Furlough does it include overtime?

Jeremy535897

Gottasavemoneysomehow said:

markrooney said:

Has anyone had any luck with there employers for overtime to be included? After challenging them on it?

No I can't get anywhere and the bigger problem is that the company is dormant so there's no real way to contact them effectively plus I'm worried that if they pay me too little and therefore claim too little from the government then there will be no way to correct this later as it says a company can only claim once.

Per my post above, if they pay too little they might be able to claim nothing at all. That would be very bad news if there is a clawback in the furlough agreement.

jonnylfc

markrooney said:

Has anyone had any luck with there employers for overtime to be included? After challenging them on it?

My employer has agreed to include overtime in the calculation , they’ve now based the 80% on my average earnings . I emailed my boss and pointed out that most of the workforce did regular overtime and our calculations should be based on average earnings due to working irregular hours as per gov uk guidelines. I got a response last week saying we were to be paid 80% of our average weekly earnings including any overtime. 

As gov uk guidelines were being updated daily my boss waited till Wednesday last week before finally agreeing as he wanted to be certain he could recoup the full amount paid out. 

Good luck Mark .

unholyangel

This page (advising employers how to work out what to include) would indicate overtime should only be included if it is not discretionary:
https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme

Jeremy535897

This wretched word "discretionary". My take is that overtime would only be discretionary if an employee on fixed hours was asked to do voluntary overtime, and the employer then made a non-contractual payment in recognition of their efforts. See:

"7.4 In paragraph 7.3 “regular” in relation to salary or wages means so much of the amount of the salary or wages as-
(a) cannot vary according to any of the relevant matters described in paragraph 7.5 except where the variation in the amount arises as described in paragraph 7.4(d),
(b) is not conditional on any matter, 
(c) is not a benefit of any other kind, and
(d) arises from a legally enforceable agreement, understanding, scheme, transaction or series of transactions."

Sub-paragraphs (a) to (c) are exclusions, but (d), taken with the start of 7.4, says that "regular" (which salary has to be to count as reference salary), is anything paid because the employee's contract of employment requires it to be paid. You don't get to the exclusions in 7.5 (performance of employee, business, tips etc) if you pass this test, because of 7.4(a). If you are paid a set rate per hour for the hours you work, you are a variable pay employee. If you happen to work 35 hours most weeks but do a bit of overtime and your contract entitles you to be paid for it, you are a variable pay employee. If you are paid for doing 35 hours a week no matter how many hours you actually work, you are a fixed rate employee. If you get a discretionary payment because you did overtime, even though your contract entitles you to nothing, you are a fixed rate employee and the overtime discretionary payment does not count.

maxico

I have had web chats with countless 'advisors' from HMRC. They all say slightly or wildly different things. Most say all overtime should be included some say not, if it was voluntary. They disagree what is classed as voluntary although some say it doesn't matter if its voluntary or not. Some quote the guidelines on 'non discretionary overtime pay' as a reason to include all overtime and some quote the same info as a reason not to. Some have disagreed that it should be included, then after my reasoning with them they agree it should. The last one I spoke to said it was up to the employer if the overtime is non discretionary. Surely it either is or isn't!  And anyway the government website now says it should include 'non discretionary payments including overtime'. I seriously would like to strangle someone!!!!!! My employer has also conceded that even though they believe they could (after many emails and copies of said web chats)  they won't  and don't have to. Apart from they don't give a toss, they say HMRC threatens that any change or backdated claim flags up an investigation into the company. Maybe my employer has something to hide unrelated to furlough claims!  I would have just thought that such an investigation would just look at past overtime, think yeah, that makes sense, then find something better to do?  My argument is, we are either entitled to it or not. And my employer is not entitled to say we cant have it! I hope I've cleared that up for everyone:{

maxico

I'd just like to add that there is a right or a wrong answer here. Some advisors have contradicted themselves from the start of a chat to the end without my help. It should not be up to individual employers to decide what someone should get. For the last three months I have only received 60% of the income that I have reasonably expected to earn for at least the last three years and its not paying the bills. I have found HMRC farcical with other issues and they have a responsibility to get it right. 

Jeremy535897

The guidance, and indeed the Treasury Direction, have changed significantly since my last post. Remember that the CJRS claim does not dictate what you should be paid, although you have to receive at least the net pay element of the claim. That is done by your contract of employment, as amended by any furlough agreement. What does that say?

I believe that if you work the hours and are contractually entitled to be paid, the overtime is non-discretionary. If you always get paid for 40 hours a week, whatever hours you work, under your contract, but your employer gives you a one-off payment for working over Easter out of the kindness of his heart, that is discretionary.

The CJRS claim made in respect of your pay is only valid if you are paid at least 80% of your "reference salary", and the debate is whether that includes overtime or not. If the claim is based on no overtime, and overtime should be included, the CJRS claim may be invalid for that reason, unless your employer can argue their calculation was "reasonable". Based on the fact that you are getting completely different answers from HMRC about the issue, I suspect they would be able to argue what they are claiming is reasonable.

Guidance now says:

"Non-discretionary overtime payments

If your employee has been paid variable payments due to working overtime, you can include these payments when calculating 80% of their wages as long as the overtime payments were non-discretionary.

Payments for overtime worked are non-discretionary when you are contractually obliged to pay the employee at a set and defined rate for the overtime that they have worked."

https://www.gov.uk/guidance/steps-to-take-before-calculating-your-claim-using-the-coronavirus-job-retention-scheme

It also says:

"Work out your employee’s usual hours for an employee who works variable hours

Where the pay varies by the amount of time worked, you will have shown the number of hours worked on your employees’ payslips in line with legislation introduced by BEIS in April 2019 (Employment Rights Act 1996, section 8). You are therefore likely to have records of the number of hours worked.

The ‘usual hours’ in this case will be calculated based on the higher of either:

• the average number of hours worked in the tax year 2019 to 2020
• the corresponding calendar period in the tax year 2019 to 2020

You need to calculate the usual hours for each pay period, or part of a pay period, that falls within the claim period.

When you calculate the usual hours, you should include:

• any hours of leave for which the employee was paid their full contracted rate (such as annual leave)
• any hours worked as ‘overtime’, but only if the pay for those hours was not discretionary "

maxico

Thanks for your thoughts and info Jeremy. We did sign some short waffle a few weeks ago about the furlough scheme, I think it was about agreeing to be furloughed, not much else I don't think. We do have a contract which says 'it may be necessary to extend your working hours in order to accommodate business requirements. You are entitled to additional remuneration at your normal rate of pay'. We are of course paid for overtime and that is not discretionary. My main frustration is that as it has now been three months the HMRC have had plenty of time to iron out any confusion. We are either entitled to it or not and it is clear that we are, and it should not be at the discretion of the employer to decide whether we get what we are entitled to or not. 

Jeremy535897

maxico said:

Thanks for your thoughts and info Jeremy. We did sign some short waffle a few weeks ago about the furlough scheme, I think it was about agreeing to be furloughed, not much else I don't think. We do have a contract which says 'it may be necessary to extend your working hours in order to accommodate business requirements. You are entitled to additional remuneration at your normal rate of pay'. We are of course paid for overtime and that is not discretionary. My main frustration is that as it has now been three months the HMRC have had plenty of time to iron out any confusion. We are either entitled to it or not and it is clear that we are, and it should not be at the discretion of the employer to decide whether we get what we are entitled to or not. 

I don't think it's HMRC's fault. I think the rules are clear. Employers will have lawyers advising them to be cautious, though, and take the path of lowest risk. What they all seem to overlook is that paying too little is a higher risk than paying too much.

maxico

Hi Jeremy, what do you mean by paying too little is a higher risk?