To pay or not to pay - that is the question

Who is right ?? Another quandary

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Client's staff member claims to have contacted HMRC and that they have said employers MUST pay at least the 80 % . My understanding is that they do not have to pay anything but can pay up to 100% with 80% being reimbursed by HMRC to the employer. He must then reimburse the staff 80%

Has anything changed and I am wrong or is it the accursed MDTP

Replies (34)

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By bernard michael
02nd Apr 2020 09:21

"do not have to pay any salary"

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By bernard michael
02nd Apr 2020 09:30

To further confuse matters these 2 quotes from the HMRC document about the Job Retention Scheme

"Your employer could pay 80% of your wages through the Coronavirus Job Retention Scheme, up to a monthly cap of £2,500."
"will pay you at least 80% of your usual monthly earnings, up to a maximum of £2,500, as your wage "

"Could" and "will" do not mean the same

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By Duggimon
02nd Apr 2020 09:38

You have to pay your employees, that's one of the rules of being an employer, I don't know where you got the idea that had changed.

edit: your quotes from the government guidance are missing the "subject to relevant employment law" caveat, which is where you will find the obligation to pay employees.

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By bernard michael
02nd Apr 2020 09:44

and if he hasn't got the money to pay them ??

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By justsotax
02nd Apr 2020 09:49

If you are not making your staff redundant, then you are retaining them at the contractually agree remuneration unless a revision has been agreed between each party.

If you are an employer who was intending to lay off staff but now wish to keep them on you can claim 80%/£2,500 back from the government for keeping them. If it is your intention to pay them other that what the contract of employment says then you need a revised agreement.

That is my understanding.....the agreed pay between emp'er and emp'ee for someone furloughed, and what the emp'er claims in grants are two different things.

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By Steve Holloway
02nd Apr 2020 10:15

I read the question as ... 'if the employer wishes to use the goverment scheme then must they pay at least 80% (subject to cap)?' The answer to that (ignoring the employment law aspects) must be yes.

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By NYB
02nd Apr 2020 10:26

I read different interpretations. One of those is "up to 80%"
Believe i read yesterday that Grant Thornton are paying there staff 60%

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Replying to NYB:
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By lionofludesch
02nd Apr 2020 10:31

NYB wrote:

I read different interpretations. One of those is "up to 80%"
Believe i read yesterday that Grant Thornton are paying their staff 60%

Nice to see that the big lads are on the ball ......

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Replying to NYB:
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By paul.benny
02nd Apr 2020 11:52

A large number of their employees will be paid more than the £30k maximum subsidy under the JRS. Whether 60% is fair or not is moot, although I rather suspect the partners won't be taking such a large % hit to their profits.

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Replying to paul.benny:
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By lionofludesch
02nd Apr 2020 12:05

paul.benny wrote:

A large number of their employees will be paid more than the £30k maximum subsidy under the JRS. Whether 60% is fair or not is moot, although I rather suspect the partners won't be taking such a large % hit to their profits.

Doubt if everybody will find themselves on £2500 a month.

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By bernard michael
02nd Apr 2020 10:27

and now the answer - just found latest information from HMRC

At a minimum, employers must pay their employee 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.

Nice to have a definitive answer

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By lionofludesch
02nd Apr 2020 10:29

If you're thinking that you can pay them less than 80% and just claim back what you pay, you're wrong. The terms of the rebate are that you MUST pay 80%. Subject to the cap, obviously.

Why would you pay less anyway ? It's not costing you anything, except in cash flow terms.

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Replying to lionofludesch:
Quack
By Constantly Confused
02nd Apr 2020 15:11

lionofludesch wrote:

Why would you pay less anyway ? It's not costing you anything, except in cash flow terms.

I think the answer to your question lies in your question...

I originally thought you could pay what you wanted (subject to employee agreement of course) and reclaim up to the 80% (so pay 60% and reclaim 60%), I'm happy I've been corrected.

I have had a couple of clients say 'we can't afford to pay everyone 80% of wages for a few months with zero income, we won't be around to get the grant!' and ask if they could pay below the 80%. Hopefully they got loans (though from what I hear, that isn't a given), otherwise there will be redundancies if HMRC don't get their portal sorted pronto.

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Replying to Constantly Confused:
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By lionofludesch
02nd Apr 2020 15:33

Constantly Confused wrote:

lionofludesch wrote:

Why would you pay less anyway ? It's not costing you anything, except in cash flow terms.

I think the answer to your question lies in your question...

I originally thought you could pay what you wanted (subject to employee agreement of course) and reclaim up to the 80% (so pay 60% and reclaim 60%), I'm happy I've been corrected.

I have had a couple of clients say 'we can't afford to pay everyone 80% of wages for a few months with zero income, we won't be around to get the grant!' and ask if they could pay below the 80%. Hopefully they got loans (though from what I hear, that isn't a given), otherwise there will be redundancies if HMRC don't get their portal sorted pronto.

It's a week since the lockdown started. Has the business insufficient reserves to last a week ?

There's a lesson here for the future.

Employees are being asked to prop up the business here. There's an ethical issue to be considered. Are employees expected to starve whilst the employer puts food on his family's table ? Have we stepped back 200 years without me noticing?

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Replying to lionofludesch:
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By lionofludesch
02nd Apr 2020 15:33

Duplicated

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By GEOFF ATHERTON
02nd Apr 2020 10:51

When do payments under the Job Retention Scheme go through the payroll; during the period the Grant covers or when the Grant is received? I'm thinking particularly of small businesses who can't pay their furloughed employees until they receive the Grant.

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Replying to GEOFF ATHERTON:
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By lionofludesch
02nd Apr 2020 11:19

Payments to employees are due on their normal wage dates.

If these small businesses are already in such trouble after only a fortnight in "lockdown" cannot pay, why should they expect their employees to finance them ?

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Replying to GEOFF ATHERTON:
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By kevin503
03rd Apr 2020 10:59

Yes payments go through payroll, still subject to PAYE and NI, and are paid now. On your payroll software create a new pay description such as furloughed or JRS (Job Retention Scheme) that way you can run a report at a later date for your HMRC reclaim, and the employee can see it is JRS pay rather than contracted salary.

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By bernard michael
02nd Apr 2020 11:05

The grant is backdated to 1st March and covers salary (or 80%) actually shown on the payroll

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Replying to bernard michael:
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By GEOFF ATHERTON
02nd Apr 2020 11:35

So it goes on the payroll now even though it may not be paid until the Grant is received? Isn't that contrary to PAYE rules whereby it should only be taxed when paid?

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Replying to GEOFF ATHERTON:
ALISK
By atleastisoundknowledgable...
02nd Apr 2020 11:34

It goes on the payroll now, is paid now, then reclaimed when the portal is open (June?).

I have heard of an employer & employee having a written agreement that salary payment would only be made once the grant was received, but I’m not sure whether that is technically allowed within the terms of the JRS.

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Replying to GEOFF ATHERTON:
By Duggimon
02nd Apr 2020 12:35

No, the salary is paid by the employer to the employee now, and goes on the payroll now. The grant is irrelevant, that's between the government and the business and has no effect on the employee. The employer has to cover the payments between now and when the grant comes in.

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By GEOFF ATHERTON
02nd Apr 2020 11:16

GOV-UK advice re Job Retention Scheme for "employees whose pay varies", which presumably includes zero hour contracts, refers throughout to monthly earnings. If, such employees are weekly paid do we simply read weekly for monthly?
Also with regard to averaging 2019/20 earnings, do we take account of weeks were they were not paid anything or just the weeks that they were paid? E.g if they were furloughed at (say) week 50, but had only been paid for (say) 35 weeks, do we divide the total pay by 50 or 35?

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Replying to GEOFF ATHERTON:
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By paul.benny
02nd Apr 2020 11:43

That's a detail that has not been announced.

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By brian-scholar
02nd Apr 2020 12:58

I have a client who's shop has been closed down and has no cash flow. He's worried about when the grant will come through.

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Replying to brian-scholar:
By ireallyshouldknowthisbut
02nd Apr 2020 14:49

Just the one? I raise you several dozen.

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Replying to ireallyshouldknowthisbut:
By SteveHa
02nd Apr 2020 15:29

I'll raise you a dozen more, and I'll see you.

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Replying to SteveHa:
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By lionofludesch
03rd Apr 2020 11:00

SteLacca wrote:

I'll raise you a dozen more, and I'll see you.

Jeez - I can't remember the last shopkeeper I acted for.

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By Ammie
03rd Apr 2020 12:03

We need to ease off the "guessing" and wait for the finer details to surface.

I have no doubt there will be employers who claim under the Job Retention Scheme and never pay the employee. I also believe that there will also be some serious whiplash when all this regains control and the audits begin.

As the old adage says "a little knowledge is a dangerous thing".

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Replying to Ammie:
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By lionofludesch
03rd Apr 2020 12:13

Ammie wrote:

I have no doubt there will be employers who claim under the Job Retention Scheme and never pay the employee.

With RTI, that would be a very dangerous game to play.

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Replying to Ammie:
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By Southwestbeancounter
03rd Apr 2020 14:57

I can agree with that old adage more than ever over the last couple of weeks!

Clients at home in their PJ's watching Netflix and listening to Martin Lewis have become armchair tax 'experts' overnight!!

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Replying to Southwestbeancounter:
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By bernard michael
04th Apr 2020 09:15

Southwestbeancounter wrote:

I can agree with that old adage more than ever over the last couple of weeks!

Clients at home in their PJ's watching Netflix and listening to Martin Lewis have become armchair tax 'experts' overnight!!

A new branch of MDTP perhaps called MOTS - Man On The Sofa

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Replying to Southwestbeancounter:
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By bernard michael
04th Apr 2020 09:15

Southwestbeancounter wrote:

I can agree with that old adage more than ever over the last couple of weeks!

Clients at home in their PJ's watching Netflix and listening to Martin Lewis have become armchair tax 'experts' overnight!!

A new branch of MDTP perhaps called MOTS - Man On The Sofa

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By pauljohnston
03rd Apr 2020 14:18

I have no doubt that some employers will try and fiddle the system and I hope if they do they will be caught

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