How do I process payroll for employees with the COVID-19 Wage Supplement?
In order to help employers retain their staff during the COVID-19 pandemic, the Government of Malta introduced the COVID-19 Wage Supplement scheme. This supplement scheme ultimately provides an organisation with a basic wage supplement per eligible employee to address the cashflow disruption caused by this pandemic.
Important: Please check with your accountants, auditors (or Malta Enterprise) to ensure whether you qualify for any benefits through this scheme, the amount per employee that you may be entitled to, and what the implications on your payroll should be.
How does this affect payroll?
See this article from the Inland Revenue Department of Malta to understand how payroll is affected with this wage supplement.
Additional information on this supplement can also be found on the Malta Enterprise website here.
How do I calculate the COVID-19 Wage Supplement for an employee who is paid weekly/fortnightly or Four-weekly?
The formula to calculate this is shown below:
Entitlement per employee per month
= The amount that an employee is entitled to, weekly.
For Fortnightly employees: Multiply the weekly amount that an eligible employee is entitled to by 2 for the supplement amount to insert.
For Four-weekly employees: Multiply the weekly amount that an eligible employee is entitled to by 4 for the supplement amount to insert.
Note: This calculation was confirmed by the Commissioner for Revenue and can be skipped in the event that you are processing payroll for employees who are paid monthly.
Example Calculations of Supplement
To show an examples of this calculation, we have created the below:
Supplement per employee per month for the organsation: €800
Note: The supplement per employee, per month in this calculation does not apply to all organisations benefiting from this scheme. Please check with your accountants, auditors (or Malta Enterprise) to ensure the correct amount per employee that your organisation is entitled to.
Weekly paid employees: With this supplement, the calculation to find out how much an employee is entitled to per week is as follows.
€800 (Monthly Employee Supplement)
× 12 (Months in a year)
÷ 52 (Weeks in a year)
= €184.62 (Supplement per employee per week)
Note: This calculation is all that is required for employees paid on a weekly basis.
Fortnightly paid employees: To find out how much an employee is entitled to for a fortnightly pay run, the calculation is shown below.
€184.62 (Supplement per employee per week)
× 2 (Weeks in a fortnightly pay run)
= €369.24 (Supplement for an employee in a fortnightly pay run)
Four-weekly paid employees: To find out how much an employee is entitled to for a four-weekly pay run, the calculation is shown below.
€184.62 (Monthly Employee Supplement)
× 4 (Weeks in a four-weekly pay run)
= €738.48 (Supplement for an employee in a four-weekly pay run)
How do I apply the COVID-19 Wage Supplement Scheme into a pay run on WorkForce Payroll?
The wage supplement adjustments can be applied to a pay run in WorkForce Payroll by using one of 3 methods:
- – Method 1: Manually on a per run basis, and for every employee
- – Method 2: Through updating employee data, using fixed payroll data (Additions & Deductions and once per employee until expiry)
- – Method 3: Importing an Excel Sheet with employees and the relative adjustments (both additions as well as deductions) prior to every run
Note for Employees that pay NI: The Wage Supplement entered in either of the methods should reflect the Gross amount (NOT with the 10% deducted). For example: if the employee is entitled to an €800 Wage Supplement, the amount of €720 is the amount received by the employer. In such cases, the full €800 Wage Supplement should be entered. The 10% is then deducted from the total Social Security Contributions in the monthly FS5.
Note for Employees that do not pay NI: For employees that do not pay NI, the Wage Supplement entered should reflect the Net amount (the amount that is actually received by the employer). In such cases, the 10% of the Wage Supplement is not deducted from the Social Security Contributions. In the monthly FS5.
Method 1: Manually on a per run basis, and for every employee
Note: This method is required per employee, per pay run, and is recommended for smaller companies.
A new field has been added into the Pre-Tax Additions tabs in the payroll calculations section as shown below.
The payroll administrator needs to start by adding the amount of the COVID Wage Supplement that the employee is entitled to for the next pay run into the COVID Wage Supplement field available in the Pre-Tax Additions tab.
Next, they would need to include the full supplement amount which each employee is entitled to, or all basic pay (in the case where the supplement is greater than the basic basic wage) into the Pre-Tax Deductions field, within the Pre-Tax Deductions tab.
Method 2: Using fixed payroll data (Additions & Deductions)
Note: This method requires for updates to be made to every employee’s data only once, and will not require further amendments until the end of the COVID-19 Wage Supplement scheme (where it would need to be removed.
This is the recommended method for organisations processing a large number of employees, but can also be used for smaller organisations as well.
The HR or payroll administrator would need to edit each employee benefiting from this wage supplement.
Note: WorkForce administrators can right click on the ‘View/Edit’ button on the Employee List to open each employee’s details in a new tab to speed up this process.
They would need to locate the Fixed Payroll Data tab under each employee and add the amount of the COVID-19 Wage Supplement that the employee is entitled to for all future pay runs into the COVID-19 Wage Supplement Pre-Tax Addition field as an amount (not as a Rate). Once the correct field, value and type have been inserted, click the + button to the right to add in this fixed pre-tax addition in the Fixed Payroll Data.
Next, they would need to locate the Pre-Tax Deductions field, within the Pre-Tax Deductions tab, to add in the value of full supplement amount or the basic pay (if it is less than the supplement). Once the correct field, value and type have been inserted, click the + button to the right to add in this fixed pre-tax deduction in the Fixed Payroll Data.
Please see the screenshot below, to see how the Fixed Payroll Data section should appear, once this update has been made.
Method 3: Importing an Excel Sheet with employees and their relative adjustments for every pay run
WorkForce Payroll allows for payroll administrators to upload adjustments into each pay run using an Excel sheet.
To learn how to do this, please see this article.
This method requires an upload per pay run from a separately maintained spreadsheet, listing the employee number, The addition/deduction type, the addition/deduction amount for the run.
For this method to work correctly, the payroll administrator would need to:
- – Locate the field code provided for the COVID Wage Supplement, from the Import Pay run Data page, by clicking on the ‘Edit Field Values’ link in the Field code section
- – Using the field code in the Excel sheet for each employee benefiting from this scheme, whilst also including the amount of the COVID Wage Supplement that the employee is entitled to for that pay run
- – Locate the field code for the Pre-Tax Deductions field, from the Import Pay run Data page, by clicking on the ‘Edit Field Values’ link in the Field code section
- – Using the Pre-Tax Deductions field code in the Excel sheet for each employee benefiting from this scheme, whilst also including the amount of full supplement amount or the basic pay (in the case where the supplement is greater than the basic basic wage) .
How do these updates appear on the payslip?
An example of a payslip has been included below. Please note the COVID-19 Wage Supplement field, and the Pre-Tax Deductions field beneath it:
How do these updates affect the FS5?
By adding the COVID Wage Supplement into pay runs and deducting the same amount as a pre-tax deduction for each employee, the software will automatically be deducting the N.I. from the run as normal. This will leave the employee take home pay unaltered and build the same NI contribution for FS5 purposes.
The FS5 will deduct 10% of the total wage supplement received from payment submission for the period as this is equivalent to 10% pre-deduction by the government prior to granting such wage supplement to the employer.
The FS5 will show the total wage supplement received by the company as well as the equivalent 10%, which are deducted from the Social Security Contributions (D5).
Below is an example of an FS5 showing the deductions section with information related to the COVID-19 Wage Supplement:
If you have queries on how to use WorkForce Payroll for the COVID-19 Wage Supplement, please contact DataByte Support.
To search for more information on how to use WorkForce, please visit: https://workforce.com.mt/documentation/