The wages claim to HMRC will be a pro rata claim based on 80% of salary, subject to the cap which is £2,500 per month. This cap will decrease from September when employers will have to meet 10% of the wage costs for furloughed employees, rising to a 20% contribution in October. The claim will be based on the proportion of hours not worked by a particular employee compared to their normal working hours.
The employer therefore needs to have certainty about the number of hours the employees are working, which will present a challenge for submitting any advance claims. If the employee works more hours than reported on the claim to HMRC, the employer will have to repay some of the grant.
For employees with fixed hours and pay, the reference period to be used for comparing their hours to normal working hours is the pay period before 19th March 2020. The calculation process here for working out the number of usual hours for each pay period is as follows:
- Start with the employee’s contracted hours at the end of the last pay period ending on or before 19th March 2020.
- Divide by the number of calendar days (including non-working days) in the repeating working pattern.
- Multiply by the number of calendar days in the pay period (or part-period) which is claimed for.
- Round up to the next whole number if the outcome is not a whole number.
In this calculation, the employer should disregard any days taken as annual leave, sick leave or family-related statutory leave.
The reference period for employees with variable pay is the higher of (a) the average number of hours worked in the 2019-20 tax year, or (b) the equivalent calendar period in the 2019-20 tax year (e.g. July 2019).
The HMRC guidance contains a series of worked examples showing how to make these calculations.