Company refuse to include overtime in furlough payments

trishjo

ve been furloughed since May and my company has not included overtime even though I do on average 11 hours a week (for the past 5 years).  This is non-discretionary overtime ie my contract says that I must work it if required and I will be paid at time and a half for the hours worked.  I have challenged the company for many months and finally had a grievance meeting over 2 weeks ago to which I am still waiting for an outcome.  They said in the meeting that they chose not to include overtime, does the company have this right to choose to include it or not, I thought government guidelines said it should be included (either 80% of average of last year or matching last years overtime), yet my company say they made the decision not to include it.  I have been to citizens advice, ACAS etc but am getting nowhere.  Incidentally the company does include it when calculating my holiday pay! At a loss as the what to do now.

Potbellypig

Even at a best case scenario, the furlough isn't going to be backdated. So you would be relying on them to accept they made an error and be willing to pay you all the overtime rate out of their own pocket, which may well lead to you not being on on their Christmas card list, if you know what I mean.

MattMattMattUK

The elements they should include are below

What to include when calculating wages

If you’ve already claimed for an employee who was on furlough during October, and they are paid a fixed salary, you will follow the same usual wage calculation for claim periods after 31 October 2020.

The amount you should use when calculating 80% of your employees’ wages for hours not worked, is made up of the regular payments you are obliged to make, including:

• regular wages you paid to employees
• non-discretionary payments for hours worked, including overtime
• non-discretionary fees
• non-discretionary commission payments
• piece rate payments

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

Non-discretionary overtime paymentsIf 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.

The issue is not the regulations though, the company has made a decision that it does not want to use overtime in the calculation. Their issue might be however the average you mention, rather than it being a consistent 11 hours each week, the reference periods they are using and how that calculation works in relation to hours work this year and now lockdown 2 and CJRS extension. However I would also say that if Citizen's Advice and ACAS can not confirm that the overtime should be included and they will have far more detail, then I would suspect that the company's decision is probably correct. 

The biggest issue you might find is that if your employer is placing people on furlough using CJRS the business is obviously struggling, they may well be looking to make redundancies and at the moment being a "difficult" employee is probably not a wise decision if you wish to remain employed. If I were in your position I would be weighing up the benefit of a little more furlough pay in the short term, vs being made redundant and unemployed in the long term. 

Jeremy535897

The first question is whether you are a fixed rate employee or not. The payment of overtime is not normally a factor in determining whether an employee is a fixed rate employee. A fixed rate employee is defined as follows:
"A person is a fixed rate employee if-
(a) the person is an employee or treated as an employee for the purposes of CJRS by virtue of paragraph 13.3(a) (member of a limited liability partnership),
(b) the person is entitled under their contract to be paid an annual salary,
(c) the person is entitled under their contract to be paid that salary in respect of a number of hours in a year whether those hours are specified in or ascertained in accordance with their contract (“the basic hours”),
(d) the person is not entitled under their contract to a payment in respect of the basic hours other than an annual salary,
(e) the person is entitled under their contract to be paid, where practicable and regardless of the number of hours actually worked in a particular week or month in equal weekly, multiple of weeks or monthly instalments (“the salary period”), and
(f) the basic hours worked in a salary period do not normally vary according to business, economic or agricultural seasonal considerations."

If an employee has a 40 hour a week contract at a fixed salary, but regularly works varying amounts of overtime for which they are paid, they are a fixed rate employee, because of the "basic hours" concept in the definition above (unless (f) applies). However, later versions of the guidance recognised that this was an area of massive misunderstanding, and so accepted (and even encouraged) employees with lots of varying overtime as not being fixed rate employees. This made sense, because a fixed rate employee's reference salary was in part dependent on the amount of contractual overtime worked in the last pay period ending before 20 March 2020, which might have been abnormally large, or abnormally small, but the variable pay calculation is based on the higher of the equivalent in the previous year, or the average for 2019/20 up to furlough.

None of that takes away from the fact that contractual overtime should be included in the CJRS calculation, whether as a fixed rate employee or otherwise, and failure to do so could arguably make the employer liable to repay all CJRS claims made on behalf of an employee, if by not including contractual overtime in the calculation of reference salary they paid the employee less than 80% of their reference salary. If the employee's furlough agreement said that furlough paid could be clawed back if the CJRS claim by the employer failed, the employee could then lose all furlough pay back to the start in March. Employers are most unlikely to want to change a calculation that has been used in the past, and an employee would have to be very sure that it was in their interests to take their employer on.