Furlough calculations

theonlywayisup

We employ someone who is furloughed in line with lockdown 3.  They have been with us for 2 years and work varied hours.  The tax year 2019-2020 they generally worked 5 days a week for varying hours at an hourly rate.   Since June 2020 they have reduced their hours but it is still variable and can be 3 or 4 days a week, or more on the odd occasion.

I want to get the furlough payment correct but reading the guidance I am going round in circles.  Do I need to account for the difference in the hours they did work in 2019 2020 (60hrs) to the average they would have worked in Jan 2021 (35hrs) as the system I use for accounting (Bright) wants to give them a 'daily rate' for each day worked or predicted to work, but I cannot find any guidance on that on HMRC.

If my understanding is correct, I need to use the higher amount of either - the same period (ie January 2019 2020) or the average of the tax year 2019-2020.  I am able to reclaim 80% of this and can chose to top them up.  

Any pointers would be most helpful.  

The short version is Bill earned £2500 last January.  He earned £31000 during the last tax year.  Since June 2020 he has earned approximately £1500 per month but there isn't a fixed amount as it varies on hours he works.   Which figures do I base the 80% furlough on. 

Jeremy535897

Isn't the answer to use the calculator?
https://www.gov.uk/guidance/calculate-how-much-you-can-claim-using-the-coronavirus-job-retention-scheme

If you are looking at how to calculate the reference salary, for a non fixed rate employee who was able to be furloughed under the original CJRS, you look at the higher of the average pay for 2019/20 up to the date of first furlough, or the pay for the equivalent pay period last year if higher (January 2020 not January 2019).

theonlywayisup

Jeremy535897 said:

Isn't the answer to use the calculator?
https://www.gov.uk/guidance/calculate-how-much-you-can-claim-using-the-coronavirus-job-retention-scheme

No I don't think it is. 
I tried it but it falters at the point I mark in bold.  They were in my employ March 2020

Use the calculator

This calculator can be used to work out what you can claim. It can be used for most employees who are paid either regular or variable amounts each pay period (for example, weekly or monthly).

The calculator cannot be used if employees:

• started a notice period or went back off a notice period in the same claim period on or after 1 December 2020
• have an annual pay period
• have been transferred under The Transfer of Undertakings Protection of Employment (TUPE)
• were not employed continuously before their furlough started
• returned from statutory leave such as maternity leave in the last 3 months (if the claim period is in July or earlier)
• receive employer pension contributions outside of an auto-enrolment pension scheme
• ended furlough then began again during the same claim period
• were variably paid, and have been on more than one period of furlough where any part of any of the periods of furlough was in the 2019/20 tax year
• have variable pay, started employment before 6 April 2020 and were not on their employer’s payroll on or before 19 March 2020
• started employment with their employer during a calendar period in the 2019-20 tax year which corresponds with part or all of the period being claimed for
• are on fixed pay and have had a change in payment frequency, for example from monthly pay to weekly pay

I think your second comment is my understanding too, but just wanted some confirmation.  

If I go by last January's figure for their reference salary, they would be due 80% of 2500 for being furloughed in January 2021.  In January 2021 they were likely to be due £1500.  I just want to get this right as they could lose out if I underpay and I will lose out if I mistakenly overpay.  I don't want to underpay them but I would definitely not want to overpay and not be able to claim (considering I am doing a top up too).  

*yes sorry meant January 2020, still haven't adjusted to this January being 2021!

Jeremy535897

The item you highlight says the calculator cannot be used if they were not on payroll by 19 March 2020. That means it can be used if they were on your payroll by 19 March 2020, which if they have been with you 2 years, they must have been.

theonlywayisup

Jeremy535897 said:

The item you highlight says the calculator cannot be used if they were not on payroll by 19 March 2020. That means it can be used if they were on your payroll by 19 March 2020, which if they have been with you 2 years, they must have been.

Apologies (English isn't my first language) but I took the double negative incorrectly.

However, I proceed and still get this.  I have no idea why.  What is more, it doesn't help with the manual calculation (which I can do as I do have an equivalent Math degree). 

Jeremy535897

The reference salary calculation hasn't changed. It is still based on the higher of the average for 2019/20 pre furlough, and the equivalent pay period in the previous year.

I think the problem is combining variable pay with flexible furlough, because if they don't have a fixed number of hours to work, and do some work, how can you say that they are furloughed at all? I think the answer is here:

Employees whose pay varies

If your employee has variable pay, how you work out their usual wages depends on when they were on your payroll.

For employees who were on your payroll on 19 March 2020, that is you made a payment of earnings to them in the tax year 2019 to 2020 which was reported to HMRC on a Real Time Information (RTI) Full Payment Submission (FPS) on or before 19 March 2020 you should calculate 80% of the higher of:

• the wages earned in the corresponding calendar period in the tax year 2019 to 2020
• the average wages payable in the tax year 2019 to 2020

This also applies to employees for whom you made a valid Job Retention Scheme claim in a claim period ending any time on or before 31 October 2020.

For all other employees you should calculate 80% of the average wages payable between 6 April 2020 (or, if later, the date the employment started) and the day before they are furloughed on or after 1 November 2020.

If your employee has variable hours you will have completed a similar comparison to work out their usual hours but the outcome may be different.

To calculate 80% of the wages from the corresponding calendar period in the tax year 2019 to 2020:

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

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

3. Multiply by the number of furlough days in the pay period (or partial pay period) you are claiming for.

4. Multiply by 80%.

If your employee did not work for you in the corresponding calendar period in the tax year 2019 to 2020, you can only use the averaging method to calculate 80% of their wages.

Find an example of claiming for the same period last year.

To work out 80% of the average monthly wages for tax year 2019 to 2020:

1. Start with the amount of wages that were payable to the employee in the tax year up to the day before they were first 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 first furloughed, or 5 April 2020 – whichever is earlier).

3. Multiply by the number of furlough days in the pay period (or partial pay period) you are claiming for.

4. Multiply by 80%.

Find an example of working out 80% of average monthly wages for the last tax year.

Each day after the employee commenced employment with you is counted in making this calculation. This includes non-working days.

From https://www.gov.uk/guidance/calculate-how-much-you-can-claim-using-the-coronavirus-job-retention-scheme

If you still have difficulties, talk to your accountant.

theonlywayisup

They are on furlough and it isn't a flexi furlough as they are being furloughed for their complete month of work.  They are only working 3-4 days a week for January 21 but all of those days they are furloughed.  Flexi furlough is if I wanted them in perhaps one day a week when normally they would come in 3-4.  They never do 0 days.  It is always 3 and sometimes 4. 

Jeremy535897

I don't understand what you are saying. They can't be fully furloughed for a complete month and work 3-4 days a week in that month.

theonlywayisup

Jeremy535897 said:

I don't understand what you are saying. They can't be fully furloughed for a complete month and work 3-4 days a week in that month.

They are NORMALLY only at work 3-4 days in January 2021 however they are FULLY furloughed as they won't be coming in at all.

However, IF I asked them to come in 2 days a week, it would then be FLEXI furlough.  

The point is, it isn't flexi furlough.  It is variable pay on full furlough.  How can I say they are furloughed at all - because they are.  I don't understand  you asking that question. 

Jeremy535897 said:

I think the problem is combining variable pay with flexible furlough, because if they don't have a fixed number of hours to work, and do some work, how can you say that they are furloughed at all? I think the answer is here:

Jeremy535897

Because you originally said "they are only working 3-4 days a week for January 21, which means they are working (as opposed to being furloughed). I think it's a language issue again. Now you are saying they would have worked 3-4 days a week if they weren't furloughed.

As Bill was furloughed under the original CJRS scheme, I think that the original method of calculation stands, and so Bill benefits from having earned £2,500 in January 2020, even though there is no chance he would have earned that in January 2021.

theonlywayisup

Jeremy535897 said:

As Bill was furloughed under the original CJRS scheme, I think that the original method of calculation stands, and so Bill benefits from having earned £2,500 in January 2020, even though there is no chance he would have earned that in January 2021.

He wasn't furloughed under the original scheme, this is the first time he has been furloughed.  But I am of the same opinion, he earned 2.5 in Jan 20 therefore when furloughed for Jan 21 he will be paid 80% of the Jan 20 salary under furlough.