HMRC will reimburse the employer 80% of the employee’s wages, up to £2,500 per month. From September, HMRC will reimburse 70% up to £2,190, reducing to 60% up to £1,875 in October. Employers must top up the grant so that their employee still receives 80% of their wage, up to £2,500.
Employees with variable earnings will be eligible for 80% of whichever amount is the higher, either their earnings for the same period last year or their average earnings for the last 12 months. If the employee has been with the employer for less than 12 months, they will receive 80% of their average earnings over their time with the employer.
Regular payments that employers are obliged to pay, such as past overtime, fees and compulsory commission payments, may be included in calculating the employee’s wage.
Discretionary bonuses, commission payments and non-monetary benefits should be excluded. Benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also be excluded. However, employees are able to switch out of such schemes, as Coronavirus is being classed as a ‘life event’ that warrants changes to the agreement.
As furloughed workers are not carrying out work, they are not entitled to the National Living Wage or National Minimum Wage during this time. However, if an employee is required to undertake training while on furlough leave, they must receive the appropriate minimum wage for the time spent training. It is the employer’s responsibility to pay the extra cost to meet this level.