Coronavirus: your questions answered

06 April 2020

More detail on how the scheme applies to employees' pay

What wages will it cover? How will pay be calculated?

The scheme covers 80 per cent of wage costs to a maximum of £2,500 per month, PLUS the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Guaranteed commission and overtime are also included, whereas discretionary bonuses and commission are not recoverable. And it seems likely – although the guidance does not address the point – that tips and gratuities will also be excluded.

The amount payable will be based on the employee’s normal salary. Where the pay is variable then the employer can claim for the higher of either the same month’s earnings from the previous year or the average monthly earnings from the 2019-2020 tax year. Where the employee has been employed for less than a year, the employer should take an average of their earnings since they started work.

Could we temporarily increase the pay of employees so that they can recover more under the scheme?

It would be surprising if the scheme - when it is published in full detail – contained a loophole to allow this. Guidance already indicates that where pay is variable, the amount covered by the scheme will be based on past payments. Where the employee is on a fixed salary the scheme is likely to require some evidence from the employee’s PAYE records showing how much the employee earns. Increases agreed after March 1 (the date to which the scheme will be backdated) are highly unlikely to be covered.

Does it only apply if we don’t pay the wages – or will we be able to recover wages that we have already paid?

The scheme is intended to help those employers who have chosen to keep employees on the books rather than make them redundant. We can certainly expect that it will refund employers who have already been paying employees from March 1st provided that the employees have not been doing any work in that period. You should therefore pay the employees, and then look to claim through the scheme.

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