Coronavirus: Work Out 80% Of Your Employees’ Wages To Claim Through The Coronavirus Job Retention Scheme
Find out how to calculate 80% of your employee’s wages, National Insurance Contributions and pension contributions if you’ve furloughed staff due to coronavirus (COVID-19)
You can claim for 80% of your employee’s wages (even for employees on National Minimum Wage) – up to a maximum of £2,500 per month.
You’ll still need to pay employer National Insurance and pension contributions on behalf of your furloughed employees, and you can claim for these too.
You cannot claim for:
- additional National Insurance or pension contributions you make because you choose to top up your employee’s wages
- any pension contributions you make that are above the mandatory employer contribution
You must check that you can use the scheme first.
You can choose to top up your employees’ wages, but you do not have to. Employees must not work or provide any services for the business while furloughed, even if they receive a top-up wage.
Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they are written to confirming their furloughed status.
Use the calculator
The following calculator can currently be used to work out what you can claim for most employees who are paid the same amount each pay period (for example, weekly or monthly).
The exceptions to this are if employees:
- receive any top-up pay in the claim period
- returned from statutory leave such as maternity leave in the last three months
- get director’s payments
- have been transferred under TUPE
- have been employed at separate times throughout the year
- receive employer pension contributions outside of an auto-enrolment pension scheme
Use the Coronavirus Job Retention Scheme calculator
If you cannot use the calculator, you’ll need to work out what you can claim manually using the calculation guidance or by seeking professional advice.
It’s your responsibility to check that the amount you’re claiming for is correct.
What to include when calculating wages
The amount you should use when calculating 80% of your employees’ wages is regular payments you are obliged to make, including:
- regular wages you pay to employees
- non-discretionary overtime
- non-discretionary fees
- non-discretionary commission payments
- piece-rate payments
You cannot include the following when calculating wages:
- payments made at the discretion of the employer or a client – where the employer or client was under no contractual obligation to pay, including:
- tips
- discretionary bonuses
- discretionary commission payments
- non-cash payments
- non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay
The entirety of the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.
Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.
Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements if the relevant employment contract is updated accordingly.
Apprenticeship Levy and Student Loans
Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the Job Retention Scheme do not cover these.
National Minimum Wage
Individuals are only entitled to the National Living Wage, National Minimum Wage or Apprentices Minimum Wage for the hours they are working or treated as working under minimum wage rules.
This means that furloughed workers who are not working can be paid the lower of 80% of their wages or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage.
However, time spent training is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage, taking into account the increase in minimum wage rates from 1 April 2020. As such, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. Where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.
Where a furloughed worker is paid close to minimum wage levels and asked to complete training courses for a substantial majority of their usual working time, employers are recommended to seek independent advice or contact Acas.
If you’re claiming for a member of a Limited Liability Partnership (LLP)
If a member of an LLP is treated as an employee (because of salaried members rules), you must only include payments that are either:
- fixed
- variable, but are varied without reference to the overall amount of the profits or losses of the LLP
- not affected by the overall amount of the LLP’s profits or losses
Holiday pay
Furloughed employees continue to accrue leave as per their employment contract.
The employer and employee can agree to vary holiday entitlement as part of the furlough agreement, however, almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.
Employees can take holiday whilst on furlough. Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.
Employers will be obliged to pay additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need. This applies for both the furlough period and the recovery period.
If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.
During this unprecedented time, we are keeping the policy on holiday pay during furlough under review.
Employees returning from family-related statutory leave
Family-related statutory leave includes maternity leave, paternity leave, shared parental leave, adoption leave, parental bereavement leave and unpaid parental leave.
In line with other employees, claims for full or part-time employees furloughed on return from family-related statutory leave should be calculated against their salary, before tax, not the pay they received whilst on family-related statutory leave. The same principles apply where the employee is returning from a period of unpaid statutory family-related leave.
Claims for those on variable pay, returning from statutory leave should be calculated using either the:
- same month’s earning from the previous year
- average monthly earnings for the 2019 to 2020 tax year
Employees returning to work after being on sick pay
In line with other employees, claims for full or part-time employees furloughed on return to work after time off sick should be calculated against their salary, before tax, not the pay they received whilst off sick.
Claims for those on variable pay, returning to work after time off sick should be calculated using either the:
- same month’s earnings from the previous year
- average monthly earnings for the 2019 to 2020 tax year
Unpaid sabbatical or unpaid leave
If your employee has been on unpaid sabbatical or unpaid leave, you’ll need to use the amount they would have been paid if they were on paid leave when calculating 80% of their wages.
Work out the maximum wage amount you can claim
The maximum wage amount you can claim is £2,500 a month, or £576.92 a week, plus any National Insurance and pension contributions you can claim for.
If the length of time you’re claiming for is not one week or one month, you’ll need to use the daily maximum wage amounts to work out the maximum amount you can claim for each employee.
To work out the maximum amount you can claim, multiply the daily maximum wage amount by the number of days your employee is furloughed for in your claim.
| Month | Daily maximum wage amount |
|---|---|
| March 2020 | £80.65 per day |
| April 2020 | £83.34 per day |
| May 2020 | £80.65 per day |
If your employee is furloughed over two calendar months, you’ll need to calculate the maximum amount for each calendar month and add them together.
If you’re claiming for multiple pay periods in one claim, you can calculate the total maximum using a mixture of:
- the daily maximum wage amount
- the weekly maximum wage amount
- the monthly maximum wage amount
If your employee is furloughed over two calendar months, you’ll need to calculate the maximum amount for each calendar month and add them together.
If you’re claiming for multiple pay periods in one claim, you can calculate the total maximum using a mixture of:
- the daily maximum wage amount
- the weekly maximum wage amount
- the monthly maximum wage amount
See an example calculation of working out the maximum wage amount for part of a pay period
Work out 80% of your employee’s usual wage
You must use these calculations to work out how much you can claim.
A calculator will be available from 20 April 2020 to assist you in calculating how much you can claim.
The way you should work out 80% of your employee’s usual wages is different depending on the way they’re paid. You must check what you can include as wages first.
Choose the calculation you think best fits the way your employee is paid. For example, if you pay your employee a regular salary, use the calculation for fixed pay amounts. 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 of approach is made.
You must pay the full amount of the grant to your employee.
Where a claim covers multiple pay periods, this calculation should be done for each and then added together.
Work out 80% of wages for fixed-rate full or part-time employees on a salary
Where a claim covers multiple pay periods, this calculation should be done for each and then added together.
Claim for the 80% of the employee’s wages, from their last pay period before 19 March 2020.
If you have already calculated your claim based on the employee’s wages as of 28 February 2020, and this differs from their wages in their last pay period prior to 19 March 2020, you can choose to still use this calculation for your first claim.
To work out 80% of your employee’s wage:
1) Start with your employee’s wages, which is their last pay period before 19 March – if you’re claiming for a full pay period, skip to step 4.
2) Divide by the total number of days in the pay period.
3) Multiply by the number of furlough days in the pay period.
4) Multiply by 80%.
See an example calculation
If your employee has not been paid for a full pay period up to 19 March 2020
If your employee has not been paid for a full pay period up to 19 March 2020, you’ll need to work out what their usual wages are and then calculate 80%. To do this:
1) Start with the amount they’ve been paid in their last pay period.
2) Divide by the number of days in their last pay period (including non-working days).
3) Multiply by the number of days that would have been in that pay period.
4) Divide by the total number of days in this pay period.
5) Multiply by the number of furlough days in this pay period.
6) Multiply by 80%.
See an example calculation
Employees whose pay varies and were employed from 6 April 2019
If the employee has been employed continuously from the start of the 2019 to 2020 tax year, you can claim the highest of either:
- 80% of the same month’s wages from the previous year (up to a maximum of £2,500 a month)
- 80% of the average monthly wages for the 2019 to 2020 tax year (up to a maximum of £2,500 a month)
To calculate 80% of the same month’s wages from the previous year:
1) Start with the amount they earned in the same period last year.
2) Divide by the total number of days in this pay period – including non-working days.
3) Multiply by the number of furlough days in this pay period.
4) Multiply by 80%.
See an example calculation of claiming for the same period last year
To work out 80% of the average monthly wages for the last tax year:
1) Start with the amount they earned in the tax year up to the day before they were furloughed.
2) Divide it by the number of days from the start of the tax year – including non-working days (up to the day before they were furloughed, or 5 April 2020 – whichever is earlier).
3) Multiply by the number of furlough days in this pay period.
4) Multiply by 80%.
See an example of working out 80% of average monthly wages for the last tax year
Employees whose pay varies and who started employment after 6 April 2019
If the employee started their employment after 6 April 2019, claim for 80% of their average monthly wages since they started work until the date they are furloughed, up to a maximum of £2500 per month.
To work out 80% of your employee’s average monthly earnings:
1) Start with the amount they earned in the tax year up to the day before they were furloughed.
2) Divide it by the number of days they’ve been employed since the start of the tax year – including non-working days (up to the day before they were furloughed or 5 April 2020 – whichever is earlier).
3) Multiply by the number of furlough days in this pay period.
4) Multiply by 80%.
Every day or period after the employee commenced employment with the employer is counted in making this calculation. This includes days when no work was undertaken.
See an example of working out 80% of average monthly wages for the last tax year
Work out how much you can claim for employer National Insurance contributions
You can claim reimbursement for the cost of some or all of the Class 1 employer National Insurance contributions paid on the gross pay grant you pay to the employee.
You can choose to provide top-up salary in addition to the grant. Employer National Insurance contributions on any additional top-up salary will not be funded through this scheme.
Working out what you can claim
The total grant for employer National Insurance contributions cannot exceed the total amount of employer National Insurance contributions you are due to pay.
In calculating the total employer National Insurance contributions paid in any pay period, the employer should subtract any Employment Allowance used in that pay period. If you have not, or do not expect to pay any employer National Insurance contributions in a pay period as a result of the Employment Allowance, you should not claim any employer National Insurance contributions costs for furloughed employees in that pay period. If you expect to exhaust any Employment Allowance in a pay period then you should claim the lower of the employer National Insurance contributions grant calculation, and the employer National Insurance contributions costs that you paid, or expect to pay across your entire payroll.
The total employer National Insurance contributions due in a pay period should be apportioned on a daily basis, with the amount apportioned to any qualifying furlough days forming the basis of the amount that can be claimed through the scheme.
If your employee is furloughed for the whole pay period, and you do not top up their pay
To work out how much you can claim to cover employer National Insurance contributions:
1) Start with the grant you’re claiming for employee’s wages.
2) Minus the relevant secondary National Insurance contributions threshold.
3) Multiply this amount by 13.8%.
| Tax year | National Insurance contribution thresholds |
|---|---|
| 2019 to 2020 | £166 per week, £719 per month or £8,632 per year |
| 2020 to 2021 | £169 per week, £732 per month or £8,788 per year |
See an example calculation
If your employee is not furloughed for the whole pay period or you top up their pay
If the pay period covers both furloughed and working periods, or you top up your employees pay over the amounts covered by the grant the following steps will help you calculate the amount of employer National Insurance contributions for each employee:
- The amount of pay minus the relevant National Insurance contributions secondary threshold.
- To calculate the employer National Insurance contributions due on an employee’s total pay for the pay period, the result of Step 1 is multiplied by 13.8%.
- Divide the amount of employer National Insurance contributions due for the pay period by the number of days in the pay period.
- The grant is capped at the total amount of employers’ National Insurance contributions due to be paid in respect of an employee. Multiply the result of Step 3 by the number of qualifying furlough days in the pay period.
- Multiply the result of Step 4 by the proportion of pay received in respect of the qualifying furlough days that is funded by the grant.
Before you claim for employer National Insurance contributions
Employer National Insurance contributions is payable on all pay over the secondary threshold at a rate of 13.8%. Employers may be eligible for the Employment Allowance. In the 2019 to 2020 tax year, the allowance was £3,000 and was available to all employers. From 6 April 2020, the Employment Allowance is £4,000 but is only available to employers whose Employer Secondary National Insurance contributions liability in the previous year was under £100,000.
Employers can use the Employment Allowance to reduce their employer National Insurance contributions bill across each payroll until the allowance is exhausted or the end of the tax year, whichever comes first.
No employer National Insurance contributions due
If there is no employer National Insurance contributions due then the amount of the grant towards employer National Insurance contributions is zero. This could be the case for:
- apprentices under 25 (category H)
- employees under 21 (category M)
- employees under 21 who can defer NI because they’re already paying it in another job (category Z)
- employers whose employer National Insurance contributions bill is reduced to £0 by the Employment Allowance
Work out how much you can claim for employer’s pension contributions
You’ll still need to pay pension contributions on behalf of your furloughed employees, and you can claim for these up to the level of the mandatory employer contribution, even if it’s not an auto-enrolment pension.
You cannot claim for any pension contributions:
- if there are no contributions made, or due to be made for an employee
- you make that are above the mandatory employer contribution
You’ll need to work out how much you can claim for employer’s pension contributions.
1) Start with the amount you’re claiming for the employee’s wages.
2) Deduct the minimum amount your employee would have to earn in the claim period to qualify for employer pension contributions – this is £512 a month for periods before 5 April 2020, and £520 a month for periods after 6 April 2020.
3) Multiply by 3%.
Grants for pension contributions can be claimed up to this cap provided the employer pays the whole amount claimed to a pension scheme for the employee as an employer contribution.
How to claim
Use the online service to claim for wages
You can only claim for periods when your employee was on furlough.
You cannot make more than one claim during a claim period – you should make your claim shortly before or during running payroll.
You must claim for all employees in each period at one time – you cannot make changes to your claim.
You can make your claim in anticipation of an imminent payroll run, at the point you run your payroll or after you have run your payroll. Claims can be backdated from 1 March 2020 where employees have already been furloughed from that date. A claim cannot start any earlier than the date the employee was first furloughed.
You must pay the full amount you are claiming to your employee, even if your company is in administration. If you’re not able to do that, you’ll need to repay the money back to HMRC. The same applies in relation to employer national insurance contributions and pension contributions you claim regarding your employee. The full amount you claim in respect of these must be paid or you will need to repay the money back to HMRC.
By making a claim, you agree that:
- the grant you receive can only be used to pay your employee’s salary and the employer national insurance contributions and pension contributions you must pay in relation to the salary paid to your employee
- you will return any grants back to HMRC immediately if you’re unwilling or unable to use it to pay your employee’s salary and the employer national insurance contributions and pension contributions
You must not make the claim if you do not accept that you can only use the money you claim for making those payments and that it must be returned to HMRC if you do not.
After you’ve claimed
HMRC will check your claim, and if you’re eligible, pay it to you by BACS to a UK bank account.
You must pay the employee all the grant you receive for their gross pay in the form of money.
Furloughed staff must receive no less than 80% of their reference pay (up to the monthly cap of £2500).
Employers cannot enter into any transaction with the worker which reduces the wages below this amount. This includes any administration charge, fees or other costs in connection with the employment.
When the government ends the scheme
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
Tax Treatment of the Coronavirus Job Retention Grant
Payments received by a business under the scheme are made to offset these deductible revenue costs. 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.
Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) are not taxable on grants received under the scheme. Domestic staff are subject to Income Tax and National Insurance Contributions on their wages as normal.
How to treat grant payments in RTI
You must report the amount of grant you receive and pay to an employee through RTI, in the same way, you would report their normal pay.
You should make RTI submissions on or before the date you pay your employee.
Where employers have continued to pay employees during a period of furlough, in advance of receiving any payments under the scheme, they do not need to make any further RTI submissions when they receive the grant that reimburses those payments made in advance.
