Budget 2020: Sick pay refunds and other changes help employers and employees but the government must refund businesses quickly

Colin Ben-Nathan, Chair of the CIOT’s Employment Taxes Committee, commented:

“We welcome the measures to support people who are unable to work because of COVID-19, and the announcement that small and medium-sized employers will be able to reclaim SSP paid to employees who are unable to work because of COVID-19.

“However, some small businesses and employers will undoubtedly have cash flow issues and find it difficult to pay SSP during this time. We assume that the government will build on existing systems whereby employers can usually reclaim 92% of employees’ Statutory Maternity (SMP), Paternity, Adoption and Shared Parental Pay (103% for small employers) through the PAYE tax real-time reporting system and we would urge the government to establish the systems needed to refund SSP to eligible employers in a matter of weeks not months.

“The existing SMP process allows businesses to apply online to be paid in advance where the business cannot afford to pay eligible employees and the new process for SSP should also allow businesses in financial difficulties to obtain similar advance funding to pay eligible SSP.”

Budget 2020 also included some welcome increases for all employers and employees, including:

• An increase in the maximum claimable Employment Allowance from £3,000 to £4,000 from April 2020. The Employment Allowance allows qualifying businesses, charities and community amateur sports clubs to offset their liability to employer Class 1 National Insurance Contributions (NIC) up to the above figure.
• An increase in the (NIC threshold at which Class 1 NICs start to be paid by employees. From 6 April 2020 the threshold is increased from £8,632 to £9,500.
• An increase in the maximum flat rate income tax deduction available to qualifying homeworking employees to claim, or for employers to reimburse tax-free to such employees, to cover additional household expenses from £4 per week to £6 per week.

Colin Ben-Nathan added:

“The increase in the homeworking expenses flat rate deduction may seem modest but many employees value the flexibility of working from home and this increase also underpins support for flexible working. In the present circumstances, where increasing numbers of people are being encouraged to work from home, it can also be seen as part of the Government’s overall response to COVID-19.”

Notes for editors

1. Support for those affected by COVID-19 - https://www.gov.uk/government/publications/support-for-those-affected-by-covid-19.

2. The eligibility criteria for the SSP refund scheme are:

• this refund will be limited to two weeks per employee
• employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020
• employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
• employers should maintain records of staff absences, but should not require employees to provide a GP fit note
• the eligible period for the scheme will commence from the day on which the regulations extending SSP to self-isolators come into force

3. Employment Allowance increases - https://www.gov.uk/government/publications/employment-allowance-increases-for-national-insurance-from-april-2020.

4. Budget 2020: overview of tax legislation and rates (OOLAR) at paragraph 2.11 (homeworking allowance increase) -  https://www.gov.uk/government/publications/budget-2020-overview-of-tax-legislation-and-rates-ootlar.