Furlough plans have made payroll situations more complex. This will likely be especially true for smaller organisations and many employees may also
Furlough plans have made payroll situations more complex. This will likely be especially true for smaller organisations and many employees may also have to factor in additional deductions to their pay.
New research from Intuit QuickBooks shed some light on just how unprepared some workers may be.
The organisation conducted research using a sample of 1,100 workers and 500 furlough workers in August 2020 which found some startling results.
The research found that half of those currently on the furlough scheme are unaware that it could impact how much tax they’ll need to pay,
this could make existing financial burdens even more difficult to deal with, with 68 percent of respondents revealing that they had seen a reduction in their household income as a result of coronavirus.
Additionally, 31 percent detailed that they had taken on extra debt and nearly half (47 percent) said they are close to running out of money every month.
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Pauline Green, the Head of Payroll at Intuit QuickBooks, commented on the findings: “The coronavirus has put intense pressure on finances across the country – from both an employer and employee perspective.
“It’s never been more important that workers are paid correctly, and on time.
“Yet employers are facing changeable and complex payroll processes, and those without finance teams are particularly prone to the pressures of running payroll under these unusual circumstances.
“Small businesses owners always want to get pay right, but sometimes mistakes do happen – which is why it’s always advised to give your payslip a quick once-over”
The importance of checking on pay has been highlighted by the fact that up to £3.5billion in fraudulent furlough claims were paid in error by HMRC.
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HMRC informed MPs on the Public Accounts Committee that it estimated that between five and 10 percent of furlough cash has been incorrectly paid out.
As Jim Harra, HMRC’s permanent secretary, told MPs: “We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between five and 20 percent.
“That will range from deliberate fraud through to error.”
Mr Harra confirmed that they will be expecting employers to work with them on the problem, he also advised that worried employees can report potential problems directly to HMRC.
As he concluded: “While we can’t get involved in any relationship between the employee and employer, we can certainly reclaim any grant that the employer is not entitled to, which includes grants they have not passed on in wages to their employees.”
Currently, the government is paying 70 percent of wages for furloughed workers, up to a maximum of £2,187.50.
From October, this support will drop to 60 percent, meaning employers will have to adapt their processes once again and make complex calculations around tax, pension contributions and other factors.
Other government support schemes will also end as we move into 2021.