J&K payroll

Small business payroll service

Covid-19 Payroll FAQ

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We are getting a lot of calls and emails asking for information on the various grants and schemes that have been announced by the UK government.

It’s a fast-moving situation and details are being added daily. The graphic below summarises what’s available. Please read – or at least skim – to the bottom of the page.

You should plan on it being weeks before any money is actually released to businesses even if you qualify.

25/3/20 – The government’s Business Support website now has a dedicated Coronavirus section, detailing all the various financial support packages available. Everything in one place.

 

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. For salaried staff the 80% is based on their salary as at 28 Feb 2020, and excludes commission, bonuses etc.
  • 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 are being furloughed – here’s a template letter.
      Employees are required to be completely inactive, so JRS does not apply to employees who have been put on reduced hours.
    • 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 a furlough can last.
    • Staff retain all their normal employment rights including holiday pay, which will continue to accrue during the period of furlough.
  • For full time 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.
    For example, if the 100% wages per month are £1,000 and employers’ NIC was £39 and pension contribution £15, the total cost to the employer would be £1,054. It is this amount that the grant would be payable on. Therefore, in this situation, the maximum grant would be £843 per month.
  • For employees whose pay varies, including those on zero hours contracts, we will calculate the 80% based on an average of their earnings from the 2019/20 tax year. Example to follow.
  • The JRS portal is still under development so you can’t apply for the 80% grant yet. You should continue to pay your staff. The portal is expected to go live during week ending 26 April.
  • 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 revenue-generating activities will fail the JRS requirements. This includes 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 below.
    We expect there to be stringent anti-fraud measures and we warn all business owners that in the event of abuse of the system, they should expect public naming and shaming for what will be, after all, a form of illegal profiteering from a national crisis. We expect heavy penalties to follow for those who abuse this scheme.

 

Coronavirus Business Interruption Loan Scheme (CBILS)

  • Until the JRS is up and running, you may have cashflow problems. Speak to your bank. As well as their normal overdrafts and loans, they will be taking part in the Coronavirus Business Interruption Loan Scheme (CBILS) – a loan that is interest-free for 12 months.
    “To qualify, 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. Again, there’s not yet a mechanism in place to do this, so refunds will be a while in coming.

  • Other help

    This includes a business rates holiday for retail, hospitality and leisure businesses; deferring VAT payments; small business grant scheme etc. Commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction. See the Business Support website for details.

    • Personal finances – MoneySavingExpert
    • Watch Martin Lewis’s Money Show Coronavirus special 26/3/20 – on ITV Hub for a limited time.
    • If you owe personal or business taxes, you may be able to agree a “Time to Pay” arrangement with HMRC.

covid19 helpIf you require changes to your March payroll, you must tell us by noon on 31 March.
Beyond this time we will invoice you for a payroll rerun. We have to report your payroll to HMRC every pay period, and accuracy is essential. This month is particularly important because it is the final period of the tax year.

The 80% grant is calculated by referring to a previous pay period. Increasing employee wages now will have no impact on what they would be paid with 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?

The JRS portal isn’t yet open – it’s expected mid to late April. You must pay your staff upfront and then get reimbursed.

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

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

When do I pay my staff?

Furloughed staff should get their wages on their normal payday.

Can I backdate it?

You can only backdate to the point that work stopped. E.g. hospitality and leisure businesses were told to close 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 work for you.
If you have some work, 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.

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.

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Workplace Pensions And You

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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

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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

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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

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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

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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

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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