Processing the Covid-19 Wage Supplements
Most organisations who applied for the Covid-19 Wage Supplements have now started to receive confirmations as well as actual payments. Now that the interesting part is over, organisations need to ensure that they are accurately recording the relevant entries for all intents and purposes associated with fiscal and financial reporting guidelines.
Firstbridge’s Payroll team have put the following guidelines together to support employers who have received Covid-19 Wage supplements in processing their payrolls.
Payroll Process and Relevant Payslips
Background : Covid-19 Supplements need to be recorded under a separate identifiable line item within employee payslips.
“The wage supplement paid to employers will not be treated as income or grant to the employer for Income Tax purposes, hence not taxable nor tax deductible “
Important Factor : Wage Supplements are being received NET of a reduction for NI and therefore that reduction is to be used as a “prepayment” and figures are to be recorded Gross within employee payslips.
Computing Payroll : Step by Step:
1. Ensure that you are clear on the receipts at hand, some may receive supplements under Annex A and some under Annex B, varying between those that work on full time hours or otherwise;
2. Differentiate and if necessary compute the balances received on an individual employee basis clearly identifying between gross and net amounts, keep note of those figures (again on an individual basis);
3. Calculate the amount attributable to different months separately;
4. Compute your monthly payroll inserting the specific “Gross” values within each employee payslip by allocating an equivalent value of Basic Monthly salary to a new entry coded specifically as Covid-19 wage supplement (or similar); and
5. Close off Payroll, there should be no difference in NI and Tax workings as the Covid-19 Wage supplements are taxable in the same manner as standard basic salaries.
FSS Reporting and your Company FS5
FSS Reporting: Step by Step Guide:
1. Once the above is done, employers need to update their FS5 workings;
2. When reporting in your organisation’s FS5, employers would need to reduce the 10% prepayment referred to above from the relevant SSC payments due and equally from the Total Balance due to IRD; and
3. FS5 shall then show an updated value due to IRD which takes into consideration the 10% already paid at source.