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Processing payroll and 80% reimbursement

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Hi everyone

I am currently processing payroll on behalf of a client who has an employee that worked up until 20th March, and has then had to be classed as a 'furloughed worker' from the 21st onwards.

Under these circumstances, assuming that he will be paid 80% of his usual salary only for the period he is at home, are we expected to process the initial 2/3 of March normally, and then add to his payslip 80% of his usual salary for the last 1/3 of the month?

 

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RLI
By lionofludesch
26th Mar 2020 15:01

Yes, of course.

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Replying to lionofludesch:
By SteLacca
26th Mar 2020 15:02

Although what that 80% actually is remains the subject of much debate and conjecture.

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By jcace
26th Mar 2020 15:08

What does the client want to do?
Has the client sought the agreement of the employee to be furloughed and receive 80% of pay etc etc?

I've pinched this from another contributor (rockallj) on an earlier thread:
• Firstly, the employment contract stands, so the employer is obliged to pay the employee their full contractual pay and at the time agreed in the contract.
• BUT, by furloughing, and it has to be with the employees’ consent, they are temporarily waiving their employment right to the 20% from the employer which the govt are not giving via the refund mechanism.
• If an employer does so without employee consent (and I would have it in writing) and pays less than contractual pay, it is an illegal deduction.
• If an employee refuses, which they have a right to do, then the contractual obligations for laying off/redundancy come into pay.
• Again all procedures will need to be followed carefully as the employer could otherwise face an Employment Tribunal later.

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A Putey FACA
By Arthur Putey
26th Mar 2020 15:12

Or he could be paid 100% of his salary because he is contractually obliged to receive that, then the employer later claims 80% or up to £2500 of the allowable costs.

Edit: my post overlapped with the one above. Where is everyone getting the idea from that you can reduce the pay to 80% and the government will reimburse 100% of that?

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Replying to Arthur Putey:
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By simonhyett
26th Mar 2020 15:22

Hi Arthur - thanks for replying. The idea was that if an employee was paid say £1,000 for the first 2/3 of the month and then £500 for the final 1/3 of the month, the correct procedure was to put a gross amount on the payslip of £1,000 + £400 = £1,400 - the reason being that HMRC would reimburse £400 (that being 80% of the usual gross pay).
Are you thinking that you should still enter £1,500 on the payslip, even if the employer is not topping up the remaining 20% out of their own pocket?

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Replying to Arthur Putey:
RLI
By lionofludesch
26th Mar 2020 15:44

It's what the Government said. Pay 80% and the rest is voluntary.

Overlooking anything in the contract which overrides that.

In what context are you disputing that ?

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Replying to Arthur Putey:
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By legerman
26th Mar 2020 16:16

Arthur Putey wrote:

Or he could be paid 100% of his salary because he is contractually obliged to receive that, then the employer later claims 80% or up to £2500 of the allowable costs.

Edit: my post overlapped with the one above. Where is everyone getting the idea from that you can reduce the pay to 80% and the government will reimburse 100% of that?

Because that is what Rishi Sunak said. Employees receive 80% of their normal wages whilst furloughed and the employer can top that up to 100% *if they wish*

If, as some have suggested, HMRC will only pay 80% of the furloughed pay, then the employer has topped up their wages, albeit unintentionally.

It is accepted that we haven't received precise instructions, but an employer with no income can't reasonably be expected to subsidise wages when they could have simply made folk redundant. and I suspect there would be uproar if that turned out to be the case.

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By kestrepo
26th Mar 2020 16:31

It is looking like the scheme will work as you describe however until the official guidance is issued nobody knows how it will actually work! In the circumstances I would first make sure that your client has a letter signed by the employee confirming that they accept being put on Furlough. I would then process the payroll as you describe. It is likely that you will not be allowed to take away any benefits from the employee so I would also make sure that the ER's pension contributions are at the same level as if they were at on full pay as well as making sure any other benefits (taxable car payments, childcare vouchers, cycle to work schemes etc) are on the same level too- I might be right, might be wrong but think this approach will cover most of the bases.

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