Incorrect furlough payment

Gottasavemoneysomehow

EssJayD said:

You have read my post wrong 

The part you originally quoted is in relation to peoples whos pay varies e.g. zero hour workers (so not that it varies due to different amounts of overtime worked)

Under the scheme employers can claim for overtime/commission etc already earned and owed, but I believe the grant will only cover 80%/£2500 of the entire amount, so potentially someone could have worked 40 hours basic, 10 hours overtime, but the money they'd get would be capped at 80%/£2500 of the entire claim.  Otherwise employers could end up claiming a grant for hundreds of pounds on top of the 80%/£2500 depending on their overtime rates (as I say I believe, I think its still a bit of a grey area generally and thankfully we don't do paid overtime so I don't have to worry about this!)

The way I read it is that if I get paid £10 an hour (I wish) and am contracted to 40 hours then ordinarily I'd get £400 per week but on furlough I'd get £320 (80%).
If I am contracted to 40 hours a week but regularly do on average 10 hours of overtime per week at single time then I would usually get on average £500 a week and on furlough I should get £400 (80%) with the exact figure being calculated as 80% of my average weekly earnings over the last 12 months or 80% of last February depending on which is higher.

Hermann

EssJayD said:

You have read my post wrong 

The part you originally quoted is in relation to peoples whos pay varies e.g. zero hour workers (so not that it varies due to different amounts of overtime worked)

Under the scheme employers can claim for overtime/commission etc already earned and owed, but I believe the grant will only cover 80%/£2500 of the entire amount, so potentially someone could have worked 40 hours basic, 10 hours overtime, but the money they'd get would be capped at 80%/£2500 of the entire claim.  Otherwise employers could end up claiming a grant for hundreds of pounds on top of the 80%/£2500 depending on their overtime rates (as I say I believe, I think its still a bit of a grey area generally and thankfully we don't do paid overtime so I don't have to worry about this!)

In the updated guidance the overtime is referenced in a separate headed paragraph it's not part of the variable pay paragraph.

Full or part time employees on a salary

Claim for the 80% of the employee’s salary, as in their last pay period prior to 19 March 2020.

If, based on previous guidance, you have calculated your claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) you can choose to still use this calculation for your first claim.

Employees whose pay varies

If the employee has been employed for 12 months or more, you can claim the highest of either the:

• same month’s earning from the previous year
• average monthly earnings for the 2019-2020 tax year

If the employee has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work until the date they are furloughed.

If they have been employed for less than a month, work out a pro rata for their earnings so far, and claim for 80%.

Past Overtime, Fees, Commission, Bonuses and non-cash payments

You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.

EssJayD

Employers can claim up to 80% of workers basic salary.

If their wage varies due to the way they are employed (zero hour etc) then that's when the section you quoted is relevant

Overtime already worked and owed can be claimed for but I'm not sure if its included in the 80%/£2500 cap.  I imagine it would be otherwise employers could end up claiming for hundreds of pounds each for potentially hundreds of workers in addition to the 80%/£2500.

I could be wrong, but I really don't think I am.

All I can advise until someone else comes along to say I'm either talking a load of truffle or agrees is that you try and speak to ACAS to see what they say.

Hermann

I don't see the word 'basic' being used in the guidance in relation to salary calculation.

EssJayD

Sorry "Usual monthly wage costs"

So that does actually probably indicate that overtime is lumped in with the total amount that can be claimed.

EssJayD

Ooooh on another forum (private so wont link/screenshot!) an employer has just posted the same thing and said they were told my view by their EL (and that ('usual wage' is basic salary), and OPs view by an Accountant.  

No-one from HMRC available to clarify - shocker!! 

nick74

Where I work we have over 100 employees who do regular overtime, and I'm currently trying to work out what to base their 80% on! HR have told me they believe it's 80% of basic salary only, but from re-reading the official guidance I cannot see anywhere where it states that. I read it as they are included in the category of 'Employees whose pay varies' and I should calculate an average from the 2019-20 tax year, including any overtime? Anyone care to agree or disagree?

I actually did an HMRC webinar on this the other day. It was possible to ask questions, but all HMRC were doing in reply to most questions was copying and pasting from the guidance on the gov.uk website which was not terribly helpful!
 

EssJayD

Nick74 - I wonder if its a terminology thing in the different 'worlds' of HR and Accounting?  Official guidance from the CIPD for HR bods refers to it being "80% of salary" where salary doesn't usually incorporate any other payments.  And generally in HR terms someone on variable pay is zero hour and such like, not salaried workers who's pay varies because of overtime etc.  But I guess in Accounting terms variable pay is quite literally that and does mean salaried workers who get overtime.  

Looks like they really need to clarify this.  Again.  Still a lot of confusion in other online communities I'm on (and some funny arguments  )

nick74

EssJayD said:

Nick74 - I wonder if its a terminology thing in the different 'worlds' of HR and Accounting?  Official guidance from the CIPD for HR bods refers to it being "80% of salary" where salary doesn't usually incorporate any other payments.  And generally in HR terms someone on variable pay is zero hour and such like, not salaried workers who's pay varies because of overtime etc.  But I guess in Accounting terms variable pay is quite literally that and does mean salaried workers who get overtime.  

Looks like they really need to clarify this.  Again.  Still a lot of confusion in other online communities I'm on (and some funny arguments  )

Yes, I am looking at it from an accounting bias certainly. However, my view is partly based on the fact that this scheme is being administered and audited by HMRC. Therefore I think that HMRC will tend to use metrics based on numbers that they can verify easily from their existing data. HMRC for example don't have copies of everyone's contracts of employment on file, so they will have no idea whether someone is on a zero hours contract or not. What they do have on file is a complete history of everyone's previous PAYE RTI submissions, showing any fluctuations in the pay figures (regardless of what the cause of these fluctuations might have been.) 

Anyway, we've now put this question to our employment law advisers so I'll report back when I've had a reply.

EssJayD

Ah that makes sense.

My old boss always used to say HR and Finance don't really mix very well, I see why now!