Has the way furlough is calculated for the 2nd lock-down changed?

inasitu

Hi

This is my first post and I wish to ask if anyone knows of any up to date information regarding how furlough should be calculated for this second lockdown?

Reason being:

I’ve worked for the same company in the retail (food & beverage) sector for that past 3-4 years on a zero hour’s contract. In March this year, I was furloughed and which was calculated on the corresponding month's pay periods last year, or the full year’s earnings for 2019-20, whichever was highest. As the hours I worked during the 2019-20 period were high I incurred no problems regarding the first furlough scheme.

In June this year, the company I work for was able to open a limited amount of their outlets so my furloughed period came to an end as I went back to work whilst other members of staff remained off work and as a result, remained on furlough. 

I’ve been back working since June and still am. Originally in June my hours were high (ish) but not at, or near the same level as pre-covid. But as the months since June have gone on and companies being incentivized to take more staff back on, my hours were reduced the more staff members came back, and now lockdown has happened for a second time my hours have reduced even more due to opening restrictions etc.

So now, for this second lock-down, I’m in the position of being given further reduced hours to work with a supposed top-up of hours/pay from the furlough scheme. 

But on this occasion, I’m told by the company that they will be calculating the furlough scheme for the second lockdown based on the past 3-months average, and I’m wondering if this is right? As over this period, my hours continually reduced as more staff came back due to the government encouraging and incentivizing companies to take more staff back on. 

I’ve been searching online and cannot seem to find anything which confirms using the past 3-months average as being right. In fact, some information online seems to suggest the calculation should be done as per the first furlough scheme. 

I’ve even looked at the government’s scheme calculator (www.tax.service.gov.uk/job-retention-scheme-calculator) which seems to use last year’s corresponding month's pay periods or the full year’s earnings for 2019-20, whichever was highest - so it’s a little confusing.  

Any help is appreciated

Jeremy535897

See https://www.gov.uk/government/publications/find-examples-to-help-you-work-out-80-of-your-employees-wages/examples-of-how-to-work-out-80-of-your-employees-wages-national-insurance-contributions-and-pension-contributions#80-return

If you were furloughed before 10 June by the same employer, your reference salary is based on the same rules as under the original CJRS scheme. The reason you can't find any reference to a 3 month average being used is that it doesn't exist. The problem you have is that if you are genuinely a zero hours contract employee they don't have to furlough you and they don't have to offer you any work. There is also the issue that if they pay you less than 80% of your reference salary while you are furloughed, they cannot claim anything in respect of your wage.

inasitu

Thanks, Jeremy535897 for your reply

Can I just ask what do you mean exactly by

There is also the issue that if they pay you less than 80% of your reference salary while you are furloughed, they cannot claim anything in respect of your wage.

As zero hours is the way which the company operates with the vast majority of employees being on it and its never been mentioned by them that this is a stumblingblock for furlough entitlement.  

Jeremy535897

The original Treasury Direction on furlough (before flexible furlough muddied the water) says:
"7.1 Costs of employment meet the conditions in this paragraph if-
(a) they relate to the payment of earnings to an employee during a period in which the employee is furloughed, and
(b) the employee is being paid-
 (i) £2500 or more per month (or, if the employee is paid daily or on some other periodic basis, the appropriate pro-rata), or
 (ii) where the employee is being paid less than the amounts set out in paragraph 7.1(b)(i), the employee is being paid an amount equal to at least 80% of the employee’s reference salary."

If the costs of employment don't meet those conditions, no CJRS claim can be made:
"The costs of employment in respect of which an employer may make a claim for payment under CJRS are costs which-
(a) relate to an employee-
 (i) to whom the employer made a payment of earnings in the tax year 2019-20 which is shown in a return under Schedule A1 to the PAYE Regulations that is made on or before a day that is a relevant CJRS day,
 (ii) in relation to whom the employer has not reported a date of cessation of employment on or before that date, and
 (iii) who is a furloughed employee (see paragraph 6), and
(b) meet the relevant conditions in paragraphs 7.1 to 7.15 in relation to the furloughed employee."

These rules have applied throughout. The CJRS calculation (the reference salary) for a genuine zero hours contract employee (who is therefore not a fixed rate employee) is:
"the greater of-
(a) the average monthly (or daily or other appropriate pro-rata) amount paid to the employee for the period comprising the tax year 2019-20 (or, if less, the period of employment) before the period of furlough began, and
(b) the actual amount paid to the employee in the corresponding calendar period in the previous year."

So if an employer doesn't pay their employee at least 80% of their reference salary (capped at £2,500 a month), for any period, they cannot claim under CJRS for that employee for that period. That is logical, otherwise they would be claiming more than they paid out.