Flexible Furlough - Calculating Employee Hours

3rd Jul 2020
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The government has reshaped the Coronavirus Job Retention Scheme to become more flexible with part-time furloughing of employees now being permitted. From 1st July, employees can work some of the week and be furloughed for the remainder, in proportions to be agreed with their employer.

When claiming for employees who are flexibly furloughed, employers are required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked.

  • If your employee is fully furloughed, you do not need to work out their usual and furloughed hours. An employee is fully furloughed if they do not do any work for you during the claim period.

  • If your employee is flexibly furloughed, you’ll need to work out your employee’s usual hours and record the actual hours they work, as well as their furloughed hours for each claim period. 

Calculating Employee’s Usual Hours

In determining an employee's 'usual hours' for the purpose of your CJRS claim, HMRC has provided comprehensive guidance to follow which can be accessed here

There are two different calculations you can use to work out your employee’s usual hours, depending on whether they work fixed or variable hours.

You should follow HMRC's guidance for calculating usual hours for employees who work variable hours, if either:

  • Your employee is not contracted to a fixed number of hours, or
  • Your employee’s pay depends on the number of hours they work

If none of these apply, you should follow HMRC's guidance for calculating usual hours for employees who are contracted for a fixed number of hours.

The employee’s working pattern does not have to match their pay period (for example, an employee could be contracted to 40 hours a week, but be paid monthly).

a) Fixed number of hours & whose pay is not dependent on the number of hours worked 

For employees contracted to work a fixed number of hours or who's pay does not vary, you need to calculate the usual hours for each pay period, or part of a pay period, that falls within the claim period.

To calculate the number of usual hours for each pay period (or partial pay period):

  • Start with the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020.
  • Divide by the number of calendar days in the repeating working pattern, including non-working days.
  • Multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for.
  • Round up to the next whole number if the outcome isn’t a whole number.

If an employee with fixed hours was on annual leave, off work sick or on family-related statutory leave at any time during the last pay period ending on or before 19 March, the usual hours should be calculated as if the employee had not taken that leave.

b) Where pay varies by the amount of time worked

Where the pay varies by the amount of time worked, you need to calculate the usual hours for each pay period, or part of a pay period, that falls within the claim period.

The ‘usual hours’ in this case will be calculated based on the higher of either:

  • the average number of hours worked in the 19/20 tax year, or
  • the corresponding calendar period in the 19/20 tax year

When you calculate the usual hours, you should include:

  • any hours of leave for which the employee was paid their full contracted rate (such as annual leave), and
  • any hours worked as ‘overtime’, but only if the pay for those hours was not discretionary

Full HMRC guidance on 'ascertaining usual hours' is available on the gov.uk website.

Calculating Employee’s Furloughed Hours

As well as submitting data on the usual hours an employee would be expected to work in a claim period, you will also be required to specify the number of furloughed hours for each employee when making a CJRS claim. Once you have agreed how many hours your flexibly furloughed employee is going to work in the claim period, they will be furloughed for the rest of their 'usual hours'.

If you claim in advance and your employee works for more hours than you agreed, then you’ll have to pay some of the grant back to HMRC. This means that you should not claim until you have certainty about the number of hours your employees are working during the claim period.

Interested in finding out more about the new changes to the Coronavirus Job Retention Scheme? Watch our webinar on-demand where we discuss flexible furlough, the wind-down of the scheme and changes to making a CJRS claim. 

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