If an employee is furloughed, you may claim 80% of their monthly wage costs capped at £2,500 (gross), plus the associated employers’ NI and minimum auto-enrolment pension contributions. How is the 80% figure calculated?
Under the government’s Coronavirus Job Retention Scheme (CJRS) you may furlough an employee if they’ve had to stop working during the pandemic.
This is not something that you can do unilaterally and neither can an employee demand to be placed on furlough leave: it must be matter of agreement agreed between you.
Up to 80%
Where an employee is correctly furloughed, the government will reimburse you 80% of their regular wage costs up to a cap of £2,500 (gross) per month. You can also claim the associated employers’ NI and minimum auto-enrolment pension contributions. These are grants so they don’t have to be repaid to the government.
Note. Contractual commission payments and bonuses can be claimed under the CJRS; discretionary commission and bonus payments and additional pension contributions are excluded.
For employees who are salaried, the 80% wage costs (and the claimable associated costs) are calculated using the employee’s actual salary before tax at 19 March 2020 . If, based on previous guidance, you have calculated your claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) you can choose to still use this calculation for your first claim..
Where an individual has fluctuating monthly wages, e.g. because they are a shift worker or they work irregular hours, their 80% wage costs (and the claimable associated costs) are calculated as follows:
if they’ve been employed for a full year prior to the furlough claim, you can claim the higher of either the employee’s equivalent month’s earnings from the previous year or their average monthly earnings over the 2019/20 tax year
if they’ve been employed for less than a year, you can claim an average of their monthly earnings since they started work.
Employees must pay income tax, NI and any other deductions on furlough payments.
On 3 April 2020 HMRC confirmed that the CJRS is aimed at those who would “otherwise be unemployed as a result of Coronavirus” and confirmed that those who had been on the payroll of a company at 19 March 2020 (changed from 28 February 2020 on 15 April) but subsequently left could be put back on the payroll and furloughed.
In other words, if an employee had resigned to go elsewhere, or you made them redundant, you could take them back and agree to furlough them, e.g. if their new job has fallen through.
Note. However, this decision remains down to the individual employer and you are under no obligation to take a former employee back on.
Tip. HMRC’s online facility to reclaim furlough leave payments went live on 20 April 2020. Details on how to submit a claim will be made available in online guidance for employers and businesses.
For salaried employees, use their actual salary before tax at 19 March 2020. For those with fluctuating monthly wages who’ve been employed a full year, you can claim the higher of their equivalent month’s earnings or average monthly earnings in the 2019/20 tax year. Use average monthly earnings for those employed less than a year.