WFM UK: Flexible Furlough: Usual Hours

Usual Hours

The Introduction of Flexible Furlough has brought with it the added complication of working out Usual Hours worked for employees. 

For salaried employees, or those with contracted hours, the calculation is quite simple.

If employees are contracted for 37 hours per week, but are paid monthly, then the usual hours worked for the period needs to be worked out as follows:

Weekly Hours ÷ 7 x days in period
37 ÷ 7 x 31 = 163.85 (round to 164)

With variable hours employees, things start to get complicated. For employees who work a varied number of hours each week, the usual hours should be 

• The average hours for the whole of the 2019/2020 tax year
  or
• The hours worked on the same days the previous year - whichever is higher 

Usual hours should include the holiday hours paid to an employee.

On 10^th July 2020, HMRC kindly updated their guidance around the calculation of usual hours which eases the pressure when deciding which way to calculation usual hours.  They say: 

“HMRC will not decline or seek repayment of any grant based solely on the particular choice between fixed or variable approach to calculating usual hours, as long as a reasonable choice is made”

More information can be found here - https://www.gov.uk/guidance/steps-to-take-before-calculating-your-claim-using-the-coronavirus-job-retention-scheme

Rules for Calculating Usual Hours Worked

The rules for calculating the usual hours worked for the same period, previous year, are outlined below. 

Same date range for each payroll 

Example 

Pay frequency – Monthly
Pay date – 31^st July 2020
Pay range – 1^st July – 31^st July 2020
Pay date last year – 31^st July 2019
Pay range last year – 1^st July – 31^st July 2019

To calculate usual hours for the same period: 

• Use the hours worked for 1^st July – 31^st July 19, divide by number of calendar days in the pay period, and multiply by the number of days in the the CJRS2 claim period 

The number of calendar days in the period needs to be the amount of calendar days the employee was available to work. If their start date fell within the period, their calculation will be different to one of an employee who started years before. Any parental leave or SSP absent days also need to be considered in the calculation.

Variable pay range per pay period 

This will be the case for weekly, fortnightly, four-weekly and some monthly pay periods, especially if the payments are paid to employees in arrears.

Example 

Pay frequency – Four Weekly
Pay period - 5
Pay date – 28^th July 2020
Pay range – 22^nd June – 19^th July 2020
July claim period – 1^st – 19^th July 

The previous year, the same pay period details were:

Pay date – 30^th July 2019
Pay range – 24^th June – 21^st July

The 2020 July claim period falls within this payroll from 2019, therefore this period’s hours should be used. 

• Identify hours worked for 24^th June 2019 – 21^st July 2019, divide by number of calendar days in the period, and multiply by the number of days in the 2020 July claim period

The number of calendar days in the period needs to be the amount of calendar days the employee was available to work. If their start date fell within the period, their calculation will be different to one of an employee who started years before. Any parental leave or SSP absent days also need to be considered in the calculation. 

Variable pay range, where claim period falls within two previous pay periods

It may be the case that the claim period will fall within two different pay periods from the previous year.  In this case, the calculation to find the hours per claim period needs to be completed for both pay periods. 

Example 

Pay frequency – Four Weekly
Pay period – 6
Pay date – 25^th August 2020
Pay range – 20^th July – 16^th August
July claim period – 20^th – 31^st July 

The previous year, the same period details were: 

Pay date – 30^th July 2019
Pay range – 24^th June – 21^st July, which contains 20^th – 21^st July (2 days)
and
Pay date - 27^th August 2019
Pay range – 22^nd July – 18^th August, which contains 22^nd – 31^st July (10 days)

The calculation will need to be done on both identified pay periods.

• Identify hours worked for 24^th June 2019 – 21^st July 2019, divide by number of calendar days in the period, and multiply by the number of days in the 2020 July claim period 

• Identify hours worked for 22^nd July 2019 – 18^th August 2019, divide by number of calendar days in the period, and multiply by the number of days in the 2020 July claim period

The number of calendar days in the period needs to be the amount of calendar days the employee was available to work. If their start date fell within the period, their calculation will be different to one of an employee who started years before. Any parental leave or SSP absent days also need to be considered in the calculation. 

Useful Reports to Help Calculate Usual Hours

Employee Hours Worked Export 

A new export has been created and added to the Payroll module which generates the hours that have been put through the rota for a specific period of time. The export also has a column to show usual hours including holiday hours, so it can be used when calculating usual hours. 

More information can be found in this article - WFM Release Note - Employee Hours Worked Export 

• For employees who have been through a rota, the hours are extracted from the rota for the specified days 
• For employees who are not in the rota, the contracted hours are used to calculate a daily rate. The same information is used to calculate the holiday hours

There are several other reports that can be used to calculate the usual days for employees.

Payroll Payments by Pay Basis 

Within the Payroll module is an export called “Payroll Payments by Pay Basis”. This can be used to report on all payments that were made to employees in a particular pay period. 

• To find the export, go to Payroll module > Reports > Exports > Payroll Payments by Pay Basis 

Employee Hours Worked (Rota module) 

Within the Rota module, there is an export called “Employee Hours Worked”. This can be used in a similar way to the export in Payroll - to extract the hours within the rota for the specified days. 

• To find this export, go to Rotas module > Reports > Exports > Employee Hours Worked

Holiday Status Report 

Within the HR module, there is an export called “Holiday Status Report”. It can be used to report on the number of holidays or the holiday dates that an employee has taken for a specified period of time. 

• To find the report, go to HR module > Reports > View Reports > Holiday Status Report 

Customers with a large number of employees may find the report takes a long time to run or require the report for multiple locations. The report can be made available as an export, which can be enabled if customers reach out to their Fourth Contact. 

• Once enabled, the export can be found in HR module > Reports > Exports > Holiday Status Export 

Absence Analysis

Within the HR module, there is a report called “Absence Analysis”. It can be used to run details of employees’ absences for a specified period of time, or a selected absence type. 

• To find the report, go to HR module > Reports > Absence Analysis

Parental Leave Custom Report 

Within the HR Module, a custom report can be created that lists all parental leave records for employees. It can be used to show which employees were on parental leave within a period of time. 

• To create a custom report, go to HR module > Reports > Customised Reports > Create Template
• For the Report Type, select Employee Details Report
• Select Save 

• Select the required fields to create the customised report. Parental Leave details will appear under the Payroll option for Report Group

Fig.1 – Payroll Report Group for a custom report

•  Once all required fields are selected, select Run Report