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Furloughing: Has the ICAEW got it sums wrong?

How much NIC can be reclaimed when salary is below £2,500?

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Would anyone care to support or to gainsay the proposition that the ICAEW has made an error in Illustration 1 of this guidance:

https://www.icaew.com/insights/viewpoints-on-the-news/2020/mar-2020/coronavirus-job-retention-scheme-furlough-guidance

The illustration as it appears in the guidance as at the time of posting is pasted below.

DISCUSSION

The guidance is I think correct to say “Plus employers' NIC on this amount”, but this amount is £1,600 and the NIC on £1,600 is £122.

Thus the claim should be for £1,722 and not £1,777. The net cost to the employer is £455 and not £400.

EXTRACT from the guidance:

Illustration 1

X Ltd employs Mr A at an annual salary of £24,000, so £2,000 per month. Mr A has opted out of auto enrolment.

Each month, Mr A currently receives net pay of £1,655 which is after deducting PAYE of £191 and employees NIC of £154. On this salary, the employer pays employers' NIC of £177.

The available grant for the employer is the lower of

(a) 80% of £2,000, and 

(b) £2,500

Plus employers' NIC on this amount

So X Ltd claims a grant of £1,600 plus £177 = £1,777.

The net amount of cash required by X Ltd to furlough Mr A based on maintaining the existing salary is £2,000 + £177 - £1,777 = £400 per month.

It is a matter for employment law whether the employer is actually required to pay this top up. Employees and employers can agree to a different arrangement during the furlough.

Replies (3)

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By Matrix
30th Mar 2020 06:54

Yes I would also assume that you would only get back the employer’s NI on the 80%, not the whole salary.

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Replying to Matrix:
ALISK
By atleastisoundknowledgable...
30th Mar 2020 08:27

Matrix wrote:

Yes I would also assume that you would only get back the employer’s NI on the 80%, not the whole salary.

A fairly reasonable assumption given that there’s no obligation to pay the top-up.

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By the_drookit_dug
31st Mar 2020 16:48

If someone is furloughed part way through a month, do you pro-rata the Er's NI threshold?

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