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80% Furlough - Should what i pay employees be same

Should pay to employee be same as grant to HMRC

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Hello

Until 31st May our company decided to pay staff 100% wages.  These are weekly paid and although contracts are for 39.5 hours per week there is a lot of overtime worked throughout the year. 

Whilst paying them 100% i paid it based on the 39.5 hours per week but the first claim I submitted (to 30th April) the claim is for more than i paid on wages as Sage included overtime based on their yearly average.  Is this ok? 

From 1st June i will be paying them 80% only (we are no longer paying the 20% topup).  For this can i pay 80% of 39.5 hours or do i need to run Sage reports and use the figures from there based on the yearly average? Does this mean what i pay the employee will be the same as the claim? Also at present my paylips state 'basic 39.5 hours', should i add a column for 'furlough' and enter the 39.5 in there going forward? 

Many thanks in advance. 

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By Wanderer
25th May 2020 21:38

Quote:
80% Furlough - Should what i pay employees be same
Should pay to employee be same as grant to HMRC

Hello

Until 31st May our company decided to pay staff 100% wages. These are weekly paid and although contracts are for 39.5 hours per week there is a lot of overtime worked throughout the year.

Whilst paying them 100% i paid it based on the 39.5 hours per week but the first claim I submitted (to 30th April) the claim is for more than i paid on wages as Sage included overtime based on their yearly average. Is this ok?

From 1st June i will be paying them 80% only (we are no longer paying the 20% topup). For this can i pay 80% of 39.5 hours or do i need to run Sage reports and use the figures from there based on the yearly average? Does this mean what i pay the employee will be the same as the claim? Also at present my paylips state 'basic 39.5 hours', should i add a column for 'furlough' and enter the 39.5 in there going forward?

Many thanks in advance.

Quote:

Whilst paying them 100% i paid it based on the 39.5 hours per week but the first claim I submitted (to 30th April) the claim is for more than i paid on wages as Sage included overtime based on their yearly average.  Is this ok? 

No, your claim is invalid and will need to be returned to HMRC.
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By Matrix
25th May 2020 22:07

Did you tick the box on the claim form certifying that the claim money would be paid to employees? Of course you should pay all the money received to your employees. So their pay should be at least as much as you received.

If you don’t think the figures generated by Sage are correct then calculate them manually according to the rules and revise your claim as necessary.

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By Ben McLintock
25th May 2020 22:03

Am I correct in thinking you paid 100% of their 39.5 hours, but claimed 80% of (39.5 hours + overtime)? If the former is greater than the latter for every employee, you should be okay.

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Replying to Ben McLintock:
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By Wanderer
25th May 2020 23:06

Quote:

...... the claim is for more than i paid on wages ...... 

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Replying to Wanderer:
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By Ben McLintock
25th May 2020 23:16

Well, I thought I'd ask, as I can see how the situation I posted could lead someone to wonder if it's okay. On the other hand, there can be no question whatsoever that it might be okay to claim more than you paid out.

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RLI
By lionofludesch
25th May 2020 23:32

I can see the reason for anonymity.

Did the OP not read the bit where it says that all the money will be paid to the employee?

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By tltodman
26th May 2020 10:00

Oh dear. Have you read the rules about how you calculate the 80% payments to staff? In case not, for variable paid staff (ie including those with lots of overtime), you pay 80% of the higher of their average monthly pay in 2019/20 and the amount they were paid in the same month in 2019. So the base amount could change month to month if they earned more than their average in this month a year ago. Or you could just stick to the average every month if you want to keep it simple. And yes, of course you must pay everything you claim to the staff - that's one of the first questions on the claim form.

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By paulwakefield1
26th May 2020 10:15

You can pay anything you like to your staff but it must be at least 80% of the higher of the previous year's average and the actual amount paid to the employee in the same month in the previous year (subject to £2,500 and possible adjustments). Therefore you can not necessarily just pay the average if last year's same month's actual was higher.

The maximum claim is based on the lower of £2,500 and 80% of the reference salary. It therefore follows that you must pay everything claimed to the employees (except for employer's NI contribution).

You could restrict your claim to being based on the average last year for simplicity but you could lose out as the higher amount must always be paid to the employee.

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Replying to paulwakefield1:
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By tltodman
26th May 2020 11:00

"the higher amount must always be paid to the employee".
I'm not sure that's right. You must pay what you claim, but you can claim either 80% of average or 80% of same month last year. If you only claim 80% of average, then that's all you have to pay. (Admittedly employee is losing out, but I don't think employer is wrong if they only claim the same amount each month based on the average. Rules just seem to say can claim if "a reasonable choice of approach is made".)

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Replying to tltodman:
RLI
By lionofludesch
26th May 2020 11:03

Quote:
Rules just seem to say can claim if "a reasonable choice of approach is made".)

Reasonable as defined by Dominic Cummings ?

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Replying to tltodman:
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By Wanderer
26th May 2020 11:09

Quote:

"the higher amount must always be paid to the employee".
I'm not sure that's right. You must pay what you claim, but you can claim either 80% of average or 80% of same month last year. If you only claim 80% of average, then that's all you have to pay. (Admittedly employee is losing out, but I don't think employer is wrong if they only claim the same amount each month based on the average. Rules just seem to say can claim if "a reasonable choice of approach is made".)

Paul is right, you are wrong, read regulation 7.2.
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By McCue1954
27th May 2020 00:22

Thanks for the responses. I am more concerned as to whether I am paying staff the correct amount rather than the claim made which was Calculated by sage.

When paying them 100% is it 100% of 39.5 contracted hours? When it drops to 80% is it 80% contracted hours?

The claim is based on historical data over the last year (includes overtime) whereas I am currently paying staff basic 39.5 hours with no overtime as they are not working. Is this correct?

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Replying to McCue1954:
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By paulwakefield1
27th May 2020 07:30

Subject to the £2,500 per month limit, you MUST pay them at least 80% of the greater of their average earnings in the last tax year and the amount paid in the corresponding calendar period last year.

This is a simplified explanation but probably covers your particular circumstances.

So yes - you do at least in theory have to look at each worker week by week and they may well vary between whether the average or the actual week by week last year was the higher. However I do not have any clients with weekly paid employees; others may comment as to whether there are pragmatic solutions to say checking the calculation monthly as I have never had cause to look into it.

You should also check that what you have been paying is sufficient. If they have had substantial overtime in the past, 100% of basic hours may be less than the required payment of the higher of 80% of average pay or last year's corresponding pay.

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Replying to paulwakefield1:
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By McCue1954
27th May 2020 07:35

Thank you, that is my worry that I’ve paid them 100% basic but that they are entitled to more base on last years figures. Thank you. I will look into this today.

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Replying to McCue1954:
By coops456
27th May 2020 15:28

And you should definitely show furlough pay as such on payslips. Don't enter it as anything that could be misconstrued as pay for hours worked.

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