Please note: As of 1st July 2020, there is updated guidance that can be found here - Flexible Furlough Scheme - July 2020 Guidance. The information below may be useful for auditing purposes.
Furlough Payment Calculations
How to Calculate Employees Paid by Rota
- Find the number of days between 6th April 2019 (or employee start date) and Furlough start date (or 5th April 2020)
- Find the basic gross pay between 6th April 2019 (or employee start date) and Furlough start date (or 5th April 2020)
- Divide the basic gross by the number of days to get a daily rate
- Multiply the daily rate by the number of furlough days in the period
- Multiply this by 80%
How to Calculate Salaried Employees Furloughed for Full Period
- Find the basic pay from the last pay slip dated before 19th March 2020
- Multiply this by 80%
How to Calculate Salaried Employees Furloughed for Part Period
- Find the basic pay from the last pay slip before 19th March 2020
- Divide by total number of days in the period
- Multiply by the number of furlough days in the pay period
- Multiply this by 80%
How to Calculate Salaried Employees with Part Earnings in Period Before 19th March
- Find the basic pay from the last pay slip before 19th March 2020
- Divide by the number of available days in their last period (including non-working days)
- Multiply by the number of days in the complete period
- Divide by the number of days in the current period
- Multiply by the number of furlough days in the current period
- Multiply this by 80%
A calculator is available on the HMRC website to help calculate employee’s Furlough pay. It is important to remember the maximum amount that can be claimed per each employee, is £2,500.
https://www.tax.service.gov.uk/job-retention-scheme-calculator
NIC Calculations
For Employee's Furloughed for the Whole Pay Period
- Use the grant amount
- Minus the relevant secondary NIC threshold
- Multiply by 13.8%
For Employee's Furloughed for Part Period or Pay Includes Top-Up
- Total pay minus relevant secondary NIC threshold
- Multiply by 13.8% = Total NIC
- Divide Total NIC by the number of days in the period
- Multiply by the number of Furlough days in the period
- Multiply the NIC day rate by the proportion of pay received (100% if only 80% pay is paid to employee)
- Multiply NIC day rate by (Furlough amount divided by total amount)
Pension Calculations
For Employee's Furloughed for the Whole Pay Period
- Use the Grant claim amount
- Deduct the relevant lower earnings limit
- Multiply by 3%
For Employee's Furloughed for Part Period
- Use the grant claim amount
- Take LEL and divide it by the number of days in the period
- Multiply the LEL by the number of Furlough days
- Deduct the part LEL from the grant claim amount
- Multiply by 3%
Employment Allowance
Commencing April 6th 2020, the Employment Allowance is only available to Companies with a secondary NIC liability of under £100,000.
Employers who are claiming the Employment Allowance cannot claim any NIC on the grant application, but should instead submit the Employment Allowance reclaim on the EPS as usual.
Once the Employment Allowance is used up and there is still NIC to pay on Furlough amounts:
- Compare the total Employer NIC due for the period, against the NIC associated with Furlough payments
- Use the Grant application to claim the lower amount
Holiday Pay
Furloughed employees continue to accrue holiday as per their employment contract. An agreement can be made between employees and the employer to vary holiday entitlement as part of the agreement. It is important to remember all workers are entitled to 5.6 weeks statutory paid annual leave each year, so the agreement cannot amount to less than the entitled allowance.
Employees are entitled to take annual leave whilst on Furlough, and the amount paid should be 100% of the holiday amount due. Therefore employers are obliged to pay the additional 20% on holiday payment amounts, which cannot be reclaimed via the Coronavirus Job Retention Scheme grant.
If an employee usually works on bank holidays, then the employer can agree to include this in the grant payment. If the employee typically takes bank holidays as leave, then the employer would either have to top up their usual holiday pay, or give a day of holiday in lieu to the employee.
What to Use When Calculating Wages
The amount that should be used when calculating 80% of your employee’s wages includes:
- Regular basic wages paid to employees
- Contractual overtime
- Contractual fees
- Contractual commission payments
- Piece rate payments
The following should not be included in the calculation
- Payments made at the discretion of the employer or a client- where the employer or client was under no obligation to pay, including
- Tips
- Discretionary bonuses
- Discretionary commission payments
- Non-cash payments
- Non-monetary benefits, such as benefits in kind (company car) and salary sacrifice schemes (including pension contributions) that would reduce an employee’s taxable pay.
In circumstances where an employer provides benefits to Furloughed employees including a salary sacrifice scheme, these benefits should be in addition to the Furlough pay amount.
Disclaimer
The materials available at this website are for general informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any issue or problem particular to your situation. Use of and access to this site or any of the e-mail links contained within the site do not create an attorney-client relationship between Fourth and you or any other user or browser. The opinions expressed at or through this site are the opinions of the individual presenter based on the information provided on governmental websites and should not be acted upon without first seeking specific guidance from your attorney. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. All liability with respect to actions taken or not taken based on the contents of this site are hereby expressly disclaimed.
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