Kate Upcraft’s WhatsApp Group questions concerning Covid-19 payroll legislation changes thoughts summarised

Kate Upcraft’s WhatsApp Group questions concerning Covid-19 payroll legislation changes thoughts summarised

These are my thoughts on a few of the things that have been posted on WhatsApp, as I say they’re just my views, because we’re all trying to interpret the same guidance in the absence of any legislation.

It’s important to remember that there is no legislation at the moment which is quite useful because we can’t be breaking the law all we have is guidance. The view that lots of us are taking is if the guidance doesn’t say something is prohibited or excluded then we can reasonably assume at the moment that it’s okay.

I think throughout what we’re doing at the moment we’ve got to take a pragmatic and appropriate view of what this scheme is intended for. The intention is to support people who would otherwise have lost their job as a result of COVID-19, it is not an opportunity to claim money from the government for people who have for example resigned during February or to retrospectively increase people’s salaries in order to be able to reclaim money from the government. There is of course always the moral imperative of supporting people in very difficult financial circumstances, but we have to bear in mind as employers that if we undertake any potential ‘abusive’ practices that HMRC could deny all or part of the reclaim which could then leave the business exposed to costs that they weren’t expecting. They have all the historic RTI data showing pay and leaving dates after all.


  1. Employee on garden leave – they are not available for work as you’ve asked them to stay away, so my view is you can’t furlough them. I’m assuming that this is what this question means and that the person has simply resigned to go to a competitor rather than being made redundant when furloughing would apply. Anyway the Garden leave is probably contractually so is required to be paid at full pay because its notice so you’d have to have renegotiate the contract anyway to do something any different


  1. Salary Sacrifice – ooh this is going to keep cropping up isn’t it? Let’s consider what a salary sacrifice is. The employee has reduced their contractual pay that’s why a reduced amount has been subject to tax and NI and that’s what’s been reported on RTI so if their pay suddenly shoots up that will look interesting to HMRC won’t it? It’s always the risk you take with salary sacrifice in reducing your employers’ NI bill. You are contractually agreeing to provide the benefit in kind instead, in this case an enhanced employer pension contribution. We have this problem with maternity don’t we, that the salary sacrifice is great whilst they have some contractual pay to sacrifice but then suddenly we are funding that enhanced employer contribution because they are only in receipt of SMP. I can understand the requests though both from the employer and employee’s perspective, but if the employee has been receiving post sacrifice pay that is their normal pay so to reduce it is only what is happening to everybody else. They were not ‘buying’ anything with salary sacrifice. they had reduced their pay in exchange for a benefit. So in summary, I think that lots of employers will probably change sacrifices going forward for April but to go back and retrospectively change your contract for March to inflate somebody’s pay I think is more of an aggressive approach, because HMRC require that a salary sacrifice is in place before the payday in which it takes effect, so we are now trying to re-write history. I think the important thing is to get the contract right so that it’s clear whether the employee is paid for something out of net pay or receiving a benefit in kind. It might sound like semantics but it’s vital in terms of PAYE! Of course people can salary sacrifice their furlough wages because what we’re talking about here is the difference between what are you doing in the payroll and what you’re reclaiming. What you’re doing through the payroll is subject to whatever you’ve agreed in the current or new contract, the reclaim is something driven by HMRC’s guidance. Who knows if we’ll get any more guidance on this from HMRC even though we have posed lots of questions to them in the last couple of days.


  1. Mortgages – I think that in respect to evidence for mortgages the banks will be sympathetic to the fact that people are taking pay cuts at the moment and they will have payslips to support what they were on in February and earlier won’t they?


  1. Statutory Leave – Yes it’s absolutely the fact that at the moment unless the law changes, and there is no reason to think it will, that those going on statutory leave in the next few months will see a reduction in their SMP etc both higher rate and flat rate depending on what the level of salary is they’ve been furloughed if at less than 100%


  1. As far as allowances are concerned, I think we’re taking the view that the only thing is explicitly excluded at the moment are fees, commission and bonuses, therefore allowances are in unless the employer has contractually agreed to remove them anyway as part of the contract change as  I know some people are doing.


  1. Question about P 45’s. P45s can be issued electronically that’s been the case for a number of years so I suggest that’s the route you go down. Payslips are nothing to do with HMRC as they covered by the Employment Rights Act so that would need to be BEIS who made that decision, I think the fact that payslips can be issued electronically will mean that the answer is people should just be moving to that and if they can’t in the long run we will catch up with issuing payslips when we can get back into offices, as long as people have been paid that’s what matters now.


  1. Martin Lewis – It’s Very kind of Martin Lewis to tell all employees that they can simply demand to be furloughed whatever reason they had for leaving an employer before or after the 28th February, this is causing chaos amongst my clients and I have not seen anything in official guidance to support that yet although I read form you that HMRC said it in a webinar today but who knows if that was a mistake or it’s Government policy!


Sorry for the long email but hope it’s useful, happy to be disagreed with of course as we’re all learning….


Best Wishes



Kate Upcraft AMBCS > Director > Kate Upcraft Consultancy Ltd


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