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Would anyone like to check my furlough calculation

Just trying to work out appropriate amounts to pay

Didn't find your answer?

This is my attempt at a furlough calculation (with some roundings)

Current Gross Salary £2000

Employee pension (salary sacrifice) £100

Employer pension £60

NI Free amount £719

NI payable on £1181

ERS NI £163

Total employer cost £2000 + £60 + £163 = £2223

Rebate available 80% £1778

Thus

Estimated new Gross £1617

New ees pension £81

New ers pension £49

New NICable pay £817

New NIC £113

New total cost £1779

Therefore cost neutral

Replies (38)

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By jonibarnes
26th Mar 2020 08:02

Looks good to me, I would assume the payslip just has 80% of gross pay? The eyers nic and pension will be claimed back through the new portal.

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Replying to jonibarnes:
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By jonibarnes
26th Mar 2020 08:27

What I mean to say is I agree with your manual calc, and to achieve that we just need to put 80% gross pay into the software which will then work out 80% eyers ni & pension. The next step will be to lift 80% gross pay, eyers Ni & pension from the payroll software to the portal. Quite how this interacts with the monthly PAYE payments who knows. Anyway I’m rambling probably none of the above makes sense.

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Replying to jonibarnes:
A Putey FACA
By Arthur Putey
26th Mar 2020 08:57

In the nicest possible way, it probably doesn't. We don't know how the portal will work. If I were designing it I would want the employer to enter the normal 100% pay details (which could then be cross checked to the RTI submission) then it would determine the 80%. Even if it turns out that the employer doesn't have to pay a furloughed worker their full pay, if the 80% applies I don't see how an employer could receive more than 80% of their actual costs.

Those who reduce the payrolled pay to 80% then try and claim 100% of that may find they shouldn't have done it like that.

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Replying to Arthur Putey:
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By tom123
26th Mar 2020 09:05

But surely, if you enter 100% and pay 80% the employees taxable income and tax would be incorrect?

In the event of employer topping up to full pay I guess it makes no difference

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Replying to tom123:
A Putey FACA
By Arthur Putey
26th Mar 2020 10:11

It doesn't help at the moment that the guidance to employers says that employment contracts prevail, but the guidance to employees suggests the 20% is optional! But whatever the employer does pay ought to be put on payroll, and I can't see how the employer would ever get more than 80% of that (whatever "that" turns out to be).

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Replying to Arthur Putey:
A Putey FACA
By Arthur Putey
26th Mar 2020 10:15

PS - tax and NI therefore follow the gross pay, otherwise there will be (even more) problems with peoples PAYE records down the line.

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Replying to Arthur Putey:
By [email protected]
30th Mar 2020 11:17

The furlough staff payroll process will be operated on a portal separate from our conventional software. I believe the process will be
1) HMRC will expect us to enter the employees normal working hours/ salary or average hours
2) you will be asked whether you are topping up the 80% payable with a 20% from your business
3) PAYE will be calculated as normal
4) NET Pay is paid to employee
5) Employer pays the pension taxes etc to Pension provider and HMRC as normal
6) the 80% will come from hmrc directly in to your bank account
7) the 80% received is treated as other (taxable) income on your p&l account

It’s simple, complex part is having the cash flow to implement this.

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Replying to jonibarnes:
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By tom123
26th Mar 2020 09:03

Thanks - in my example a straight 80% of gross into payroll would be fine.

However, I am trying to work out a process to suit rates of pay nearer to (and above) the reimbursement cap.

In my case (with salary sacrifice of 3%) I think the maximum gross will be £2238, leading to a total employment cost of £2499

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Replying to tom123:
A Putey FACA
By Arthur Putey
26th Mar 2020 10:16

I still can't see how you'd get the £2499 back! I think you'd only get 80% of it. Boy this is going to be fun!

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Replying to Arthur Putey:
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By AthollAccounts
30th Mar 2020 09:58

The guidance released on Thursday by HMRC confirms that you can claim 80% of the regular wage plus associated pension and NIC contributions, so you would get the same whether you pay 80% or 100% wages

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By hje
26th Mar 2020 11:48

Frankly all of this is pointless until HMRC show us.

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Replying to hje:
By northernmonkey
26th Mar 2020 12:01

Agree! Why bother making assumptions and use guesswork? Just wait till the formal guidance comes out.

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Replying to northernmonkey:
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By tom123
26th Mar 2020 12:19

But I need to put staff on Furlough from next Wednesday 1st April, and tell them what their gross pay is going to be.

I need to do this in a cost neutral way - I cannot just put everyone on 80% of whatever the gross is and get whatever comes back.

Thanks (1)
Replying to tom123:
RLI
By lionofludesch
26th Mar 2020 13:05

tom123 wrote:

But I need to put staff on Furlough from next Wednesday 1st April, and tell them what their gross pay is going to be.

I need to do this in a cost neutral way - I cannot just put everyone on 80% of whatever the gross is and get whatever comes back.

To be fair, Tom, in your example 80% of £2000 would be £1600 gross and you have £1617. It's a margin of error of 1%.

Nobody knows the answer, although we all have opinions. Go with your gut feeling.

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By Scott Bradshaw
26th Mar 2020 12:12

I agree with that calculation and hope this will be the case, but I've a feeling it will turn out that employers will need to pay salaries in full and reclaim 80% of them when the portal opens. I hope not as we've already done weekly payrolls at 80% pay and set an 80% Furlough pay item up in Xero for all clients!

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blue
By mg200
26th Mar 2020 13:12

It seems as though some people think the govenment have announced that employers can pay furloughed workers 80% of their normal pay and then claim 80% of that 80% back. But that's not the case.

Pay 80% and then claim this back from HMRC. If you want to pay the other 20% go ahead but it doesn't affect the reclaimed amount.

Thanks (5)
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By jonibarnes
26th Mar 2020 13:30

As pointed at we should wait for the guidance, however i just cant help myself! if we pay the 100% and claim back the 80% what happens to the 20% in the accounts?

I see it as a agreed reduction in pay - which is why I think only 80% needs to be paid

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Replying to jonibarnes:
RLI
By lionofludesch
26th Mar 2020 14:55

jonibarnes wrote:

As pointed at we should wait for the guidance, however i just cant help myself! if we pay the 100% and claim back the 80% what happens to the 20% in the accounts?

The accounts ? If you pay the 20%, claim it as an expense.

Surely this isn't an issue. Don't we have enough problems here without making more up ?

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RLI
By lionofludesch
26th Mar 2020 14:02

For what it's worth, the original announcement said pay 80% of wages. Not "an amount that will give you 80% of the employment costs you had before you put the employee on furlough".

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By SteveHa
26th Mar 2020 15:07

For crying out loud, how many more of these threads.

Neither payroll nor RTI are geared up for this at the moment, and without detailed guidance, no-one knows.

For the time being, just make sure furloughed pay is easily identified in the payroll, and then adjustments can be made once we have the detail.

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Replying to SteveHa:
A Putey FACA
By Arthur Putey
26th Mar 2020 15:23

I agree, we don't know. But meanwhile there is no need to introduce the concept of "furloughed pay". The employee will be identified as furloughed and reported as such in due course via the portal, and their pay will be their pay, there's no need for changes in the payroll process. I hope! You do the payroll journal as normal and when the grant arrives you credit it to a non trading income account, or whatever.

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Replying to Arthur Putey:
RLI
By lionofludesch
26th Mar 2020 15:51

Arthur Putey wrote:

I agree, we don't know. But meanwhile there is no need to introduce the concept of "furloughed pay". The employee will be identified as furloughed and reported as such in due course via the portal, and their pay will be their pay, there's no need for changes in the payroll process. I hope! You do the payroll journal as normal and when the grant arrives you credit it to a non trading income account, or whatever.

Sure - pay is pay. But I believe it's convenient for me to record the furloughed pay separately. One day, I'll need that information.

On the accounting point, as far as I'm concerned it's a reduction in payroll costs, as a grant specifically related to certain expenditure.

Thanks (1)
Replying to lionofludesch:
A Putey FACA
By Arthur Putey
29th Mar 2020 15:46

I'm not disagreeing with the accounting principle, but what gov.uk now says is surprisingly at odds:

"They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles."

Never knew accountancy could be so interesting!

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Replying to Arthur Putey:
RLI
By lionofludesch
29th Mar 2020 16:04

Arthur Putey wrote:

I'm not disagreeing with the accounting principle, but what gov.uk now says is surprisingly at odds:

"They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles."

Never knew accountancy could be so interesting!

Nobody at HMRC has read FRS102 then.

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Replying to Arthur Putey:
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By meadowsaw227
27th Mar 2020 10:14

Moneysoft has issued guidelines stating you show "furloughed" pay as a separate addition .
We have filed a few clients showing just the 80% in the furloughed pay column and then being subject to tax/ni/ae .
Presumably at later date HMRC and the portal can be checked side by side to see if they agree ! .

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Routemaster image
By tom123
26th Mar 2020 15:44

Letters have now gone out, based on my original thinking.

Thanks etc,

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Replying to tom123:
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By lionofludesch
26th Mar 2020 15:52

Good luck !!

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Replying to tom123:
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By ColinNibbs
30th Mar 2020 10:06

So how do we get these letters when they will go to the office, but I am working from home, and cannot collect the post.

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By ted.henderson
27th Mar 2020 13:26

Just sent to employers

" Employers can apply for " Employers can apply for grants of 80% of furloughed employees' (employees on a leave of absence) monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage, provided they keep the worker employed."

So, we are now calling it 'leave of absence'.

80% of .... wage costs, up to £2,500 a month
plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage

---sounds like 80% of wages paid (not contracted) + the whole of the NI and pension contribs on that wage

Still unclear. (employees on a leave of absence) monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage, provided they keep the worker employed."

So, we are now calling it 'leave of absence'.

80% of .... wage costs, up to £2,500 a month
plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage

---sounds like 80% of wages + the whole of the NI and pension contribs on that wage

Still unclear.

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Replying to ted.henderson:
RLI
By lionofludesch
27th Mar 2020 14:23

I'm not even going to spend time worrying about NI and pension costs where the employer pays more than furlough rates.

Is the furlough the top slice of the pay ? Or the bottom slice ? Or do we take an average ?

I'm going to guess .....

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
27th Mar 2020 16:59

If it is any help, HMRC issued new guidance last night on the Job Retention Scheme. It does offer more detail, but not on the specific calculations and other issues raised here, I'm afraid. We're collecting questions for HMRC and will seek answers from them next week.
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus...

Thanks all for your interest and input on this thread. Stay well.

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By TableandChairs
27th Mar 2020 20:15

Just to add to this thread instead to starting a new one...

One of my questions I would like to add to the list is, how about splitting a monthly payroll if employee is furloughed part way through the month (and returns again part way through another month).

Also I see in the new guidance, that commissions are to be excluded, however our sales staff their salary is nearly 75% commission. We furloughed staff before the extra guidance, so agreed we'd pay 80% of an average wage including commissions. It would be a significant hit if we couldn't get that back.

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Replying to TableandChairs:
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By lionofludesch
27th Mar 2020 20:34

Afraid you have that significant hit.

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Replying to TableandChairs:
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By lionofludesch
27th Mar 2020 20:34

Duplicate

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By ColinNibbs
30th Mar 2020 10:02

There is going to be one heck of a lot of fraud here. For example, many businesses will be claiming furlough, even though their employees are still working, albeit from home. I know of one accountancy firm who is doing it (washes mouth out with soap and water!).

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By pauljohnston
30th Mar 2020 10:50

So for us accountants there are going to a lot of enquiry's once this Virus crisis is passed for the the misclaims (FRuand?). Whoppee more fees

Furloughing 80%. What I am doing it telling employers pay 80% and will update the info if HMRC comes out with a different calculation

Lets hope some sort of normality resumes in JUne

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By TonyCS
19th Apr 2020 11:39

Hello, just a query regarding furlough pay. We have done employees with fixed salary. We paid them in full in March run (pay period 01.03.20 to 31.03.20) even though we put them on furlough on 16th March.
My question is: I can claim back 80% of their pay from the 16th March to the 32st March but I guess I don’t need to show this figure on their April payslip otherwise I would be duplicating it. Is that correct?

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Replying to TonyCS:
RLI
By lionofludesch
19th Apr 2020 12:49

TonyCS wrote:

My question is: I can claim back 80% of their pay from the 16th March to the 31st March but I guess I don’t need to show this figure on their April payslip otherwise I would be duplicating it. Is that correct?

Of course not.

What put that doubt in your mind ?

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