Business as usual for payroll professionals?
Isn’t it ironic that it takes a national emergency for our profession to be recognised as business critical. The Department for Education coronavirus helpline (0800 046 8687) confirmed on Friday 19th March that payroll professionals were key workers and therefore, even if that was just one parent, their children could still go to school if that was imperative to allow them to continue paying employees. It’s obviously a very fast moving area and clients have been contacting me throughout last week just wanting clarity on what all these government announcements mean in practical terms. As we assume HMRC have been so busy internally responding to the Treasury’s requests for practical suggestions, there has been no consultation with stakeholders ahead of any announcements. So at this stage let’s outline what has been announced, and what practical steps you can take before we have any detailed guidance.
Statutory Sick Pay (SSP)
Two announcements have been made in respect to SSP. It is not clear that these have been superseded by the job retention scheme so it’s sensible to consider that these are still in place.
- All employers with less than 250 employees* as of the 28th February will from 13th March be able to reclaim up to 14 days SSP for those who are:
- Self-isolating due to symptoms/sickness
- Caring for those in the same situation or
- Those who have been advised to self-isolate due to age or health conditions
- SSP will be payable from day one with affect from 13th March
*We believe that this will be measured using the connected companies/connected charities rule as for employment allowance but this has not been confirmed. We do know from HMRC that at the moment it will not be based on a separate PAYE scheme having less than 250 employees.
The legislation that has been published so far only applies in Great Britain but corresponding legislation is expected to be laid for Northern Ireland. This is it:
- The Statutory Sick Pay (General) (Coronavirus Amendment) Regulations 2020 this introduces SSP from day one from 13th March
- The Statutory Sick Pay (General) (Coronavirus Amendment) (No 2) Regulations 2020 defines COVID-19 as a deemed incapacity so SSP is due even if COVID-19 was not confirmed from 13th March
Payroll software will not be able to calculate SSP from day one for new absences, of course it automatically does that for any linked absences where the waiting days have already been served in the first absence. For this reason, until you get a payroll update you might want to pay an additional £40.40 SSP in the short-term over and above what your software has calculated. This is three days’ worth of SSP up to and including 5th April 2020. from 6th April 2020 3 days’ SSP will be £41.08. This is not an additional SSP entitlement, so those who’ve received 28 weeks already in a linked absence will not be entitled to any additional SSP, unless they have been classed as working for 56 days after the last day of the previous absence.
Normal SSP entitlement rules continue to apply, the only change has been to remove the three waiting days. This means that employees are required to have average earnings over the eight weeks prior to the start of the absence, of at least the Lower Earnings Limit (£118 per week 2019/20 and £120 a week for 2020/21). Employees who are not eligible for SSP should be issued with an SSP1 exclusion form as usual so that they can make a claim for state benefit. Please ensure you are using the SSP1 form dated 10/19 (there is a separate version for Northern Ireland) not the one that was published on the 18th February, which has been removed as it was unworkable for employers.
Single director companies can be entitled to SSP if they meet the average earnings rules so this will mean that they need to have been paid a salary through PAYE that equates to an average of the lower earnings limit appropriate to the tax year concerned. You need to consider if this will change the frequency of salary payments to such directors. On the subject of personal service companies, you will no doubt be aware that the extension of the IR35 rules to the private sector has been delayed until April 2021. This also means that the public sector will not have to change their operating model in respect to status determination statements and appeals, but it is expected that they will start to populate the off-payroll worker (OPW) marker flag in the full payment submission, as this will be available in payroll software from April 2020.
We aren’t clear if employers are going to be recovering 1 to 14 days’ worth of SSP, or 7 or 14 days of SSP. Equally, we are not clear if you have to form a PIW (in a new unlinked absence) i.e. have four days or more of absence even for the first three days to be payable.
In light of this uncertainty it makes sense for all employers to pay any COVID-19 related SSP under a separate pay element, so that this can be used to evidence any reclaim in the future. Given that the job retention scheme is for all employers, it’s possible that the SSP reclaim might be extended too.
Job retention scheme
The Chancellor’s announcement on 19th March said that 80% of wages would be paid up to a cap of £2,500 per month, backdated to 1st March.
This will apply to staff who are:
- not working but are still under an employment contract
- not currently employed, but were employed as of 28 February 2020 and their employment was terminated as a result of COVID-19
It makes sense to therefore consider how to identify these individuals, perhaps via a new payroll group or cost centre, so that costs can be evidenced and quantified more easily.
We are not clear how this relates to zero hours staff currently/formerly under an employment contract, but you may wish to start assessing average earnings for the 8 weeks prior to 28th February as this would be a useful benchmark for earnings’ replacement from 1st March onwards.
We’ve been told by HMRC it won’t be straightforward to introduce the SSP reclaim process as an add-on to RTI, so it’s likely to be a standalone system that will equally apply to the job retention scheme. You should therefore plan that it will be probably be for some weeks that we will have to fund sick pay and wages before any reclaim is provided. There will be other financial support for businesses in the meantime, including Time to Pay for PAYE, Coronavirus Business Interruption Loans and deferred VAT until June 2020. I have asked if advance funding for SSP (before the job retention scheme was even announced) could be introduced as a quick fix but it seems that this would distract HMRC’s efforts to develop a more comprehensive system.