Employers Furloughed Employees FAQs

31 March 2020

We have been receiving a lot of calls from our clients regarding the Government’s Coronavirus Job Retention Scheme and have put together some of the frequently asked questions:

FAQS

Q1.  How much pay should I be entering? 100%, 80%, or something else?

A lot of people have been asking us how much pay they should be entering into the software. The Government have said that they will reimburse 80% of an employee’s wage cost, up to £2,500 per month.

Some employers may choose to continue to pay their employee their ‘normal’ salary whilst furloughed (i.e. 100% of their pay). Others may decide to pay 80% of their ‘normal’ salary, and so will be paying a lower amount. Whatever is decided between the employer and the employee, it is important that you enter the actual amount paid into the software.

Example:  If an employer normally pays an employee £2,000 per month (before the deduction of tax & NIC), but comes to an agreement with the employee to pay them 80% of their normal pay whilst furloughed, then the figure to enter into Payroll Manager will be £1,600.

The GOV.UK Coronavirus Job Retention Scheme guidance for Full and Part-Time salaried employees states that:

“For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.”

Q2.  But if I ‘normally’ pay £2,000, but only pay £1,600 when the employee is furloughed, won’t HMRC only reimburse 80% of the £1,600 figure, i.e. 80% of 80%?

No. HMRC will not be using RTI returns that you send whilst an employee is furloughed to determine what an employee’s ‘normal’ pay is. Whilst HMRC have not yet released full details of how payments will be reimbursed (see question below) they will be basing the 80% on what the employee’s ‘normal’ pay was, or should have been, and not on the amounts the employee actually received whilst furloughed. 

Again, The GOV.UK Coronavirus Job Retention Scheme guidance for Full and Part-Time salaried employees states that:

“For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.”

So, you may expect the amount of reimbursement to be based on the February 2020 salary for such employees.

Q3.  How much should I pay someone whose pay varies?

Government guidance on this is: If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

• the same month’s earning from the previous year
• average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

Q4.  How do I claim these payments back from HMRC?

The online portal you’ll use to claim is not available yet. HMRC expects it to be available by the end of April 2020.  Please keep an eye on our website and social media platforms for updates.

Click on the link for more details about claiming for wage costs in the GOV.UK Coronavirus Job Retention Scheme.