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Furlough payment for employees on variable pay

Calculating furlough payment for commission based employee

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Hi,

I have a client who has few employees who get paid basic + commission on top based on sales that they generate. The employees were palced on furlough on 15th March. I understand that for someone who is on variable pay, their furlough has to be calculated by looking at same month's wages from previous year or average monthly wages for 19/20 tax year and we claim 80% of whichever is highest. What I need clarification is whether these rules apply for only March 2020 ? And how do we calculate furlough from April onwards. Do we calculate on the same basis or do we just take 80% of basic salary in April (as they were not getting any commission in April).

Any help will be appreciated.

Kind regards

 

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By Matrix
28th May 2020 17:11

No for April you compare to April 2019 if it is a variable employee.

Do you mean the client already paid them just the basic for April and are only working out the furlough claim now? If the employer is only able to pay the basic under their contracts then maybe they are fixed rate employees. In any case, if the furlough claim is higher, I assume the employer knows they have to pay this to the employees.

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By G JAin
28th May 2020 20:14

Thanks.
For April & May there was no commission to pay because there were zero sales. They are in travel industry and there were no bookings at all. Hence the client paid only basic per the employment contract. The employment contract says they will get 10% commission if they do minimum £10k worth of sales. So question is what should be the furlough payment for April and May? 80% of basic or do we look at April 19 & May 19 and so on?
Also, if the contract says they get commission only if they hit £10k, then is it non discretionary at all?

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By jcace
28th May 2020 20:25

Here's what the guidance says:
"When you’re working out if a payment is non-discretionary, only include payments which you have a contractual obligation to pay and to which your employee had an enforceable right.

When variable payments are specified in a contract and those payments are always made, then those payments may become non-discretionary. If that is the case, they should be included when calculating 80% of your employees’ wages."

From what you have said, the commission paid is not discretionary, but arises from a contractual obligation. If it is paid regularly, I would treat the employee(s) as being on variable pay.

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By G JAin
28th May 2020 20:53

Thanks. In April as well as in May, there are no commission payments because of zero sales. Does that not make it discretionary? The employer does not have to pay it because of no sales. The employment contract says they will get 10% only if they hit £10k of sales else only the basic pay.

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JCACE
By jcace
29th May 2020 00:31

If the contract requires the employer to pay commission if a target is met, then there is no discretion - it's a contractual requirement. Similarly, overtime is payable only if extra hours are worked, and then at a given rate. No extra hours worked = only the basic.

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By G JAin
29th May 2020 10:40

So for April & May 20 would we look back at April 19 & May 19 to calculate furlough amount, keeping in mind there was no commission and only basic paid in those months?

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JCACE
By jcace
29th May 2020 11:08

G JAin wrote:

So for April & May 20 would we look back at April 19 & May 19 to calculate furlough amount, keeping in mind there was no commission and only basic paid in those months?


Calculate the average monthly earnings in 2019/20 to the earlier of the day before they were furloughed or 5 April 2020. Compare this with the amount from the equivalent pay period a year ago and take 80% of the higher amount.
Full instructions can be found at https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim...
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By Wanderer
29th May 2020 07:37

G JAin wrote:

Hence the client paid only basic per the employment contract.

G JAin wrote:

Thanks. In April as well as in May, there are no commission payments because of zero sales. Does that not make it discretionary? The employer does not have to pay it because of no sales. The employment contract says they will get 10% only if they hit £10k of sales else only the basic pay.

Stop, stop, stop looking at the April & May 2000 commission calculations, you are looking at the wrong year! As part of your overall calculation you need to look at April & May 2019. Thoroughly read the rules before you proceed.
https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

Based on what you've posted so far your CJRS claim calculations will possibly completely fail to satisfy the rules resulting in no reimbursement whatsoever.

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