Furlough Pay - more info

100% or 80% of 100%

Didn't find your answer?

Probably missing something pretty obvious - but I can't find it.

Can someone point me to the definitive guidance which says that employees on furlough can have their wages reduced to 80% and HMRC will refund 100% of this 80%.

The only guidance I have found says, "HMRC will reimburse 80% of their wages, up to £2,500 per month."

I have read two interpretations of this:

1. Employer pays 100% and HMRC reimburses 80% of what is paid

2. Employer reduces pay to 80% and HMRC pays 100% of this

There are questions on this page referring to "current government guidance" but I can't find it. 

Replies (14)

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blue sheep
By NH
25th Mar 2020 07:49

We do not know yet until the detailed guidance is released

This question keeps being asked on here again and again and again - AWeb can we please have some control here of the same threads coming up multiple times a day

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By jpcentral
25th Mar 2020 08:27

No one has come up with an answer. However, I think I have, eventually found it:

"You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to."

This is from the Guidance for employees - https://www.gov.uk/government/publications/guidance-to-employers-and-bus...

To answer my own question - an employer can reduce salaries to 80% and receive 100% of that from HMRC.

It mentions "all employment costs" so don't know at this stage whether that means Employer NI, pension etc.

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Replying to jpcentral:
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By FCCAATTTONY
25th Mar 2020 09:02

My understanding of that is,

The employer can choose whether or not to pay anything above the £2500 limit.

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Replying to FCCAATTTONY:
By Duggimon
25th Mar 2020 10:29

Your understanding is flawed, the point of the top-up comment is that a salaried worker who would have been made redundant can be furloughed. Their salary remains as it was prior to the furloughification, at least as a conceptual amount.

The government will pay 80% of the furloughificated salary. The employee will be getting 20% less than they did before being furloughenised. The employer may pay this 20% or may choose not to. That is the top-up. This top-up may also include amounts above the £2500 limit, but for anyone earning less than £3,125, the top-up is just the missing 20%.

If they choose not to, they had better have had something in the employment contract saying they are allowed to not pay it, or have come to some sort of an agreement with the employee that it's ok to not pay it, because otherwise they're probably in breach of contract. I'm no employment law expert though, maybe there's standard clauses in most employment contracts rendering this point null.

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Replying to Duggimon:
Universe
By SteveOH
25th Mar 2020 11:08

A brilliant and concise reply, although I detect a few made up words there :):):)

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Replying to Duggimon:
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By rockallj
25th Mar 2020 16:23

I think FCCAATTTONY has it spot on.

As the employer cannot provide work, under the CoE they are still obliged to pay 100% pay to the employee. The furloughing bit with the grant is for HMRC to bear 80% of the cost.

This is why the employee has to agree to the reduction, otherwise the employer has breached the contract. The furloughing is effective a temporary waiving of the obligation to pay 100%, unless the employer wishes to do so.

I'm no lawyer, but that is how I understand it.

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By FCCAATTTONY
25th Mar 2020 10:06

Comprehensive details on the scheme below:

https://www.ft.com/content/bd63d562-6d1b-11ea-89df-41bea055720b

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Replying to FCCAATTTONY:
blue sheep
By NH
25th Mar 2020 10:14

I think I am going for a long walk! - this is not comprehensive details, this is the same info that has been out there for a few days (still not shouting)

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Replying to FCCAATTTONY:
By Duggimon
25th Mar 2020 10:22

Some previously unknown definition of 'comprehensive' being applied here.

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By colinwain
25th Mar 2020 10:40

I'm getting loads of client questions at the moment about this, where there are directors who are paid approx. £8k pa each year every March, and are on annual payroll schemes which are just about to be run.

The issues I can see are:

-can directors actually be furloughed, unless they resign their directorship (difficult for a sole director company)
- I am reading that the basis of the furlough pay is the person's February salary, which is presumably £nil for the annual scheme director.

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By colinwain
25th Mar 2020 10:46

There are small business clients who are telling me that they are furloughing their workforce as they are having to shut, and that they will pay their furloughed staff in April when the government grants for this scheme come through in cash. I didn't think that this was how this was supposed to be working, I thought that the employer would have to carry on paying staff salaries, in order to justify the later furlough claims?

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Replying to colinwain:
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By legerman
25th Mar 2020 18:04

colinwain wrote:

There are small business clients who are telling me that they are furloughing their workforce as they are having to shut, and that they will pay their furloughed staff in April when the government grants for this scheme come through in cash. I didn't think that this was how this was supposed to be working, I thought that the employer would have to carry on paying staff salaries, in order to justify the later furlough claims?

If this has been negotiated with the employees, and the employee has agreed, then I don't see an issue. You still put the pay through RTI, the employee becomes a creditor, and is paid once the money is grant is received.

The alternative is to put the employee on the dole.

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By youngloch
25th Mar 2020 11:50

I would add to that question as I read that employers wage costs would be reimbursed up to a cap of £2500.

The issue for me, and questions from more on the ball clients (with a standard answer it seems right now of "we don't know") is:

Does this include Employers NIC
Does this include Employers Pension contributions
Is £2500 gross or net

I assume we will physically payroll the payment to be made so, if the employer is only going to pay the 80% then that is all that would go through as otherwise, accounting-wise, you're going to have a wage creditor that is not going to be paid.

In the meantime how can any of us consider running payrolls, and committing via submission............

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By colinwain
25th Mar 2020 12:31

ICAEW have now produced guidance on this, as far as they know at this stage:

https://www.icaew.com/insights/viewpoints-on-the-news/2020/mar-2020/coro...

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