The Job Retention Scheme was announced by the Chancellor of the Exchequer Rishi Sunak last week, which seeks to offer up to 80 percent of workers’ wages amid the coronavirus outbreak. But do you have to pay national insurance and a pension contribution on the job retention scheme?
Chancellor Rishi Sunak has agreed to pick up “most of” the wages of workers as the coronavirus continues to devastate several industries.
Mr Sunak said government grants would cover up 80 percent of the salary of staff who are kept on by their employer but are unable to work.
The scheme will cover wages up to £2,500 a month.
He added he would do “whatever it takes” and said his plans represented “unprecedented economic intervention to support the jobs and incomes of the British people”.
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How does the scheme work?
The Treasury and HMRC are still attempting to figure out the system for the job retention scheme.
Once the system is in place, officials will confirm details on the coronavirus business support website here.
The government has pledged to backdate payments to March 1 and has said its hope is the scheme encourages firms to retain workers.
In total employers can access up to 80 percent of their workers’ wages up to £2,500 a month.
If employers wish to top up pay levels they can, but they will only be able to claim up to 80 percent of £3,125 a month, equivalent to a gross salary of £2,500.
Companies without the cash flow to pay their worker’s wages are expected to borrow in the short term until the job retention scheme is running.
The main source of funds for this will be the deferral of value-added tax payments for the quarter until June 2020 which do not have to be paid until March 2021.
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How do you access it?
Employers will need to undertake two actions to access the grant.
First, employers need to designate affected employees as furloughed workers and must notify their employees of this change.
This stage is undertaken as changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
Secondly, once the new online portal is live, you must submit information to HMRC about the employees that have been furloughed and their earnings.
Who is eligible?
All UK-wide workers with a PAYE scheme are eligible.
This includes the public sector, Local Authorities and charities.
Furthermore, this also includes zero-hour contract workers where their monthly pay for February should be used as a benchmark.
If any employee did not work in that month, they should claim universal credit, the Treasury said.
Do you have to pay national insurance and pension contributions?
The specific details of the new scheme will be confirmed once the new system is live.
Currently, the process is believed to mimic the normal payroll system and will see the normal tax deductions made under the pay as you earn system.
But what happens to employers’ national insurance contributions, which amount to about 13.8 percent of the majority of a worker’s salary is still unclear.
When questioned about this, a Treasury spokesperson told FT.com: “We are working on getting some more detailed guidance out there as soon as possible on NICs.”
Express.co.uk will update this article when more information is available.
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