Furlough reclaimed pay query

djmobius

Hi all,

I’ve been furloughed since March 24th, but it was too late for my employer to adjust pay for that month so they said they’d adjust in April. When they’ve made the deduction they’ve taken back the full difference between what I get in furlough and my p60 earnings for last year + the statutory 5% pension contribution (I actually contribute more than this). Last years p60 includes a large amount of discretionary bonus (I’ve checked and it’s termed as such in letters from my employer). 

This feels wrong to me, surely the difference they took back should just have been between my basic and the furlough amount not as above?! 

Thanks in advance for any advice

Jeremy535897

You were only furloughed for 8 days in March, so any reduction should only apply for 8 days of income. I assume you have agreed to a pay reduction equal to what your employer expects to claim under CJRS?

It sounds as if they are treating you as a variable pay employee. If your pay only varies due to discretionary bonuses, that is unlikely to be correct. But not all bonuses labelled as discretionary really are.

This is from the guidance:

"Employees whose pay varies and were employed from 6 April 2019

If the employee has been employed continuously from the start of the 2019 to 2020 tax year, you can claim the highest of either:

• 80% of the same month’s wages from the previous year (up to a maximum of £2,500 a month)
• 80% of the average monthly wages for the 2019 to 2020 tax year (up to a maximum of £2,500 a month)

To calculate 80% of the same month’s wages from the previous year:

1. Start with the amount they earned in the same period last year.

2. Divide by the total number of days in this pay period - including non-working days.

3. Multiply by the number of furlough days in this pay period.

4. Multiply by 80%.

Example of claiming for the same period last year

A Ltd pays an employee on a weekly basis. The employee’s pay period starts on 23 March 2020 and ends on 29 March 2020. The employee was paid £350 for 23 March 2019 to 29 March 2019. The employee was furloughed for the whole week.

1. Start with £350 (the amount they earned in the same period last year)
2. Divide by 7 (the total number of days in this pay period)
3. Multiply by 7 (the number of furlough days in this pay period)
4. Multiply by 80% - this is £280

To work out 80% of the average monthly wages for the last tax year:

1. Start with the amount they earned in the tax year up to the day before they were furloughed.

2. Divide it by the number of days from the start of the tax year - including non-working days (up to the day before they were furloughed, or 5 April 2020 – whichever is earlier).

3. Multiply by the number of furlough days in this pay period.

4. Multiply by 80%.

Example of working out 80% of average monthly wages for the last tax year

Worker started work for A Ltd in 2010 and was placed on furlough on 23 March 2020, earning £15,000 between 6 April 2019 and 22 March 2020 inclusive. There are 353 days between 6 April 2019 and 22 March 2020. A Ltd is claiming for 23 March to 31 March 2020. There are 9 days between 23 March and 31 March.

1. Start with £15,000 (the amount they earned in the tax year up to the day before they were furloughed)
2. Divide it by 352 (the number of days from the start the tax year, up to the day before they were furloughed)
3. Multiply by 9 (the number of furlough days in this pay period)
4. Multiply by 80% - this is £306.82"

unholyangel

The difference they should have taken back would have been the difference between what you should have been paid and what you were paid. It would depend on specifics - how much you're paid, whether fixed rate or not and also what makes up your reference pay. 

djmobius

Thanks for the reply Jeremy. 
Yes the adjustment has been for 8 days, I didn’t really a free to anything. We were simply told that’s what would happen as our payday it penultimate working day of the month and they didn’t have time to adjust for March’s payday.

The employer can claim the max amount for me off my basic without any need for taking the bonus into account. The bonus isn’t listed in my contract and the letters setting out the terms of it state “discretionary “ within them and it’s based on a % of profit. Us closing our doors temporarily (I’m in the automotive sector, Business to Business) and Covid will naturally affect my future bonus earnings and any bonus paid already is for previous performance. As such I don’t see having all this reclaimed if fair, but of course if they’re legally obliged to work it out like that then that’s irrelevant.

djmobius

unholyangel said:

The difference they should have taken back would have been the difference between what you should have been paid and what you were paid. It would depend on specifics - how much you're paid, whether fixed rate or not and also what makes up your reference pay. 

Thanks unholyangel, I guess it boils down to whether my bonus is classed as discretionary in a legal sense basically. 

Jeremy535897

It is confusing, because you are not checking what you are paid, you are checking what you had deducted from April for March. That deduction should equal what you were actually paid for those 8 days in March, less what the furlough calculation produces.