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CJRS: clarification re overtime payments

Can employees paid monthly basic hours + overtime be treated as 'variable rate' employees?

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Just been reading HMRC's updated guidance which confirms that overtime payments can be included in CJRS salary calculations where the employer was contractually obliged to pay the employee at a set and defined rate for the overtime worked (rather than where the employer was contractually obliged to offer the overtime).

For our staff, their employment contracts provide for 160 basic hours each month, with overtime paid for any additional hours worked. There is no contractual obligation to offer overtime, but the reality is that employees regularly work overtime most months.

I've not included overtime in my calculations to date, instead using the 160 basic hours as the basis of our claim due to the fact that it's at the employer's discretion whether or not to offer overtime.

No overtime was paid in February (a quiet month), therefore to claim for overtime the rules for 'variable rate' employees would have to apply. What do others think - are they fixed rate or variable rate employees?

Employees' salaries have been topped up to 100% of their basic hours, which would cover 80% of their average monthly basic hours + overtime hours.

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By Cheshire
24th May 2020 08:46

You been advised before, on here, to stop reading the guidance.

Read the legislation. What does that say?

(I've not read it yet, sick and tired of it all. One for later.)

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By Ben McLintock
24th May 2020 09:32

The legislation isn't clear on the matter, however some other commentary I've since read would suggest that the term 'fixed rate employee' is similar to the definition of salaried employees for NMW purposes and that regular overtime payments make them variable rate employees.

I'm no employment lawyer though - I'm an accountant trying my best to suss this legislation out.

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JCACE
By jcace
24th May 2020 15:37

The Treasury Direction states that, amongst other things, a person is a fixed rate employee if "the basic hours worked in a salary period do not normally vary according to business, economic or agricultural seasonal considerations."
If an employee regularly works overtime I would therefore conclude that he/she is not a fixed rate employee.

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By Manchester_man
25th May 2020 05:59

jcace wrote:

The Treasury Direction states that, amongst other things, a person is a fixed rate employee if "the basic hours worked in a salary period do not normally vary according to business, economic or agricultural seasonal considerations."
If an employee regularly works overtime I would therefore conclude that he/she is not a fixed rate employee.

I don’t have any clients affected in this way but, and it’s conceivable that I may be reading this wrong, taking the above quote in isolation, I would take it the opposite to how you have interpreted it.

(If)... “the basic hours worked in a salary period do not normally vary”

I read that in the context of Basic hours and Overtime hours.

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By Ben McLintock
25th May 2020 09:08

I'll check contracts, but I think in our case 'basic hours' are minimum guaranteed hours per month - employees are paid on an hourly basis though, and when they go over this limit hours are recorded as overtime.

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Replying to Cheshire:
JCACE
By jcace
24th May 2020 15:34

Cheshire wrote:

Read the legislation. What does that say?

(I've not read it yet, sick and tired of it all. One for later.)


The Treasury Direction states:
"This direction requires Her Majesty’s Revenue and Customs to be responsible for the payment and management of amounts to be paid under the scheme set out in the Schedule to this direction (the Coronavirus Job Retention Scheme).....
.....The claim must be made in such form and manner and contain such information as HMRC may require at any time (whether before or after payment of the claim) to establish entitlement to payment under CJRS."
The guidance is therefore an important part of the scheme, and not something to be ignored.
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