Share this content
11

Which furlough calculation(s) is/are correct?

If you can give a line or two to justify your choice or is another method is more appropriate?

Didn't find your answer?

Calculation of Furlough pay

Is there any calculation(s) that is/are totally wrong?  Why?

Started work 26/02/2020 Wednesday

Furloughed 21/03/2020 (last day of work Friday 20/3/20)

Earnings  £437.43  3 working days 

                £726.14  5 working days 

                £726.14   5 working days 

                £726.14   5 working days 

  Total Pay  £2615.85

 

Calculation of claim

Using HMRC example as variable pay

1) Earnings in year  £2,615.85

2) Number of days employed 24

3) 1 divide by 2 = £108.99 per day ie £762.93pw

4) Weekly furlough pay £576.92 Restricted to max as 80% of £762.93 is £610.34

Employers version 1

1) Earnings in year £2,615.85

2) Number of weeks employed 3.6  (First week pro rata)

3) Average per week £726.63

4) Weekly furlough pay £576.92 Restricted to max as 80% of £726.63 is £581.30

Employers version 2

1) Earnings in year £2,615.85

2) Number of weeks employed 4  (first week not pro rata)

3) Average per week £653.96

4) Weekly  Furlough (80% of £653.96) pay £523.17    Paid for first week of furlough only

For second and subsequent weeks recalculate based on earnings in the tax year to 5 April 2020

1) Earnings in year £2,615.85

2) Number of weeks employed 5

3) Average per week £523.17

4) Weekly Furlough pay (80% of £523.17) = £418.54

Replies (11)

Please login or register to join the discussion.

avatar
By Paul Crowley
08th Aug 2020 16:45

What were terms of employment? Three weeks the same, first week a couple of £ different using 3/5

Thanks (0)
Replying to Paul Crowley:
avatar
By hilllinda6
08th Aug 2020 19:04

Contract of employment started on the Wednesday, weekly payment. The first week was for 3 days (W/Th/F) out of 5 days (Mon- Fri). Somewhere along the chain I guess the figure has been written down wrong. Just ignore for the purposes of this unless you think it is significant in some way?

Simple run of mill employment contract.

Furlough agreement says as per HMRC guidelines (basically average wage pro ratad as necessary)

Thanks (0)
Replying to hilllinda6:
avatar
By Paul Crowley
08th Aug 2020 21:02

If weekly pay is fixed the weekly base figure should be £726.14, as is presumably the figure agreed when employed.
80% of £726.14 is £580.91.
Equivalent to £2517 per month so restriction applies: £576.92

Once restriction applies on basic pay the job is done

This is based on my understanding of full furlough

Happy to get put right, if I am wrong, by other responders

Thanks (3)
Replying to Paul Crowley:
avatar
By hilllinda6
08th Aug 2020 23:04

Thanks Paul, makes sense and very helpful.

Do you have any comments about any of the calculations?

And for absolute clarity I'm not trying to set a trap on this or even set any arguments going (!) I'm just interested on hearing peoples thoughts on the calculations.

All comments are welcome.

Thanks (0)
avatar
By Paul Crowley
08th Aug 2020 23:34

It does not appear that he is on variable pay. Do not think the average makes any sense. The rate that should be used is the rate of pay in February. I will even stick out my neck and say I consider all the workings to be incorrect.

Thanks (2)
Replying to Paul Crowley:
RLI
By lionofludesch
09th Aug 2020 10:52

Agree. This employee is on a fixed salary.

Thanks (3)
avatar
By psimonparsons
10th Aug 2020 17:21

What earnings were declared on FPS prior to 20th March and covering what period. If none then there is no furlough grant available for them. Else the basis will be on declared earnings for the reference period covered by that payment. When they worked has limited relevance, working days also limited relevance, what is more important is the commencement and what payments had been declared for 2019/2020 tax year.

If you are indicating that earnings are fixed, then variable would be incorrect and the basis is the regular earnings basis used up to 20th March and declared on FPS so reference pay ie £726.63. Grant being 80% of that if claiming on a weekly basis.

Thanks (1)
Replying to psimonparsons:
avatar
By hilllinda6
10th Aug 2020 18:59

Hi psimonparsons

There is no problem with regard to being on FPS. payments were made 6/13/20 and 27 March. So yes, there are many ways to work it out but again you come down on Furlough pay of £576.92 ie the maximum. Both "HMRC example as variable pay" and "Employers version 1" give this as well

And as HMRC say "HMRC will not decline or seek repayment of any grant based solely on the particular choice of pay calculation, as long as a reasonable choice is made."

Do you think Employers version 2 is a reasonable choice?

Thanks (0)
My photo
By Matrix
10th Aug 2020 19:41

I agree with Paul. Fixed rate employee capped at weekly equivalent of £2,500 pcm.

What did you actually claim and why are you revisiting now?

Thanks (1)
Replying to Matrix:
avatar
By hilllinda6
10th Aug 2020 23:37

Employer of a client used calculation "Employers version 2". I've been in correspondence with them since June and have explained clearly where their calculation has gone wrong but all to no avail. They are relying on a flawed "calculator" that is not fit for purpose. Their method is ok, and they can choose any reasonable method they want, but they haven't done any pro-rataing when partial weeks are involved and have averaged up to 5 April not furlough date, although for the first week they averaged up to the date of furlough!

My corrected calculation is "Employers version 1"

I'm sure you know what I'm doing now but just wanted to be sure that I wasn't going Bananas before it all moved on.
I hope you understand why I don't want to go into too much further detail.

Thanks for the comments

Thanks (0)
Replying to hilllinda6:
RLI
By lionofludesch
11th Aug 2020 18:39

hilllinda6 wrote:

Employer of a client used calculation "Employers version 2". I've been in correspondence with them since June and have explained clearly where their calculation has gone wrong but all to no avail. They are relying on a flawed "calculator" that is not fit for purpose. Their method is ok, and they can choose any reasonable method they want, but they haven't done any pro-rataing when partial weeks are involved and have averaged up to 5 April not furlough date, although for the first week they averaged up to the date of furlough!

My corrected calculation is "Employers version 1"

I'm sure you know what I'm doing now but just wanted to be sure that I wasn't going Bananas before it all moved on.
I hope you understand why I don't want to go into too much further detail.

Thanks for the comments

Yeah - but this bloke is on a fixed salary. He was only paid less in week 1 because he worked less.

His base pay is what he gets in a full week.

Thanks (2)
Share this content

Related posts