# Furlough pay and holiday top up

Apples vs pears on number of days?

• ### Non resident dividends from 6/4/2022

Just out of interest, how is everyone calculating "top up" pay for holidays e.g. bank holidays during furlough periods?

Given that the "normal" method of calculating holiday pay is based on working days e.g. daily rate = annual pay dividend by 260 for a full time worker, and HMRC's furlough pay calculations are based, nonsensically, on calendar days each month...

I might be overthinking it, but my brain hurts with all this guidance!

### Replies (18)

By lionofludesch
19th May 2020 19:09

I've done what I think's fair and if HMRC come round to check it, I'll tell them "you tell me what you think and if we disagree by enough, we'll have a chat."

Life's too short and HMRC changed their minds too often and too late.

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By PandoraSleeps
19th May 2020 19:13

Yes, I totally agree. Every time I think I have this down, something else raises uncertainty in my mind!

Although I don’t think HMRC will care as this doesn’t affect the claim amount, it’s about working out how much to pay the employees based on these mixed and muddled rules.

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By NYB
19th May 2020 19:18

Agree whole heartedly. These so called rules and regs that morph over a period of time can totally be misinterpreted. I too would say I have done my best.

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By jonkaye
19th May 2020 19:24

For the 2 May Bank Holidays my calculation is as follows for an employee who normally works 5 days pw, is on an annual salary of £24,000 and has agreed to accept 80% pay whilst on furlough:

Holiday pay for the 2 days is £24,000 x 2/(52 x 5) = £184.62
“Normal” furlough pay for those same 2 days is £24,000/12 x 80% x 2/21 = £152.38
“Top-up” for the 2 days = £32.24

My reasoning is that there are 21 weekdays / potential working days during May 2020.

I believe that the fact that the maximum CJRS grant refers to calendar days, i.e. 31 days for May, is not relevant to the holiday pay calculation. Otherwise, as you suggest, we would be comparing apples and pears. I think that my method enables us to compare apples and apples (or it may be pears and pears) - and that's assuming anyone gives a fig.

Anyone else have any thoughts on this, please?

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By PandoraSleeps
19th May 2020 20:26

Thank you. That is certainly very logical and sensible.

We had taken advice from our tech support line who told us to calculate holiday pay on working days and compare to furlough pay on calendar days which just doesn’t make sense to me and, worse, costs the client!

I had tried doing it based on using calendar days for everything to compare like with like. So using the figures in your example:

FL pay £24,000/12 x 80% x 2/31 = £103.22
Hol pay £24,000/12 x 2/31 (hence topping up to 100%!) = £129.03
Therefore top up £25.81

There are too many options and permutations. The whole concept of basing anything to do with payroll on calendar days is just bizarre.

Of course there are added complications when furlough is for a part period, and don’t even get me started on salary sacrifice gross up which has caused some very interesting algebra.

It’s so frustrating that there is not clear, unequivocal guidance - maybe with some examples! On salary sac, TPR website has examples but not where there is top up pay / part period.

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By Nicpnic
19th May 2020 21:11

Thank you for this, something I had begun to wonder this month but hadn’t progressed yet. I will apply your logic, it seems fair and solves the apple to pear conundrum.

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By Michaeltax
20th May 2020 11:11

I originally got to the same answer using your example John. My issue with this method arises if you consider a full pay period (weekly or monthly) on holiday you end up topping up more than a normal pay rate.

Taking your example, 21 working days with top-up of £32.24 x 21 = £677.04
Original pay for the month at furlough rate is £1,600
Total gross pay is now £2,277.04. £277.04 higher than a normal pay period.

Extreme example I know with an employee taking an entire month, but is much more applicable for weekly paid employees.

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By lionofludesch
20th May 2020 11:12

Michaeltax wrote:

I originally got to the same answer using your example Pandora. My issue with this method arises if you consider a full pay period (weekly or monthly) on holiday you end up topping up more than a normal pay rate.

Taking your example, 21 working days with top-up of £32.24 x 21 = £677.04
Original pay for the month at furlough rate is £1,600
Total gross pay is now £2,277.04. £277.04 higher than a normal pay period.

Extreme example I know with an employee taking an entire month, but is much more applicable for weekly paid employees.

I wouldn't calculate it that way. It's stupid.

If you're going to calculate furlough on the basis of a seven-day week, you need to calculate holiday pay on the basis if a seven-day week. Instead of 28 days, it's now 39.2 days but at a lower daily rate.

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By PandoraSleeps
20th May 2020 11:29

Don't forget though that £32.24 in John's example is for TWO days.

So I think the WORKING DAY method is:

Furlough pay £1,600 (on a reference salary of £24,000 pa).
Holiday pay = £24,000 / 260 = £92.31 per day - for 21 working days in May £1,938.51
Furlough pay for 21 working days is £1,600 (since whole month is AL)

Therefore total pay is £1,938.51.

Using the CALENDAR DAY method:

Furlough pay is still £1,600, for 31 days
Holiday pay - normal monthly pay is £2,000, x 31/31 (on AL for whole month)
Therefore total pay £2,000 - this makes sense as if on AL for whole month they should receive their normal pay.

HOWEVER there is still the complication of weekends where you do not have a full month. E.g. if there were 2 weeks' annual leave, I think to get the right answer under the calendar days method you would have to count the weekends in between..?!?!

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By lionofludesch
20th May 2020 11:34

PandoraSleeps wrote:

HOWEVER there is still the complication of weekends where you do not have a full month. E.g. if there were 2 weeks' annual leave, I think to get the right answer under the calendar days method you would have to count the weekends in between..?!?!

Yes, that's my point.

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By PandoraSleeps
20th May 2020 11:57

lionofludesch wrote:

PandoraSleeps wrote:

HOWEVER there is still the complication of weekends where you do not have a full month. E.g. if there were 2 weeks' annual leave, I think to get the right answer under the calendar days method you would have to count the weekends in between..?!?!

Yes, that's my point.

And non-working days for part-timers?!

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By tom123
20th May 2020 11:34

At the moment you are paying the employee a reduced amount per month.
You need to calculate what his normal rate of pay would be for each day of holiday.
I would use working days for both those calculations.

What you get or not from the government is neither here nor there for this.

The employee needs to get is normal daily rate for his holidays.

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By PandoraSleeps
20th May 2020 15:22

OK, I have thought it through and I think, I think, that calendar days is the way forward.

Thinking of a scenario where someone is FL part way through a month, e.g. their furlough starts 18 May. When we are calculating their pay for May, we take normal monthly salary x 17/31 for the non furlough period, and then calculate their furlough pay for the rest of the month at 14/31. No other way to do that as the denominator has to be the same to add up!
EDIT - This is incorrect! Where someone is furloughed part way through the month, they should be paid in the normal way (i.e. # working days x daily rate etc.) while they're working, and then calendar days to work out furlough pay while they're not working. -_-

Then, extending this thinking to holiday. All we are really doing is saying that the number of days holiday effectively increases the "normal monthly salary" number of days and decreases the "furlough pay" number of days when we are calculating pay.

So for example if an employee was furloughed on 18 May and was also on annual leave from 18-28 May, I would say we calculate this as normal salary for 28/31 and furlough pay for 3/31. (Note that if an annual leave period crosses a weekend I think you include the weekend, as per lionofludesch's comment).

This seems to provide the right answer even if people don't work 5 days a week.

Any further thoughts? Are we there?!

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By ann domonkos
20th May 2020 13:08

I used the normal rate of daily pay because its what the EMPLOYEE is entitled to then worked out 80% of this and topped up the difference .
So on £24000.00 i would have said £91.95 ( 261days) per day the govt technically give you £73.56 so i would pay £18.39 as top up per day.

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By PandoraSleeps
20th May 2020 14:57

We have taken advice, and been advised that the legal position is that you calculate holiday pay in the usual way, but when calculating top up you compare it to the furlough pay based on calendar days.

So apparently it is correct to work out 1 day's leave based on 260 working days, then compare this to furlough pay x 1/31 and the top up is the difference.

Yes this may not make sense but it is what the law requires.

I give up!

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By lionofludesch
20th May 2020 15:04

PandoraSleeps wrote:

I give up!

I gave up a month ago.

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By PandoraSleeps
20th May 2020 15:10

lionofludesch wrote:

PandoraSleeps wrote:

I give up!

I gave up a month ago.

In the words of one of my clients, "At least there's wine"!

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