Furloughed Employees – calculating wages

Update 29 May - modified measures have been announced, commencing 1 July - click here

Furloughed employees are those currently laid off due to the Coronavirus emergency. Based on the guidance from HMRC, pay should be calculated on the following basis:

For full or part time employees on a salary – 80% of the employee’s salary, as of 19 March 2020, before tax.
Please note that HMRC has recently extended the qualifying date from 28 February to 19 March. Their updated advice also states:
If, based on previous guidance, you have calculated your claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) you can choose to still use this calculation for your first claim.

Employees whose pay varies
If the employee has been employed for 12 months or more, you can claim the highest of either the:
• same month’s earning from the previous year
• average monthly earnings for the 2019-2020 tax year

If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work until the date they are furloughed. If they have been employed for less than a month, work out a pro rata for their earnings so far, and claim for 80%.

Employer National Insurance and Pension Contributions
Employer will still have to pay employer National Insurance and pension contributions on behalf of your furloughed employees and can also claim for these.

Topping Up Salaries & Enhanced Pensions
Employer can choose to top up employee’s salary but will only be able to claim 80% of their salary to a maximum of £2,500. Please note that employees must not work or provide any services for the business while furloughed even if they receive a top-up salary. You will not be able to claim for additional National Insurance or pension contributions you make because you chose to top up your employee’s salary. You cannot claim for any pension contributionsyou make that are above the mandatory employer contribution.

Past Overtime, Fees, Commission, Bonuses and Non-Cash Payments
Include overtime and compulsory commission in the calculation of wages. Discretionary bonuses (including tips), commission payments and non-cash payments should be excluded
.

Apprenticeship Levy and Student Loans
Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. These will not be covered by the grant.

Claims Through This Scheme
The online service for claims was launched on 20 April and we will provide further guidance as available. You will need to claim for:
– 80% of your employees’ wages up to a maximum of £2,500.
– minimum NIC and automatic enrolment employer pensioncontributions on the subsidised wage

Claims should be started from the date that the employee finished work and starts furlough.

HMRC has released the following supplementary guidance  https://www.gov.uk/guidance/work-out-80-of-your-em...

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