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Redundancy, furlough or paycut?

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mc2fool
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Re: Redundancy, furlough or paycut?

#294431

Postby mc2fool » March 26th, 2020, 12:15 pm

didds wrote:
mc2fool wrote:The company I worked for during the Callaghan government's 5% pay rise limit moved pay day backwards from the 25th of the month to the 6th, so changing from mostly in arrears to mostly in advance, and it stayed that way for at least until I left (and may well still be so).

surely that only "works" for the first month? after the first payment on the 6th, it's still a monthly payment - so it just moves the arrears payment date to the 6th of the month instead?

No, salaries for the whole of the month were changed to be paid on the 6th of that month, rather than the 25th.

So your salary for, say, March was paid on the 6th of March, so 5 days in arrears and 25 days in advance, rather than 24 days in arrears and 6 days in advance previously.

Bringing pay day forward was a way of boosting employees' bank accounts a bit, while staying within the 5%pa pay rise limit. (At the cost of a "lean" period of the same length when you finally left the company of course....)

Gaggsy
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Re: Redundancy, furlough or paycut?

#294494

Postby Gaggsy » March 26th, 2020, 2:56 pm

Well today, my boss rang me and asked what I wanted to do. I said what I wanted was to continue on full pay and failing that I'd go on furlough. He says he can't afford the first and doesn't want the second. I'm not sure why he offered it in the first place then.
He has now told me that under furlough, I would only receive £2,000. Not £2,500 because this would be taxable. I said I thought this sounded wrong and contrary to the information I'd read but he was adamant and said he'd spoken to HMRC about it. I smell BS. Does anyone know for sure?

He's changed his tune on the pay-cut somewhat. We're now talking about an effective 40% pay-cut starting from April.

I'm still prevaricating at the moment. Others in the company have said they haven't been told of a pay-cut but he denies this and says everyone has and I'd have the best deal of everyone. Someone is lying to me.

pochisoldi
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Re: Redundancy, furlough or paycut?

#294497

Postby pochisoldi » March 26th, 2020, 3:05 pm

Gaggsy wrote:Someone is lying to me.


I would say that your boss is being less than transparent, and it will bite him in the backside, as employees act in their own individual interest instead of the common interest. (aka "them bosses" and "us workers", instead of "our company and its employees")

Is COVID exposing a fundamental weakness in the business?

dspp
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Re: Redundancy, furlough or paycut?

#294505

Postby dspp » March 26th, 2020, 3:47 pm

Gaggsy wrote:Well today, my boss rang me and asked what I wanted to do. I said what I wanted was to continue on full pay and failing that I'd go on furlough. He says he can't afford the first and doesn't want the second. I'm not sure why he offered it in the first place then.
He has now told me that under furlough, I would only receive £2,000. Not £2,500 because this would be taxable. I said I thought this sounded wrong and contrary to the information I'd read but he was adamant and said he'd spoken to HMRC about it. I smell BS. Does anyone know for sure?

He's changed his tune on the pay-cut somewhat. We're now talking about an effective 40% pay-cut starting from April.

I'm still prevaricating at the moment. Others in the company have said they haven't been told of a pay-cut but he denies this and says everyone has and I'd have the best deal of everyone. Someone is lying to me.


I think the sum he is doing is £2500 x 80% = £2000.

There are quite a few indications he is correct in what I am seeing. There seems to be no obligation for the business to actually pay their 20%. But at least the 80% must be paid out before the business can reclaim. It is very unclear and murky, and open to exactly this sort of behaviour.

regards, dspp

mc2fool
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Re: Redundancy, furlough or paycut?

#294527

Postby mc2fool » March 26th, 2020, 5:12 pm

Gaggsy wrote:He has now told me that under furlough, I would only receive £2,000. Not £2,500 because this would be taxable. I said I thought this sounded wrong and contrary to the information I'd read but he was adamant and said he'd spoken to HMRC about it. I smell BS. Does anyone know for sure?

No, but you (and he) might find this useful: https://www.businesssupport.gov.uk/

You may also be able to get answers in HMRC's forums, https://community.hmrc.gov.uk/

dspp
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Re: Redundancy, furlough or paycut?

#294576

Postby dspp » March 26th, 2020, 8:13 pm

Something to be aware of is any employer trying to sneak a permanent change to employee Ts & Cs under the guise of furlough management. I've just been passed such a set by a friend and it would have given the employer infinite right to put any employee on zero hours and zero pay for all time.

Be very careful out there. I am sure it was just a slip of a pen by a junior lawyer ........

regards, dspp

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Re: Redundancy, furlough or paycut?

#294587

Postby chris » March 26th, 2020, 8:53 pm

The 20% tax would not be on the full £2500 as you will have a tax code. If it is the standard tax code of 1250L then you can earn 12500 per year without being taxed. The way this works in practice if you are paid monthly is that you can earn £1042 per month before you pay tax and therefore your tax on £2500 is 20% x (2500-1042) = £291.60.

Then you will pay NI where you can only earn £719 before you pay NI at 12%. Therefore NI will be 12% x (2500-719) = £213.72.

In total you will receive:

Gross furlough pay £2500
Less Tax £ 291.60
Less NI £ 213.72

Total £1994.68
So in theory you employer is about right. However, you would have paid tax and NI in that way anyway. What is more important is that your terms and conditions haven't changed by being on furlough and once you are back at work, you are back on full pay (unless they decide to change something else). You are also accruing both time at work to take you over 24 months and also holiday allowance. Therefore if at a later date you are made redundant, it is based on a higher salary.

Compare it to 60% of your salary now and if you are later made redundant, then the redundancy will be based on that lower level. More importantly, your future salary will continue at 60% of its present level. Whilst this may mean that you could be employed for longer (which may be a good thing), this kind of slash in the salary level could well mean that the company has serious financial difficulties and I really do not think that orders / building will pick up very fast after this initial crisis is over. Therefore I think that even if companies survive the initial shock, they are less likely to survive in the long-term.

Unfortunately, it is a difficult decision to make but my gut instinct is that you are unlikely to find a job in the short-term but the company may be unlikely to survive in the long-term. Therefore furlough would seem to be the best choice.

Chris

mc2fool
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Re: Redundancy, furlough or paycut?

#294762

Postby mc2fool » March 27th, 2020, 11:56 am

"While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
:
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
"

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Gaggsy
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Re: Redundancy, furlough or paycut?

#294800

Postby Gaggsy » March 27th, 2020, 1:29 pm

mc2fool wrote:"While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
:
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
"

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

But 2 paragraphs up:
"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. You can choose to top up the employee’s salary, but you do not have to."
Which suggests to me that the employee should get the whole £2,500

dspp
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Re: Redundancy, furlough or paycut?

#294805

Postby dspp » March 27th, 2020, 1:49 pm

Gaggsy wrote:
mc2fool wrote:"While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
:
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
"

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

But 2 paragraphs up:
"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. You can choose to top up the employee’s salary, but you do not have to."
Which suggests to me that the employee should get the whole £2,500


No the employee should get the £2000. The other £500 can go missing en route. This is support for 80% of salary , up to cap £2500/m. There is no requirement for company to ‘top up’ wages from 80%, if they fall under wage thresholds they may be able to get support elsewhere – universal credit etc dependent on personal circumstances. Assumption that staff who are furloughed would not necessarily be the ones made redundant at a later date as there is inherent bias into the decision (i.e. many businesses have furloughed staff who are at risk/pregnant etc as a priority). Company must get written confirmation from staff that they agree to being furloughed as this is a fundamental change to their terms of employment.

It is a minefield.

regards, dspp

Watis
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Re: Redundancy, furlough or paycut?

#294816

Postby Watis » March 27th, 2020, 2:10 pm

dspp wrote:
Gaggsy wrote:
mc2fool wrote:"While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
:
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
"

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

But 2 paragraphs up:
"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. You can choose to top up the employee’s salary, but you do not have to."
Which suggests to me that the employee should get the whole £2,500


No the employee should get the £2000. The other £500 can go missing en route. This is support for 80% of salary , up to cap £2500/m. There is no requirement for company to ‘top up’ wages from 80%, if they fall under wage thresholds they may be able to get support elsewhere – universal credit etc dependent on personal circumstances. Assumption that staff who are furloughed would not necessarily be the ones made redundant at a later date as there is inherent bias into the decision (i.e. many businesses have furloughed staff who are at risk/pregnant etc as a priority). Company must get written confirmation from staff that they agree to being furloughed as this is a fundamental change to their terms of employment.

It is a minefield.

regards, dspp


Based in this extract from the article linked to by mc2fool:

"At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month."

by my calculations, an employee with a qualifying salary in excess of £37,500 will be paid the full £2,500 as gross pay. For most, after tax and NI, that will be nearer £2,000 nett pay - is that where the confusion has arisen?

Also, the employer will recover the Employer's NI from the Government grant so won't need to deduct it from the employee's pay - a suggestion I saw somewhere today.

If anyone thinks I've misinterpreted the document, please show me where.

Watis

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Re: Redundancy, furlough or paycut?

#294818

Postby PinkDalek » March 27th, 2020, 2:14 pm

Gaggsy wrote:Which suggests to me that the employee should get the whole £2,500


Yes but as Gross Pay, no fees can be deducted but that Gross Pay can and should be subjected to PAYE in the normal manner.

Edit: what watis wrote!

dspp
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Re: Redundancy, furlough or paycut?

#294845

Postby dspp » March 27th, 2020, 3:59 pm

https://gateleyplc.com/insight/in-depth ... on-scheme/

may be a useful link (as in, I am sure it is .....).

regards, dspp

mc2fool
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Re: Redundancy, furlough or paycut?

#294850

Postby mc2fool » March 27th, 2020, 4:10 pm

Gaggsy wrote:
mc2fool wrote:"While on furlough, the employee’s wage will be subject to usual income tax and other deductions.
:
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
"

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

But 2 paragraphs up:
"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. You can choose to top up the employee’s salary, but you do not have to."
Which suggests to me that the employee should get the whole £2,500

Yes, the whole £2,500 gross. What they get net will depend on their tax code (and possibly the results of their self assessment), NI deductions, and contributions to pension schemes.


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