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Q&A: How does the payroll scheme work? And who can use it?

Q&A: How does the payroll scheme work? And who can use it?

Tuesday 28 April 2020

Q&A: How does the payroll scheme work? And who can use it?


More details have been announced about the government's £138m scheme to keep 27,000 islanders in employment, which is going live later this week with the first payments expected on 6 May.

The co-funded payroll programme aims to ensure that businesses, charities and self-employed people disrupted by covid-19 can access the funds they need to protect workers and reduce redundancies.

Express breaks down the facts and figures surrounding what the government has described as the “largest economic support package ever launched in Jersey”...

How does the scheme work? 

In April, May and June 2020, the government will refund employers a maximum of £1,600 per employee (80% of a worker’s salary up to £2,000) per month, if they can prove "material detriment" - meaning they have seen a drop in turnover of at least 30% in 2020 or the same month in 2019.

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Pictured: Businesses are eligible to the scheme if they can prove a drop in turnover of at least 30% in 2020 or the same month in 2019.

This funding is available to employers who continue to pay their agreed wages in the usual way and can demonstrate a drop-in turnover of at least 30% in the month due to covid-19.

Businesses must maintain their usual pay schedules (e.g. weekly, monthly pay) with employees as per the first quarter of 2020. They will have to complete a dedicated online form – which will be available from 1 May – for each qualifying month in arrears. 

The application window for April payroll will therefore be between 1 May and 29 May 2020, the first payments will be one on 6 May.

There is no appeal process for the scheme.

Which businesses can apply?

The list of eligible businesses is available online

There are certain conditions applying to specific sectors.

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Pictured: Certain conditions apply to specific sectors, such as law firms.

Law firms, as well as accounting, bookkeeping and auditing activities; tax consultancy; and regulatory and compliance activities will only be eligible if they have less than 30 employees and 75% of their work is conducted locally.

Businesses conducting pre-primary education and child day-care activities will not be eligible if they are charging fees to parents of children who are no longer receiving a service in the qualifying month.

Are business owners, sole-traders and partners eligible?

Phase 2 includes workers who expect to pay Class 2 social security contributions for March 2020 such as business owners, directors, sole traders or partnerships - acknowledging they may be able to defer such payments under a Government deferral due to covid-19). 

Self-employed workers who are not required to pay Class 2 contributions as they have an exemption or contribution credits such as pensioners, parents caring for a child under five or married women, are also eligible.

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Pictured: Phase 2 includes workers who expect to pay class 2 social security contributions for March 2020.

If you are in an eligible business, you can apply for 80% of your gross average monthly earnings in 2019 up to a maximum payment of £1,600 per month. This is self-declared but will be checked against your 2019 tax return when it is processed.

This support is only available if you earned on average less than £8,884 per month in 2019 (£106,608 in the year).

Are charities included? 

Charities registered in Jersey which employ paid staff are eligible for payroll support under Phase 2 of the scheme. Like businesses, they will have to confirm material detriment – meaning that its donation, grant or other income has dropped by at least 30% during the qualifying month, when compared to a previous comparable month.

If a charity is granted payroll support, this information will be shared with Government Departments administering other grants and support to charities to assist in their decision making. 

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Pictured: Businesses can apply for a special exemption if they can't afford their payroll costs.

My business can’t afford the full wage cost... Can I still apply to the scheme?

If a business can’t bear its payroll costs under the standard scheme, it may apply for a special exemption. 

They will have to provide additional evidence and will be able to provide a lesser contribution of any percentage up to 20% of the wage cost. 

The government has warned that, by taking advantage of the special exemption, they will be placed in a higher priority category for audit. They might also be required to provide records and evidence of their claim at a later date. 

My business has an insurance policy for business disruption... Can I still apply?

If a business or other applicant to this scheme has an insurance or other policy which includes business disruption, it is obliged to pursue that claim, before making an application to the payroll scheme. 

If a claim is made later on, the business will have to inform the Customer and Local Services Department and repay the funds received under the scheme.

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Pictured: If a business or other applicant to this scheme has an insurance or other policy which includes business disruption, it is obliged to pursue that claim.

Can I reemploy people who have been made redundant?

It is possible to include an employee who was made redundant since 31 March 2020 if they were re-hired, if they were included on the March 2020 Social Security contribution schedule. 

Can I apply to the scheme for my household employees?

If a household employs, for example, a cleaner, nanny or gardener, and therefore pays ITIS and/or social security contributions in respect of the employee, the household is eligible for payroll support if it can demonstrate material detriment.

This will be measured as a reduction of 30% or more of the household’s total gross income over the qualifying month when compared to the average monthly total gross income for the household in 2019. 

If the employee remains self-employed for the purpose of the engagement, they should consider if they are eligible to apply as a self-employed individual. Only one party should make a claim in respect of any particular worker, and that should be determined on the basis of whether the individual is employed by household or self-employed.

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Pictured: Households who have lost 30% of their income can apply for payroll support for cleaners, nannies or gardeners.

What about businesses who provide staff accommodation?

Any worker in employer-provided accommodation on 19 March 2020 must continue to be given the opportunity to remain in that accommodation for the duration of the scheme, whether or not they remain in employment.

Employers that fail to meet this requirement may be excluded from this scheme and other schemes – unless there is a clear case of misconduct and appropriate procedures have been followed to dismiss an employee.

What if my staff are not working their full-time hours?

Where a business claims under this scheme, and it is envisaged that staff will have spare working capacity, those staff should be made available to the government to participate in appropriate activity required to support the government and community actions needed, including volunteering, whilst the health crisis persists. 

Employers who claim under the scheme should make their staff aware of this situation and may be contacted by the Community Taskforce.

CLICK HERE for more information on the Co-funded Payroll scheme and other government support. 

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