MY CIPP
The CIPP's Advisory Service team provides answers to popular questions
Q. A company is looking to make some employees redundant. There is a dispute as to whether an employee in question would be eligible for statutory redundancy pay due to their start date. They commenced employment 1 September 2019 and are due to be made redundant 31 August 2021. Can you advise? A: Length of service for redundancy calculations are based on complete years of service. From the dates provided, these employees have been employed for a full 24 months; therefore, they are entitled to redundancy pay. For reference, HM Revenue & Customs (HMRC) provides an online calculator where details of age, start date, redundancy date and weekly salary can be entered to find out how much statutory redundancy an employee is entitled to: https://bit.ly/3oW3Me8. Q. Is a period of incapacity for work (PIW) linked to an earlier PIW if the time between them is less than eight weeks? If so, is statutory sick pay (SSP) payable from day one? A: You should link PIWs and treat them as one PIW if the gap between them is eight weeks (56 days) or less. If all three waiting days have not been used in the first PIW, use any remaining waiting days at the start of the next or series of linked PIWs. A PIW is a period of sickness lasting four days or more in a row. All days of sickness count towards the total number of days in a PIW, including: bank holidays, weekends, non-working days. If the period of sickness is less than four days in a row there is no PIW and you do not need to do anything. SSP is not payable for the first three qualifying days in a PIW.
There is no business presence in Romania. The employee has been in Romania for 107 days so far. What certification is required from HMRC in relation to their class 1 National Insurance contributions (NICs)? Is there anything from a tax perspective required for payroll purposes? A: If an employee is working temporarily in the EU then they must get a certificate from HMRC to exempt them from Romanian social security. Social security is usually paid in the country in which duties are performed. Ideally all applications should be submitted prior to the employee departing the UK. Form CA3822 must be completed. HMRC will then issue a certificate to ensure payment of UK NICs continue. HMRC provide guidance on which country's social security contributions to pay: https://bit. ly/2LGudG8. With regards to the tax position, an employer would have to refer to the relevant double taxation treaty (DTT) the UK has in place with the country. Most DTTs require an employee to be present in the overseas country for 183 days before double taxation arises. This would mean that an employee would continue paying UK tax until their overseas presence exceeds 183 days. When dealing with globally mobile employees, it is advisable to speak to a tax advisor to deal with any complexities that may arise from overseas employment. HMRC provides guidance on DTTs: https://bit.ly/3iqrQ6d. Q. A company is looking at introducing a scheme wherein employees can purchase extra holidays (not using a salary sacrifice arrangement). The deduction will be a gross deduction
HMRC provide guidance on manual SSP calculations along with the rules surrounding both SSP and PIWs: https:// bit.ly/3iowOR6. Q. W hen will statutory maternity pay (SMP) commence for an employee whose baby is born mid-week and has previously been on furlough leave and pay? Also, does the calculation of the average weekly earnings (AWE) differ where furlough pay has been applied? A: Child-related statutory leave can start on any day of the week but can only be paid in completed weeks. Where an employee works up until the birth, the leave and pay must commence on the first day after the birth of the baby. AWE is usually calculated based on all payments made in the reference period, which is the eight-week period before the qualifying week. Due to Covid-19, a temporary rule was introduced to protect employees on furlough leave where their AWE calculation is lower due to the pay received whilst on furlough. In this situation, employers would base the AWE calculation on the pay the employee would have received, had they not been on furlough. HMRC provide guidance on how to manually calculate an employee's payments for SMP: https://bit.ly/3bP5RER. How to establish the earnings employees may have received had they not been furloughed is a contractual matter, and there is no formula to assist. Whatever calculation an employer may choose to use must be justifiable should HMRC carry out an investigation. Q. An employee is currently living in Romania on a temporary basis but is working for the UK-based company and being paid through the UK payroll.
| Professional in Payroll, Pensions and Reward | March 2021 | Issue 68 10
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