Car retail staff will be among the UK employees whose commission-led monthly salaries will prove detrimental to their income as “furloughed workers” under the Government’s Coronavirus Job Retention Scheme.
Clarification of the scheme has revealed that, while the scheme will cover the lower of 80% of an employee’s regular wage or £2,500 per month and include employer National Insurance Contributions (NIC) and minimum automatic enrolment employer pension contributions, fees, commission and bonuses will be omitted.
Nigel Morris, tax director at MHA MacIntyre Hudson, said: “The updated guidance on the Coronavirus Job Retention Scheme is very welcome and will be good news to many employers and employees. However, we are concerned that in the definition of what can be claimed.
“For many in our sector, and indeed other sectors such as Motor Dealers and Estate Agents etc, the regular wage of the employee’s includes every month a very low basic, often just at national minimum or national living wage, plus commission on sales in the period.
“If the exclusion of commission in the final sentence above were to apply this would be very detrimental to all of those employees and not reflective of their regular wage.
“We therefore seek clarity and confirmation that for the calculation of furloughed pay that the basic pay and regular (monthly) commission paid to them in February 2020 can be used as the basis of the furloughed grant.”
In its commentary on the clarified terms of the Government’s Coronavirus Job Retention Scheme, ASE said that, while the scheme is “unbelievable in terms of its scope”, adding that “it would harsh to be critical” there were areas that need to be tweaked.
Among the key points that ASE questioned was the idea that a person with several employments (the company director with several employments) is eligible for more than one £2,500 payment, branding it “grossly unfair”.
In an interview with AM earlier this week Marshall Motor Holding chief executive, Daksh Gupta, said that his business would pay all its “furloughed workers” 90% of their normal wage, even if that was above the government’s £2,500 cap.
But the recent clarification of the terms and conditions of the Job Retention Scheme may bring into question how much retailers will actually be able to claim back, when payments are delivered in the form of a grant.
ASE acknowledged today that most businesses "placed their staff on furlough, in advance of fully knowing the rules".
The National Franchised Dealers Association (NFDA) has written to Kemi Badenoch MP, Exchequer Secretary to the Treasury, to seek clarifications on the Coronavirus Job Retention Scheme.
"We urge the Government to clarify its guidance on the Job Retention Scheme as the latest information is creating uncertainty in the sector”, said director Sue Robinson.
“Monthly bonuses and commissions form a normal part of employees’ monthly ‘earnings’ in the retail automotive industry and salespeople in franchised dealerships rely heavily on the commissions they regularly receive.
“It is vital that the Government clarifies this issue as soon as possible to provide significant relief to workers operating in this key sector."
MHA MacIntyre Hudson will aim to deliver some clarification in the latest of its coronavirus mitigation webinars, which is set to take place at 1pm today.
But it has also issued the following advice for car retailers looking to take advantage of the scheme:
Under the JRS, all UK dealers with a PAYE scheme that was created and started on or before 28 February 2020 will be able to access support to continue paying part of your employees’ salary for those employees that would otherwise have been laid off during this crisis and to avoid redundancies.
This applies to employees who have been asked to stop working, but who are being kept on the pay roll, otherwise described as ‘furloughed workers’.
It is intended for the JRS to run for at least three months from March 1, 2020, but it will be extended if necessary.
Dealers can use this scheme anytime during this period.
The JRS will cover the cost of wages backdated to March 1, 2020, and will be open before the end of April.
It will continue for at least three months and can include workers who were in employment on February 28.
1. Furloughed employees must have been on the PAYE payroll on 28 February 2020, and can be on any type of contract, including:
a. full-time employees
b. part-time employees
c. employees on agency contracts
d. employees on flexible or zero hour contracts
2. HMRC will pay dealers a grant worth 80% of an employee’s regular wage costs, up to £2,500 a month, plus the associated employer National Insurance Contributions (NIC) and minimum automatic enrolment employer pension contributions on that subsidised wage.
3. For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.
4. For employees whose pay varies, if the employee has been employed for a full twelve months prior to the claim, dealers can claim for the higher of either:
a. the same month’s earning from the previous year
b. average monthly earnings from the 2019-20 tax year
5. If the employee has been employed for less than a year, dealers can claim for an average of their monthly earnings since they started work.
6. Employees are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working. Furloughed workers are not working paid the lower of 80% of their salary, or £2,500 even if this would be below NLW/NMW.
7. Tax and NICs will still have to be paid as normal
8. Dealers are qualifying employers
9. The dealer must have a UK bank account
10. Dealers should discuss with their staff and make any changes to the employment contract by agreement. To be eligible for the subsidy dealers should write to their employee confirming that they have been furloughed and keep a record of this communication.
11. Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
12. A worker must be furloughed for a minimum of 3 weeks for their employer to be eligible to claim under this scheme.
13. If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme
14. A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of the dealer.
15. If workers are required to complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
16. If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.
17. HMRC are working urgently to set up a system to pay these grants. We expect the first grants to be paid within weeks, and we’re aiming to get it done before the end of April.
18. More guidance on how dealers should calculate their claims for employer National Insurance Contributions and minimum automatic enrolment employer pension contributions will be provided.
19. To claim, you will need:
a. your ePAYE reference number
b. the number of employees being furloughed
c. the claim period (start and end date)
d. amount claimed (per the minimum length of furloughing of three weeks)
e. your bank account number and sort code
f. your contact name
g. your phone number
20. You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
21. You can only submit one claim at least every three weeks, which is the minimum length an employee can be furloughed for.
22. Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
23. You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.
24. You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted