Coronavirus Job Retention Scheme – will your calculations change?

Coronavirus Job Retention Scheme

How reference pay and usual hours are calculated for some employees will change from 1 March 2021.

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Caroline Laffey

Partner, Employer Reward Services

KPMG in the UK

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The latest Coronavirus Job Retention Scheme (CJRS) Treasury Direction, made on 25 January 2021, formally extends the scheme until 30 April 2021. However, it also changes how some employees’ reference salary and usual hours calculations must be performed for March and April claim periods. Employers should confirm whether the new rules will affect any of their furloughed workforce. If so, they should act now to ensure they hold the information needed to perform calculations on the new basis.

Furloughed employees’ ‘reference salary’ and, unless they are fully furloughed and carry out no work at all during the relevant claim period, their ‘usual hours’, must be determined in order to calculate a CJRS claim. This requires the employer to confirm whether each furloughed employee is paid a ‘fixed’ or ‘variable’ rate, and whether they ordinarily work ‘fixed’ or ‘variable’ hours.

How CJRS grants are calculated will change for some variable rate and/or variable hour employees from 1 March 2021.

Which rules are changing?

In summary, for variable rate employees included in a Real Time Information (RTI) submission made on or before 19 March 2020 and whose employment did not cease on or before 23 September 2020, ‘reference salary’ for a claim period is currently the higher of:

  • The average amount payable in the 2019/20 tax year before any period of furlough began; and
  • The amount earned in the same calendar period in the 2019/20 tax year.

Broadly, for variable hours employees included in an RTI submission made on or before 19 March 2020 and whose employment did not cease on or before 23 September 2020, ‘usual hours’ for a claim period is the higher of their:

  • Average hours worked in the tax year 2019/20; and
  • Actual hours worked in the corresponding calendar period in the tax year 2019/20.

However, as the scheme has been in place since March 2020, to ensure the look back period for both variable pay and variable hours is based on a period of working time, rather than a furlough period, these rules need to change from 1 March 2021.

Different rules, which will remain unchanged, apply when calculating the reference pay and usual hours for employees whose circumstances differ from those summarised above.

How are these rules for variable pay and variable hour employees changing?

For CJRS claim periods in March and April, ‘reference salary’ for an affected variable rate employee will now be calculated as the higher of:

  • The average amount payable in the 2019/20 tax year before any period of furlough began; and
  • The amount earned in the same calendar period in the 2019 calendar year (i.e. in March or April 2019 as appropriate).

Additionally, ‘usual hours’ for an affected variable hours employee will be the higher of:

  • Average hours worked in the tax year 2019/20; and
  • Actual hours worked in the corresponding calendar period in the 2019 calendar year (i.e. in March or April 2019 as appropriate).

What should employers do now?

These changes again emphasise the different approaches that need to be applied to different employees when making a CJRS claim and the need for employers to fully understand the nature of their workforce to ensure the correct basis is applied for both ‘reference pay’ and ‘usual hours’.

These changes mean that employers must make sure that, where relevant, they calculate CJRS claims for March and April 2021 on the revised basis. Failing to do so could potentially invalidate those claims.

In some circumstances, for example where employees were transferred to a new employer under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), locating the information on pay and hours worked for March and April 2019 might not be straightforward.

Due to the tight deadlines for claims, employers should act now to ensure they have the information they need on affected employees who are likely to be furloughed in March or April so claims can be calculated and submitted in good time.

Employers should also consider whether it would be appropriate to explain the change in how furlough pay will be calculated to affected employees in order to pre-empt any questions.

Further information on the CJRS is available in our CJRS Employer Q&A.

For further information please contact :

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