Furlough Pay and CJRS – application in practice

Example 1 – hourly paid employee receiving a fixed weekly rate of pay

In this example, an employee is contracted to work 40 hours per week at the NLW. The employee is furloughed from Monday 6 April 2020.

CJRS claim:

The amount available to claim under the CJRS is based on 80% of the pay received during the latest
pay period ending on or before 19 March 2019.

For the week ended Friday 13 March 2020, the weekly pay was 40 hours @ £8.21 = £328.40.

The amount that the employer can claim in respect of this employee is £262.72 per week plus employer NIC of £12.93 plus employer pension contributions of £4.28.

Total CJRS claim available of £279.93 per week of furlough.

Contractual entitlement:

In this example, the contractual furlough entitlement has been agreed at 80% of the employee’s weekly pay.

The employee is contracted to work 40 hours per week at the NLW. On 1 April 2020, the NLW increased from £8.21 to £8.72 per hour. This means that the employee’s contractual weekly pay at the point of furlough is £348.80.

As the contractual furlough pay is 80% of the employee’s contractual pay, the employee would be
entitled to receive £279.04 per week. The employer NIC on this would be £15.19 and the employer
pension contribution would be a minimum of £4.77.

The total contractual furlough cost for this employee is a minimum of £299.00 compared with a CJRS
claim available to the employer of £279.93 per week of furlough.

Example 2 – salaried employee earning at a fixed monthly rate of pay

In this example, an employee earns an annual salary of £24,000 per annum paid equally over 12 calendar months. The employee is furloughed from 1 April 2020.

CJRS claim:

The amount available to claim under the CJRS is also based on 80% of the pay received during the latest pay period ending on or before 19 March 2019.

For the month ended 28 February 2020, the monthly pay was £2,000.

The amount that the employer can claim in respect of this employee is £1,600 per month plus employer NIC of £119.78 plus employer pension contributions of £32.40.

Total CJRS claim available of £1,752.18 per month of furlough.

Contractual entitlement:

In this example, the contractual furlough entitlement has been agreed at 80% of the employee’s monthly pay.

The employee’s contractual monthly pay at the point of furlough is £2,000.

As the contractual furlough pay is 80% of the employee’s contractual pay, the employee would be
entitled to receive £1,600 per month. The employer NIC on this would be £119.79 and the employer
pension contribution would be a minimum of £32.40.

Total CJRS claim available of £1,752.18 per month of furlough.

For salaried employees receiving 80% of their pay under furlough, then unless they have received a
pay rise since the pay period ending on or before 19 March 2019 (which may still have been required
for NMW purposes) or they receive more than the statutory minimum employer pension contributions, then the CJRS claim available should be the same as the contractual entitlement whilst the employee is furloughed.

Example 3 – employees not earning at a fixed monthly rate of pay (variable pay employees)

In this example, an employee’s monthly pay varies because they regularly work paid overtime. The
employee worked 170 hours and earned £1,395.70 in April 2019. The employee worked an average of 195 hours per month throughout the 2019-20 tax year and received average monthly pay of £1,600.95 across the course of the year. The employee is furloughed from 1 April 2020.

CJRS claim:

The amount available to claim under the CJRS is based on 80% of the greater of:

  • The average monthly amount paid during the 2019-20 tax year (= £1,600.95), and
  • The actual amount paid to the employee in the corresponding calendar period in the previous year (= £1,395.70).

The amount that the employer can claim in respect of this employee is £1,280.76 per month plus employer NIC of £75.73 plus employer pension contributions of £22.82.

Total CJRS claim available of £1,379.31 per month of furlough.

Contractual entitlement:

In this example, the contractual furlough entitlement has been agreed at 80% of the employee’s monthly pay.

For an employee whose pay varies, then the contractual pay entitlement is likely to be based on a calculation of hours multiplied by the average current pay rate (to incorporate any overtime or other regular payments paid at a higher pay rate).

It would be logical to base the calculation of the contractual entitlement on 80% of the contractual pay rate at the point of furlough multiplied by the greater of:

  • The average monthly hours worked during the 2019-20 tax year (= 195 hours), and
  • The actual number of hours worked by the employee in the corresponding calendar period in the previous year (= 170 hours).

In this example, the employee is paid at NLW.

Therefore, as the NLW increased to £8.72 on 1 April 2020 and the furlough agreement does not specify that the NLW uplift does not apply, we would expect the employee to be entitled to monthly contractual pay of £1,700.40 per month (195 hours x £8.72).

As the furlough agreement is based on 80% of the contractual pay entitlement, the employee should receive gross furlough pay of £1,360.32 per month.

The employer NIC on this would be £86.71 and the employer pension contribution would be a minimum of £25.21.

The total contractual furlough cost in this case would therefore be a minimum of £1,472.24 compared with a CJRS claim of only £1,378.31 per month of furlough.