have been paid by 19 April – but critically it was the last payment for the 2013/14 tax year.

Paying it late meant that HMRC automatically took it into the 2014/15 tax year.

4. Do your sums

To check your payments, first knock off any interest that HMRC have added, because the payments you are looking for obviously don’t include that.

So we’re actually looking for £256.61 minus 17p interest = £256.44

We’ve figured out from the payment dates that £180.96 must have been allocated to the new tax year. That leaves £75.48. Ring any bells?

Yep, it’s the payment made on 6 November.

5. Call HMRC

This is usually the painful bit, involving a good 20 minute wait to speak to someone. But funnily enough, when you ring Debt Management division, you often get through straight away.

The first thing they ask is, “Are you making a payment?”

This is where you laugh and say, “No, cos I don’t owe you anything.”

 

laughing cat