CORONAVIRUS - 02.07.2020

Calculating flexible furlough pay

From 1 July 2020 eligible employees may be flexibly furloughed. Where this happens, you must pay them their usual rate of pay for all hours worked. How is this calculated?

All change. When the furlough scheme was first introduced, the rules stated that furloughed employees couldn’t do any work for their employers at all. On 1 July 2020 this was relaxed. Now, eligible employees may be furloughed on a flexible basis, i.e. they can work some of their usual weekly hours, but are furloughed for the remainder of the week. An eligible employee is one who was correctly furloughed under the original furlough scheme by 10 June 2020 .

Pay matters. Where an eligible employee is flexibly furloughed, you must pay them their usual pay for actual hours worked and furlough pay for any unworked contractual hours. Until 1 September 2020 , you can claim a pro rata amount of 80% of the employee’s usual gross monthly pay for the hours not worked. The employer’s contribution will then be reduced on a sliding scale and removed altogether on 31 October 2020 . We looked at this change in a previous article ( yr.22, iss.13, pg.1 , see The next step ).

Hours worked. Where an employee works regular or set hours, your pro rata usual pay calculation must be based on the number of hours they worked in the pay period before 19 March 2020 . Where an employee works variable hours, to calculate their usual pay find the higher of either: (1) the average number of hours worked by the employee during the 2019/20 tax year; or (2) the corresponding calendar period in the 2019/20 tax year. Then divide the employee’s total earnings in the same period by that figure. There’s a worked example in the government’s online guidance (see The next step ).

Tip. Eligible employees don’t have to be flexibly furloughed for a minimum of three weeks. This requirement has also been removed.

Where an employee works fixed hours, use the pay period before 19 March 2020. If their hours vary, use the higher of the average number of hours worked in the 2019/20 tax year or the corresponding 2019/20 calendar period.

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