Should the financial loss allowance paid for jury service be topped up to gross pay or to net pay?

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The current maximum daily rates of the financial loss allowances available to jurors (from July 2007) are as follows:

1. paying employees their normal pay during jury service
2. paying nothing to employees during jury service
3. topping up the juror allowances

1. Paying employees their normal pay during jury service

Some employers continue to pay employees in full during jury service. The certificate describes this approach as "a valuable contribution to society by reducing the expenditure from the public purse". The Ministry of Justice says that an increasing number of employers are continuing to pay their employees while on jury service. If the employee is to be paid as normal during jury service, the loss of earning certificate should not be completed.

2. Paying nothing to employees during jury service

However, there is no statutory requirement for employers to pay an employee anything during a period of jury service. Some employers may simply decide that, because the employee is not available for work, no wages will be paid. They may argue that, if the employee is out-of-pocket because the juror allowance is less than the employee's normal net pay, that is the employee's "contribution to society".

3. Topping up the juror allowances

Other employers prefer to top up the juror allowance so that the employee does not lose out financially.

If the employer does wish to top up the allowance,

• the additional net pay amount paid by the employer must be no more than is necessary to maintain the employee's net earnings
  
  
• the net loss of earnings entered on the certificate is the actual loss that the employee is going to suffer, i.e. the daily net loss of earnings, minus the amount of the employer's top-up. For example, if the employee's daily net loss of earnings is £80 and the employer is going to top-up the court's payment of £59.96 to £80, the amount entered on the certificate is £59.96, not £80.

The following examples illustrate the different situations that can arise. The examples all assume that the employee's tax code is 522L and NICs table letter is A.

Example 1: loss of earnings is less than the maximum allowance for the first 10 days

An employee is on jury service for 15 days. The employee's weekly gross pay for a five-day working week is £383.22, for which the net pay would be £295. The employer enters £59 on the certificate as the daily net loss of earnings.

For the first 10 days of jury service, the maximum daily financial loss allowance is £59.96. From the 11th day, the maximum allowance is £119.93. The employee's net daily loss of earnings is less than the maximum allowance throughout the period of jury service. The employee's loss of earnings is therefore fully covered by the court's payment of £59 per day.

Example 2: loss of earnings is more than the maximum allowance for the first 10 days but less than the maximum allowance from the 11th day

Another employee is on jury service for 15 days. The employee's weekly gross pay for a five-day working week is £693.02, for which the net pay would be £505, or £101 per day. The design of the current Certificate of Loss of Earning or Benefit does not correctly accommodate this situation. As a result, the employer completes two certificates at the beginning of jury service, one to reflect the loss of earnings in the first 10 days, the other to reflect the loss from the 11th day. The certificate can be photocopied or extra copies obtained from the Jury Central Summoning Bureau (08458 038003) or the court via the employee. Both certificates are given to the employee to present to the court at the appropriate time.

The first certificate should show the net loss of earnings as £59.96, the maximum that the court will pay each day for the first 10 days. It would be incorrect to enter £101 as the net loss because the employer is going to top up the court's payment to £101 per day.

The second certificate should show the net loss of earnings as £101 per day and that is the amount that the court will pay. The employee's loss of earnings is therefore fully covered by the court's payment of £101 per day. It would be incorrect to enter £59.96 as the net loss because that would limit the court's payment to that amount.

The Ministry of Justice acknowledges that the current loss of earning certificate does not allow an employer to state that the employee, after the first 10 days of jury service, will actually be losing a higher amount and will be claiming that higher amount. The design of the form is under review.

Example 3: loss of earnings is more than the maximum allowance from the 11th day

An employee is on jury service for 15 days. The employee's monthly gross pay for a five-day working week is £3898.35, for which the daily net pay would be £128.

The employer completes two certificates at the beginning of jury service, one to reflect the loss of earnings in the first 10 days, the other to reflect the loss from the 11th day.

The first certificate should show the net loss of earnings as £59.96 per day, the maximum that the court will pay each day for the first 10 days. It would be incorrect to enter £128 as the net loss because the employer is going to top up the court's payment to £128 per day.

The second certificate should show the net loss of earnings as £119.93 per day, the maximum that the court will pay each day from the 11th day. It would be incorrect to enter £128 as the net loss because the employer is going to top up the court's payment to £128 per day.

In the rare event that an employee's jury service lasts for more than 200 days, the employer should complete another certificate. The employer should enter

• the full amount of the employee's net loss of earnings, where that is more than the maximum allowance from the 11th day but less than the maximum allowance from the 201st day
  
  
• £210.54, where the employee's net loss of earnings is more than the maximum allowance from the 201st day.

Calculating the amount of the top-up

In order to top up the payment that an employee receives from the court, the employee's gross pay is increased by an amount that, after the deduction of tax and NICs, will give the necessary additional net pay. Most payroll systems have this "net to gross" calculation facility.

However, the practice of some employers is simply to reduce the employee's gross pay by the amount of the allowance paid by the court. As a result, the employee has more take-home pay than normal. This procedure is wrong and fraudulent. Employers may be prosecuted if such a fraud came to the knowledge of the court. The court's payment is intended to maintain an employee's net earnings and it is the net loss of earnings that the employer has certified. By making a gross payment that results in the employee's net pay being higher than that declared is an abuse of the juror loss of earnings arrangement.

The correct and incorrect methods of calculating the top-up is illustrated in the following Table, based on the figures used in Example 2 above. The figures in column 2 show that, if the court's payment were deducted from gross pay, the employee would take home over £96 more than normal. The correct method, as shown in column 3, ensures that the employee's take-home pay is the same as it would otherwise be.

Employers should also note that the incorrect method shown in column 2 is also unnecessarily expensive for the employer. The employer has paid £144.22 more in gross pay and £18.46 more in secondary NICs than was necessary.

The UK Payroll News is sponsored by HRD & Payroll Solutions

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