Release Notes WFM: Furlough Average Daily Rate

What’s Changing?
An additional value for a ‘Furlough Average Daily Rate’ is being added to the Furlough Batch Update screen and the Furlough Status Export, to be used as an alternative to the current Average Pay Calculation.

Proposed Release Date: 30th April 2020

Reason for the Change
Following changes to the average pay calculation announced by HMRC on Friday 17th April, the additional field and calculation have been created to provide customers with the amounts required to calculate employees’ furlough payments.

Customers Affected
All HR & Payroll customers.

For additional Covid19-related information, please go to Fourth Products and Covid-19.

Information
Based on initial guidance provided by HMRC, the Average Pay Calculation was released, and a ‘period’ amount was added to the Furlough Status screen and export.  This calculation was based on the basic gross pay for employees for the 2019/2020 tax year using 29th February as the earnings cut-off.

More information about the calculation can be found here - WFM - Average Pay Calculation.

On Friday 17th April, HMRC released an update to their guidance which changed the way in which they expected average pay to be calculated. The details of the calculations were posted on the Fourth Customer Community and can be found here - WFM - Updated Furlough Guidance from 20th April.

The new guidance refers to a calculation of a daily rate, and this daily rate is to be multiplied by the number of days in the furlough period as part of the furlough pay calculation.

The new Daily Rate field and calculation have been created to provide customers with the amounts required to calculate employee’s furlough payments, in line with the latest HMRC guidance.

Within the current HMRC guidance, they have noted that:

HMRC will not decline or seek repayment of any grant based solely on the particular choice of pay calculation, as long as a reasonable choice of approach is made

Further details can be found on the gov.uk website - https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme


Release Notes

Variable Pay Calculation using Daily Rate

In line with HMRC’s new guidelines, the calculation for employees with variable pay is as follows:

How to Calculate Employees Paid by Rota
 

• Find the number of calendar 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 (calendar days)
• Multiply this by 80% = furlough payment

Salary Pay Calculation using Daily Rate

In line with HMRC’s new guidelines, the calculation for employees with salary pay is as follows:

Salaried employees furloughed for full period
 

• Find the basic pay from the last pay slip before 19th March 2020
• Multiply by 80% = furlough payment

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 to get a daily rate
• Multiply the daily rate by the number of furlough days in the pay period
• Multiply by 80% = furlough payment

Salaried employees with part earnings in period before 19th March

• Find the basic pay from 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 to get a daily rate
• Multiply the daily rate by the number of furlough days in the current period
• Multiply by 80% = furlough payment

Where to find the Average Daily Rate 
 

• Go to HR module > Employees > Employee list > Batch Update Covid19 Furlough Status    

Fig.1 - Average Daily Rate in the Batch Update page

The new Average Daily Rate will appear in the Employee list and on the Furlough Status Export (under column M) – see Fig.2.
 

• To view the Average Daily Rate, go to HR module > Employees > Employee list > Batch Update Covid19 Furlough Status > Furlough Status Export > Download

Fig.2 - Average Daily Rate in the Furlough Status Export

Additional info on other calculations displayed within the furlough screen and furlough status export.

Contract Hours/Average Hours

When the Coronavirus Job Retention Scheme was announced, there was little guidance published detailing how to calculate the 80% of employee pay.

To provide information that could help to calculate average pay, employees’ contracted hours or average hours were generated within the furlough status screen.

Average Pay Calculation vs Average Daily rate

When HMRC changed the date that employees had to be employed from (28th February to 19th March), their average calculation also changed.

The Average Pay Calculation (variable hours)

Takes the (basic) gross pay earned from 6th April 2019 (or start date) to 29th February 2020 and uses a formula to calculate an annual average rate which is then divided according to the employee’s pay period.

The Average Daily Rate Calculation (variable hours)

Takes the (basic) gross pay earned from 6th April 2019 (or start date) to furlough start date (or 5th April) and divides it by the number of calendar days to calculate a daily rate.

The Average Pay Calculation (salaried)

Takes the annual salary as of 29th February 2020 and divides it by the pay period to give a period average daily rate.

The Average Daily Rate Calculation (Salaried)

Takes the (basic) gross pay paid in the pay day before 19th March and divides it by the number of calendar days in the period (or worked, if the employee started part way through the period) to give a daily rate.