Calculations of Furlough Payments don't match government advice

blue1977

Hi 
My employer has said that the calculation for the Furlough payment I will receive will be 80% of the average wage employees earned between 1 December 2019 up to 1 March 2019. 
The government furlough website that the pay should be the higher of:

• the same month’s earning from the previous year
• average monthly earnings from the 2019-20 tax year

I would receive more if my furlough wage was decided using the government's measures. Is my employer allowed to do this?

Jeremy535897

My reading of the guidance is that an employer cannot claim back more from the scheme than it pays you. It can pay you more, not less. The scheme is not there to make them a profit. But if they reduce your pay, which needs your agreement, to a smaller amount than you think they could claim, point this out to them and, if you feel confident you won't just be made redundant, don't sign the variation of your contract that they will need you to sign until they get the calculation right.

"Work out what you can claim

Employers need to make a claim for wage costs through this scheme.

You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.

At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.

We will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.

Full time and part time employees

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.

Employees whose pay varies

If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

• the same month’s earning from the previous year
• average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim."

The full guidance is at https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

blue1977

OK, I understand, I guess I will never know how much the employer will be claiming back. 

I was on statutory sick pay for two of the months that my employer has decided is the time that they will use to work out our wage. It will have a big impact on my wage packet compared to the rest of the year. 

Hermann

The employers refund will be paid based on the PAYE data so I doubt there is much opportunity for claiming more than is paid. If they do it will show on your copy of the PAYE paperwork.

Nikster73

Im having an issue with our accountant.  In Jan 20 I was paid a lower wage than my normal monthly salary, as I was attending hospital appointments that month.  Then in February, I was on SSP due to having surgery.  I was also on SSP for March's salary.  My sick line was up until 13th April.  If it were normal circumstances, I would now be working full time receiving my normal monthly salary.  The accountant has advised me that I will be furloughed on the amount I was paid in January.  For example:-
January salary - say £500
Feb salary - £441 ssp
March salary £441ssp
April salary would have been say £1000 but accountant is telling me my furloughed amount will be based on the January £500 amount.  Is this correct? 

Jeremy535897

I take it you are a fixed rate employee, otherwise your reference salary (what your employer's CJRS claim for you is based on) would be arrived at using a different calculation. A fixed rate employee's reference salary is "the amount payable to the employee in the latest salary period ending on or before 19 March 2020 (but disregarding anything which is not regular salary or wages...)"

I assume that your pay in January was reduced by unpaid leave, and your pay in February and March was SSP. Your reference salary in normal circumstances would be based on your February salary, but you received only SSP for February.

Fortunately the legislation addresses this, and says, in a very roundabout way, that if you receive SSP in your pay period that determines your reference salary, and it was likely that SSP would end between 1 March 2020 and 30 June 2020, and it did so, and your furlough began after the end of your SSP, your reference salary is determined on the basis of what you would have been paid if working normally, not receiving SSP.

I have gone to the legislation rather than the guidance for this.because I don't think the guidance specifically covers it. You will have to ask the accountant to read paragraphs 7.6 to 7.15 and 8.7 of the Treasury Direction in here:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/879484/200414_CJRS_DIRECTION_-_33_FINAL_Signed.pdf