For business owners who employ staff, the news that the Job Retention Scheme – more commonly known as Furlough – has been extended to March 2021 will come as welcome news, especially if business has been slow due to Covid-19.

Key points:

  • Furlough extended until March 2021

  • Up to 80% of wages funded – capped at £2,500 per month

  • Calculations for variable pay calculated slightly differently

  • Employee must have been on payroll before 31st October 2020

  • Employers need to report for seven consecutive days, minimum

Under the scheme. The government will pay 80% of any wages for any hours an employee is unable to work, or having reduce hours, due to the downturn until March 2021. The rate has gone back up to 80% of the wages, similar to when the scheme was first introduced in March 2020. However, NICs and pension contributions will not be taken into account and will not be paid, similar to how things were over the summer.

To make a claim, the HMRC portal will be used as before, but the calculations will be done slightly differently, depending on whether the employee has a fixed or variable pay. The guidance is fairly complicated but boils down to this:

Fixed pay

The usual hours for an employee who is contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work, will be the contracted hours worked in the last pay period ending on or before 30 October 2020. 80% of those hours not worked will be covered by the scheme

Variable pay

If an employee does not have fixed hours and was not previously eligible for furlough (because they were not employed by you on 19 March 2020), then the average hours worked since the start of their employment or 6 April 2020, whichever is the later.

If the employee was previously eligible for furlough (ie, was in employment with you on 19 March, then the furlough pay is 80% of the wages earned in the corresponding period last year, or the average wages paid in 2019/20, whichever is the higher.

Remember, part time, full time, and flexible employment is all funded.

It’s a bit more complicated than in the past but still pretty straightforward. If you’ve got any questions at all, or would like us to check out your calculations, please contact us straight away. We’re here to help you, even if you aren’t yet an Acumenica client.