1. Furlough - How to Administrate the Payment?
We would recommend you follow the steps below to administer Furlough pay.
Please note that the payroll's furlough pay calculator caters for whole pay periods only. In instances where an employee is put on furlough part way through a pay period or returns to work after furlough absence in the middle of a pay period, we suggest you follow the (Optional) steps below.
Step 1: Click on 'Employer/Setup'
Step 2: Click on 'Chart of Setup'
Step 3: Click on 'Payment Setup'
Step 4: Create a new Payment Item called "Furlough Pay", subject to Tax, Pension and NIC, to facilitate reporting for claim purposes under the Coronavirus Job Retention Scheme (CJRS) at a later date. Specify a Payment Item Code of your choice for reference in the relevant box.
Step 5: Click on "Save" to save the new Furlough payment item.
Step 6 (If applicable): If you as an employer are in a position to be able to top up the employee's Furlough Pay by the additional 20%, Create a new Payment Item called "Top up Furlough Pay", subject to Tax, Pension and NIC with a Payment Item Code of your choice.
Step 7 (If applicable): Click on "Save" to save the new "Top up Furlough Pay" payment item.
Step 8: Click on 'Employer/Setup'
Step 9: Click on 'Chart of Setup'
Step 10: Click the 'Department Setup' or 'Cost Center Setup'
Step 11: Create a new Department/Cost Center called "Furloughed Employees"
Step 12: Click on "Save" to save the new Furlough Department/Cost Center
Step 13: Click on 'Pension'
Step 14: Click on 'Group Assigning'
Step 15: Click on 'Assign Employee to Department' or 'Assign Employee to Cost Center'
Step 16: Select the "Furloughed Employees" Department/Cost Center for each furlough paid employee from the drop down list and then click on the check box 'Select to Assign'.
Step 17: Click on the 'Confirm Selected' button to confirm the assigning.
Step 18: Use a calculator to calculate the Furlough amount i.e. Normal Pay x 0.8
Step 19: Call HMRC if you are not sure what should be classed as 'Normal Pay'.
Step 20: Go to Payrun, Process Pay, and select the appropriate Pay Frequency. Click on Other Payments
Step 21: In the Other Pay Items section, click on the drop down and select the newly created "Furlough Pay" item
Step 22 (If applicable): If you are topping up the employee's Furlough Pay by the additional 20%, this additional pay can be entered under the "Top up Furlough Pay".
Step 23: Enter the Calculated "Furlough Pay" amount and the "Top up Furlough Pay" amount (If applicable), click on Save, and then click on "Save Data & Process Pay".
Step 24 (Optional): Click on 'Continue'. In the Payrun Approval screen, click on "Draft Payslip - View / Print" and save the "Draft payslip report.
This step is crucial, since the draft payslip gives all required values - Employee's Gross Pay, Employer Pension, Employer NIC - for making a Furlough Claim from HMRC's Coronavirus Job Retention Scheme (CJRS) online portal.
Step 25 (Optional) : After draft payslip is saved, do not proceed any further. Now Click on "Amend Pay Data" and add the "Normal Pay" or "Non-Furlough Pay" or any other "Top up Furlough Pay" and process the pay and update YTD in the usual manner.
Step 26: E-file the FPS as usual.
Note: If you've already paid, then rollback, repeat the steps and reprocess
Please do not call the payroll software provider to ask what the 'Normal Pay' amount should be for calculating the Furlough pay. Each company has their own unique circumstance and it is only the company itself and HMRC who can answer that question.
2. How to check and claim back the NICs and Employer Pension amounts on Furlough Pay and Top-up Pay for employees under flexible furlough arrangements?
Effective from 1st July 2020, employees can be "flexibly furloughed". Provided you created such a payment item in the software already, you can get the "period wise" Furlough Payments from the Payslips or download the "period wise" Furlough Payments made to employees in CSV format,
Reports -> Costing & Accounting Reports - View / Print -> Self-Defined Payments & Deductions.
In order to check the NIC and Employer Pension claim amounts, you need to key in the Furlough Payments from the Payslips ( or Self-Defined Payments CSV ) into the HMRC calculator. The Calculator is updated with support for calculating grant amounts for flexibly furloughed employees and is accessible from the URL : https://www.tax.service.gov.uk/job-retention-scheme-calculator/
For Manual Calculation of Grant Amounts for flexibly furloughed employees based on usual hours and furloughed hours, copious examples are provided in the link :
Please note that the HMRC Legislation, Guidance and Calculator on Covid-19 are being continuously updated.
There is a gradual tapering of support to employers through the Coronavirus Job Retention Scheme (CJRS) from August before its eventual closure in October.
From claims on or after 1st August 2020, employers can only be able to claim Gross Pay Grant. From then on, the onus of responsibility would be on the employers to pay for their own pension contributions and National Insurance contributions for all employees.
The employers will still be able to claim the lower of 80% of staff wages or £2,500 a month until the end of August, after which they can avail claim reduced to the lower of 70% or £2,187.50 a month in September and the lower of 60% or £1,875 in October, with the scheme closing on 31st October.
3. How to Claim Back Furlough Payments from HMRC?
Step 1: Click on Reports
Step 2: Select the Costing & Accounting Reports
Step 3: Click any report under the Cost to Employer Report category, there are many variants.
Step 4: Select the "Furloughed Employees" Department/Cost Center
Step 5: Click on View/Print to view the consolidated amounts
Step 6: Take note of the amount you as an employer has paid out i.e. the Furlough Pay plus employer NICs and employer Pension contributions
Note (Optional) : For employees who are paid "Furlough payments" as well as "Normal" or "Non-furlough" or any other "Top-up Pay", refer to the already downloaded draft payslips and use the amounts - Furlough Pay plus Employer NICs and Employer Pension contributions from the draft payslips instead.
Step 7: Click on HMRC's Guidance to ensure your claim is compliant within the Coronavirus Job Retention Scheme. https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme - Clear guidance is given on how to claim back wages of furloughed employees.
Step 8: Follow the instructions on HMRC's website to submit your claim to HMRC.
Thank you for your attention,