This article explains the support that exists in FreeAgent’s payroll for claims made for furloughed workers under the Coronavirus Job Retention Scheme (CJRS) dated up to 30th June 2020. Please note that information on claims dated from 1st July 2020 is available in a separate article.
Claims dated up to 30th June 2020
The first iteration of the Coronavirus Job Retention Scheme, which ran from 1st March-30th June 2020, allowed employers to reclaim from the government 80% of the salary, employer's NI and pension contributions for any 'furloughed' employees. For claims dated up to 30th June 2020, you need to adjust the gross pay of any furloughed employees to reflect this in FreeAgent’s payroll.
If you chose to ‘top up’ a furloughed employee’s wages (i.e. to pay the other 20% of their salary yourself) for claims dated up to 30th June, you won’t need to adjust the employee’s gross pay. However, you will still only be able to claim 80% back from the government.
Functionality to support furloughed workers in FreeAgent’s payroll
We’ve added functionality to our payroll to help you make the calculations needed for making a claim under the Coronavirus Job Retention Scheme. HMRC has provided two methods for calculating how much a business is allowed to claim.
In order for FreeAgent to perform the calculations using either of these methods, we need the following information:
- the number of consecutive days an employee has been furloughed
- the number of consecutive days the payslip covers
Please note, the days an employee was furloughed won’t show on their payslip but the figures will be saved in FreeAgent for your records.
How does FreeAgent make the calculations?
This uses the “daily reference pay” for your employee, multiplies it by 80% and then multiplies it by the number of furloughed days.
The daily reference pay for your employee is calculated in FreeAgent as follows:
We take the basic pay amount entered in your employee’s profile for the relevant tax year, then multiply it by 12 months and divide it by the number of days in that tax year (366 for 19/20, 365 for 20/21).
This allows you to have some control over calculation 2 since you can edit this field.
If you do edit this field, when you generate a payslip for your employee for the following month you may need to edit the basic pay amount on the payslip before submitting payroll. This is because the payslip will default to the value entered in the profile. Editing a profile will not affect any payslips already submitted to HMRC.
This makes use of the daily maximum rate that HMRC provides under the scheme: £81.52. This figure is then multiplied by the number of days the employee has been furloughed.
If your employee has been furloughed for the full current pay period, you can use the furlough report to calculate how much to pay them. To use this figure, you’ll need to edit their payslip before making the submission.
If your employee has been furloughed for part of the pay period, the furlough report will show you their total furloughed wages, as well as the grant you can claim against them. You will need to work out their pay for their non-furloughed days too, and then add that to the value on the report. You will then need to edit their payslip once more before making the submission.
How to add furlough information to your employees' payslips
There are two main boxes that you’ll need to complete in each employee’s payslip to make the calculations: ‘Days in pay period’ and ‘Days furloughed’.
Days in pay period
You’ll need to enter the number of days the payslip covers. For example, if the employee was paid on 25th March, then the payslip may have covered the period of 25th February to 24th March. In that case, you would enter 29 days: five days for February (including the leap year day) and 24 days for March.
If the payslip covered a different pay period to this example, you would enter the number of days it covered. Generally, this will be around one month, unless the employee started or left employment during the period.
You’ll also need to enter the number of consecutive days the employee has been furloughed for. Using the previous example, if the employee has been furloughed since 1st March (the earliest date they could have been) then the number of furloughed days would be 24.
If your payroll is marked as 'Unfiled'
First, navigate to the 'My Money' tab and select 'Payroll'.
Select the green button 'Continue Month X Payroll' at the top right.
Then, in the 'Review and edit payslips' section select 'Edit Payslip'.
Scroll to the bottom and you’ll see two fields in the box: 'Days in Pay Period' and 'Days Furloughed'.
Enter the appropriate figures using the guidance we've outlined above.
If your payroll is 'Marked as filed' or has been submitted via RTI
As above, navigate to the relevant payroll profile. In the 'History' section, select the appropriate month.
Then select 'View Payslip'.
Choose 'Edit Payslip' at the top right. Then navigate to the 'Coronavirus Furlough Details' area, enter the correct numbers and choose 'Save Changes'.
Claiming for multiple periods
If you’re claiming for multiple periods, you’ll need to add up the separate monthly reports for your furloughed employees before submitting the figures to HMRC. You can refer to the government’s website for the most up to date guidance on this.
How to access your furlough claim report
Once you’ve updated the relevant payslips as outlined above, you’ll be able to create your furlough report.
Select 'My Money', navigate to 'Payroll'.
In the 'History' section, select the appropriate month.
Then select the 'Furlough report' button.
The report then calculates the maximum amount you’re allowed to reclaim for your furloughed employees. If you’re paying employer’s National Insurance (this will depend on the National Insurance Category letter in your employee’s payroll profile and whether you have used your Employment Allowance) this will be added on to your claim automatically.
If your employee has been auto-enrolled into a pension scheme you’ll also be able to claim back the minimum contributions you would have had to make, and this will be taken into account in the report.
The report will display the lowest value from the two calculations we have performed as per HMRC’s specification. We’ll also display the calculation that has been used in the process.
This report contains the information you’ll need to process your claim with HMRC. Once you have all the figures you need, you can then make the claim on HMRC’s portal.