Today, NFDA wrote to Kemi Badenoch MP, Exchequer Secretary to the Treasury, to seek clarifications on the Coronavirus Job Retention Scheme, following the release of further details which have created confusion among employers.
“We urge the Government to clarify its guidance on the Job Retention Scheme as the latest information is creating uncertainty in the sector”, said Sue Robinson, Director of the National Franchised Dealers Association (NFDA), which represents franchised car and commercial vehicle retailers in the UK.
The uncertainty arises in whether commission and bonuses can be included in the calculation of average earnings, of which 80 per cent will be paid to furloughed employees. A paragraph in the Government guidance lists the elements of remuneration that cannot be included in the 80% calculation.
Full time and part time employees
For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.
NFDA wrote to HM Treasury to seek confirmation that salary enhancements of the kind that vehicle salespeople ordinarily receive and on which they pay tax (regular, sales-linked monthly bonuses and similar) may, in fact, be included in the calculation of the 80% because these form part of the employee’s normal earnings or “actual salary before tax”.
NFDA highlighted to the Government this should be the correct interpretation because the guidance makes specific provision for “Employees whose pay varies” and goes on to state:
Employees whose pay varies
If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:
- the same month’s earnings from the previous year
- average monthly earnings from the 2019-20 tax year [Emphasis added]
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
This indicates that employers should calculate average employee earnings by including their basic salary and their salary enhancements (including regular bonuses/commissions).
Additionally, the use of the term “earnings” rather than “salary” in the guidance supports the interpretation that regular bonuses (which form part of earnings) should be included in the calculation of average earnings.
Sue Robinson added, “Monthly bonuses and commissions form a normal part of employees’ monthly ‘earnings’ in the retail automotive industry and salespeople in franchised dealerships rely heavily on the commissions they regularly receive.
“It is vital that the Government clarifies this issue as soon as possible to provide significant relief to workers operating in this key sector”.
Note: The Government’s Job Retention Scheme was launched to assist all UK employers to access support to continue paying part of their employees’ salary for those employees that would otherwise be laid off during the Coronavirus outbreak. Under the scheme, HMRC will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 per month per employee.
About the RMI
The Retail Motor Industry represents the interests of operators in England, Wales, Northern Ireland and the Isle of Man providing sales and services to motorists and businesses. The RMI has a formal association with the independent Scottish Motor Trade Association which represents the retail motor industry in Scotland.