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Furloughing and overtime pay?

Furloughing and overtime pay?

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I have a client who has fuloughed their employees this week. 

The employees earn basic pay every week, and then they also do overtime at variable hours each week, occasionally no overtime, but in the main they do overtime as well.

The employees have no formal contract of employment, so nothing to look up there.  The overtime is not guaranteed, but in the main always do some, even if it is just 1 hour.

As I believe they are relying on this overtime for their normal standard of living, in calculating their 80% of gross pay, should I include basic pay and overtime in this instance with it forming part of their normal pattern?  

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By lesley.barnes
31st Mar 2020 15:30

The guidence doesn't mention overtime but expressly excludes other payments such as bonuses, commission and fees. It mentions "regular wages" My vote is no you can't include overtime because it isn't part of their regular wage and varies as and when it is required.

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Replying to lesley.barnes:
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By paul.benny
31st Mar 2020 16:58

I vote yes you can include overtime:
(a) it's not explicitly excluded in the way that bonuses are
(b) if overtime were excluded, employers would not be able to claim for workers on zero-hours contracts

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Replying to paul.benny:
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By lesley.barnes
01st Apr 2020 10:14

I think it would be too risky for this poster to advise her client that they can count overtime as part of wages and run the payroll on that basis, even if it does cause the employees hardship. Once HMRC have developed their website all might become clear (or not as the case might be). If she advises that overtime is included and her client pays staff on that basis and then only gets 80% of their wages back the client might look to claim the difference from her insurance for bad advice. If HMRC advise that overtime is included at a later date happy days she can correct payroll them. I would go on the side of caution with so much unknown at the moment.

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JCACE
By jcace
31st Mar 2020 16:27

Until we have something definitive, we are guessing somewhat.
However, the guidance states "At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month.....For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.....If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:
the same month’s earning from the previous year
average monthly earnings from the 2019-20 tax year etc etc"

There certainly appear to be some inconsistencies within the guidance.

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By Carolynne
01st Apr 2020 15:08

The more I have thought about overtime, I have come to this conclusion.

If someone takes maternity leave, under statutory pay, you would pay them 90% of their average pay of the last 8 weeks in their qualifying week. (Which would include any overtime earned).

If someone takes a holiday on variable pay, you would look at the last 3 months of their average pay to work out this statutory pay also (which again would include any overtime earned).

Surely therefore, as this is a statutory payment under the Furlough Scheme, would this same principle not apply, that as overtime is not mentioned as an exclusion, and that as the 'average figure from their regular wage' is mentioned, that it would be deemed overtime should be included with their basic pay calculation, as it forms part of their regular pay each week anyway.

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