CJRS: How to Work Out 80% of Employees’ Wages, NI and Pension Contributions

CJRS: How to Work Out 80% of Employees’ Wages, NI and Pension Contributions

HMRC updated their CJRS guidance. Learn how to work out 80% of your employees’ wages, National Insurance contributions and pension contributions.

  1. Work out 80% of your employee’s normal wage

1.1 Example of working out the maximum wage amount for part of a pay period

A Limited company pays all of their employees weekly on each Friday and puts all of their employees on furlough on Wednesday 8 April 2020.

A Ltd will need to calculate the grant using the daily calculation for the first pay period which ends on Friday 10 April 2020. This is £83.34 multiplied by 3 days, which is £250.02.

For the next pay period, 11 April 2020 to 17 April 2020, the maximum amount is £576.92 because the pay period is a whole week, and the employee is furloughed on each day.

A Ltd makes a claim for 8 April 2020 to 17 April 2020. The maximum wage amount that they can claim for is the two amounts added, £826.94.

Read guidance on how to work out the maximum wage amount.

1.2 Example for working out 80% of wages for fixed rate full or part time employees on a salary

Worker started work for B Ltd in 1997 and is paid a regular monthly salary on the last day of each month. The worker agreed to be placed on furlough from 23 March 2020. The worker was paid £2,400 for the last full monthly pay period before 19 March 2020. There are 9 days between 23 March and 31 March.

  1. Start with £2,400 (employee’s wages)
  2. Divide by 31 (the total number of days in March)
  3. Multiply by 9 (the number of furlough days in March)
  4. Multiply by 80% – which is £557.42

Read guidance on how to work out 80% of wages for fixed rate full or part time employees on a salary.

1.3 Example for working out if your employee has not been paid for a full pay period up to 19 March 2020

Employee started work for B Ltd on 21 February 2020 and is paid on the last day of each month. The employee had not had a full pay period up to 19 March 2020, but was paid £700 as a pro-rata of their salary on 29 February 2020. There are 9 days between 21 February and 29 February. The employee agrees to be furloughed from 25 March 2020. There are 7 days between 25 March and 31 March.

  1. Start with £700 (the amount they were paid in their last pay period)
  2. Divide by 9 (the number of days in their last pay period – including non-working days)
  3. Multiply by 29 (days in February)
  4. Divide by 31 (the total number of days in the March pay period)
  5. Multiply by 7 (the number of furlough days in the March pay period)
  6. Multiply by 80% – which is £407.46

Read guidance on how to work out 80% of wages if your employee has not been paid for a full pay period up to 19 March 2020.

1.4 Example of claiming for the same period last year

A Ltd pays an employee on a weekly basis. The employee’s pay period starts on 23 March 2020 and ends on 29 March 2020. The employee was paid £350 for 23 March 2019 to 29 March 2019. The employee was furloughed for the whole week.

  1. Start with £350 (the amount they earned in the same period last year)
  2. Divide by 7 (the total number of days in this pay period)
  3. Multiply by 7 (the number of furlough days in this pay period)
  4. Multiply by 80% – this is £280

Read guidance on how to work out 80% of the same month’s wages from the previous year.

1.5 Example of working out 80% of average monthly wages for the last tax year

Worker started work for A Ltd in 2010 and was placed on furlough on 23 March 2020, earning £15,000 between 6 April 2019 and 22 March 2020 inclusive. There are 353 days between 6 April 2019 and 22 March 2020. A Ltd is claiming for 23 March to 31 March 2020. There are 9 days between 23 March and 31 March.

  1. Start with £15,000 (the amount they earned in the tax year up to the day before they were furloughed)
  2. Divide it by 352 (the number of days from the start the tax year, up to the day before they were furloughed)
  3. Multiply by 9 (the number of furlough days in this pay period)
  4. Multiply by 80% – this is £306.82

Read guidance on how to work out 80% of average monthly wages for the last tax year.

1.6 Example of working out 80% of average monthly wages for the last tax year

Employee started work for A Ltd in 1 May 2019 and was placed on furlough on 23 March 2020, earning £15,000 between 1 May 2019 and 22 March 2020 inclusive. There are 327 days between 1 May 2019 and 22 March 2020. A Ltd is claiming for 23 March to 31 March 2020. There are 9 days between 23 March and 31 March.

  1. Start with £15,000 (the amount they earned in the tax year up to the day before they were furloughed)
  2. Divide it by 327 (the number of days from the start the tax year, up to the day before they were furloughed)
  3. Multiply by 9 (the number of furlough days in this pay period)
  4. Multiply by 80% – this is £330.28

Read guidance on how to work out 80% of average monthly wages for the last tax year.

  1. Work out how much you can claim for employer National Insurance contributions (NICs)

2.1 Example of working out employer NICs for an employee furloughed for a whole pay period with no topped up wages

A Ltd pays employees on a calendar monthly basis. An employee was furloughed on 1 April 2020 and is paid £1,500 of furlough pay on 30 April 2020. A Ltd did not top up the employee’s pay.

  1. Start with £1,500 (the grant you’re claiming for employee’s wages)
  2. Deduct £732 (the relevant secondary NICs threshold)
  3. Multiply this amount by 13.8% – this is £105.98

The total amount of the grant that can be claimed towards employer NICs is £105.98 for this employee.

If A Ltd claims the Employment Allowance, it must make sure not to claim too much from the scheme.

Read guidance on how to work out employer NICs for an employee that’s furloughed for a whole pay period with no topped up wages.

2.2 Example of working out employer NICs for an employee furloughed part way through a pay period, employer does not top up the employee’s pay

An employee who is paid each calendar month agrees to be furloughed by A Ltd on 16 April 2020. A Ltd agrees to pay the employee 80% of their usual wages while they are furloughed. That means they will receive 80% of their wage for the rest of the days after 16 April 2020.

The employee’s usual wages are £2,400 in total every month.

They will be paid their normal wage for the first 15 days of April, and they will be paid 80% of their normal wage for the rest of April.

This means that the employee will receive £2,160, which is made up of:

  • £1,200 of pay funded by A Ltd for the time the employee worked from 1 April 2020 to 15 April 2020
  • £960 (which is £1,200 x 80%) of pay funded by the scheme for the time the employee is furloughed from 16 April 2020 to 30 April 2020

A Ltd works out the amount of the grant that it can claim towards the employer NICs:

  1. Start with £2,160 (the employee’s total pay in April 2020)
  2. Deduct £732 (the relevant secondary NICs threshold)
  3. Multiply by 13.8%
  4. Divide by 30 (the number of days in the pay period)
  5. Multiply by 15 (the number of furlough days in the pay period)
  6. Divide by £960 (the employee’s total pay for the furlough days in the pay period)
  7. Multiply by £960 (the amount of the grant for employee wages)

The end amount is £98.53, so A Ltd can claim £98.53 towards employer NICs for the employee’s April 2020 pay. The grant you claim should not be more than the employer NICs that you are due to pay.

If A Ltd claims the Employment Allowance, it must make sure not to claim too much from the scheme.

Read guidance on how to work out employer NICs for an employee that’s furloughed for a whole pay period with no topped up wages.

2.3 Example for working out employer NICs for an employee furloughed for part of the pay period and employer tops up employee’s pay

An employee who is paid each calendar month agrees to be furloughed by A Ltd on 16 April 2020.

The employee’s usual wages are £2,400 in total every month. A Ltd pays the employee 80% of their usual wages while they are furloughed.

If A Ltd chooses to top up the employee’s pay to 100% during the period of furlough, the employer NICs must be split between the pay funded by the grant and the pay funded by the employer. The step-by-step calculation does this.

The employee’s April 2020 total pay is made up of:

  • £1,200 of pay funded by A Ltd for the time the employee worked between 1 April 2020 and 15 April 2020
  • £1,200 of pay for the time the employee is furloughed between 16 April 2020 and 30 April 2020, of which:
    • £960 is funded by the scheme
    • £240 is top-up pay funded by A Ltd

A Ltd works out the amount of the grant that it can claim towards the employer NICs:

  1. Start with £2,400 (the employee’s total pay in April 2020)
  2. Deduct £732 (the relevant secondary NICs threshold)
  3. Multiply by 13.8%
  4. Divide by 30 (the number of days in the pay period)
  5. Multiply by 15 (the number of furlough days in the pay period)
  6. Divide by £1,200 (the employee’s total pay for the furlough days in the pay period)
  7. Multiply by £960 (the amount of grant for employee wages)

The end amount is £92.07, so A Ltd can claim £92.07 towards employer NICs for the employee’s April 2020 pay. The grant you claim should not be more than the employer NICs that you are due to pay.

If A Ltd claims the Employment Allowance, it must make sure not to claim too much from the scheme.

Read guidance on how to work out employer NICs for an employee that’s furloughed for a whole pay period with no topped up wages.

  1. Work out how much you can claim for employer’s pension contributions

3.1 Example of working out pension contributions if an employee is furloughed for the whole pay period and you do not top up their pay

A Ltd pays employees on a monthly basis. An employee was furloughed on 1 April 2020 and is paid £1,500 of furlough pay on 30 April 2020. A Ltd did not top up the employee’s pay. A Ltd pays employer pension contributions into the employee’s pension.

  1. Start with £1,500 (this is the gross pay grant)
  2. Deduct £520 (this is the Lower Level of Qualifying Earnings)
  3. Multiply by 3% = £29.40

A Ltd can claim £29.40 towards employer contributions it makes into the employee’s pension.

Read guidance on how to work out how much you can claim for employer pension contributions.

3.2 Example of working out pension contributions if an employer makes contributions above the minimum level of contributions for an auto-enrolment pension

A salaried employee of A Ltd earns £2,125 per month, and is furloughed from 1 May 2020 to 31 May 2020. A Ltd has agreed to top up the employee’s salary to its usual amount, including making employer pension contributions which are usually 3% of the employee’s entire salary. The amount of gross pay grant is 80% of £2,125, which is £1,700.

The grant that can be claimed towards the employer pension contributions is the lower of the minimum level of contributions for an auto-enrolment pension, based on the furlough payment, and the amount actually paid by A Ltd.

The minimum level of auto-enrolment contributions is:

  1. Start with £1,700 (this is the gross pay grant)
  2. Deduct £520 (this is the Lower Level of Qualifying Earnings)
  3. Multiply by 3% = £35.40

The total employer pension contribution made by A Ltd under the terms of the pension scheme is the gross pay to the employee of £2,125 multiplied by 3%, which equals £63.75.

As A Ltd can only claim the lower of the minimum level of contributions for an auto-enrolment pension (based on the furlough payment) and the amount actually paid into the employee’s pension, they can claim £35.40 to cover employer pension contributions.

Read guidance on how to work out how much you can claim for employer pension contributions.

3.3 Example of how to calculate the grant towards employer pension contributions where the employee is furloughed during the pay period

Where an employee is paid for a pay period where only some of the days are furlough days then the Lower Level of Qualifying Earnings should be apportioned on a daily basis.

A Ltd pays employees on the last day of every month. A Ltd pays employer pension contributions into employees’ pensions in line with the minimum level of contributions for an auto-enrolment pension.

An employee agrees to be furloughed from 16 April 2020.

Their April 2020 gross pay is £1,501.20. This is made up of £810 which they earned before being furloughed, and £691.20 of furlough pay.

The amount of the grant which A Ltd can claim towards their employer pension contributions is:

  1. Start with £691.20 (this is the furlough pay)
  2. Deduct £260 (this is a proportion of the Lower Level of Qualifying Earnings)
  3. Multiply by 3% = £12.94

The minimum level of auto-enrolment pension contributions on the furlough pay is £12.94.

A Ltd can claim for the lower of £12.94 or the employer pension contributions due on the furlough pay under the terms of the pensions scheme. in respect of the furlough pay.

The Lower Level of Qualifying Earnings in this example is calculated as £520 divided by 30 days (the number of days in April), and then multiplied by 15 days (the number of days that the employee is furloughed in April).

Read guidance on how to work out how much you can claim for employer pension contributions.

Source: Gov.UK

Image: Pixel-Shot / Adobe Stock

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Linda Casey has over 10 year work experience in accounting and covers UK news on accounting and taxation.