Furloughed workers are entitled to 80 percent of their monthly salaries because of a new Government scheme created to tackle the impacts of the coronavirus crisis in the UK. The coronavirus pandemic forced several businesses in the UK to close, laying off many workers up and down the country. But how does furlough pay work in terms of fees, bonuses and commission?
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What is the Coronavirus Job Retention Scheme?
The Coronavirus Job Retention Scheme and Self-Employment Income Support Scheme were created by the Government as a means to provide income for those negatively impacted by COVID-19.
Under the Coronavirus Job Retention Scheme, all UK employers can access a grant worth 80 percent of an employee’s usual wage to cover their salary.
The Coronavirus Job Retention Scheme is applicable for all UK employers whose business began on or before February 28, 2020.
Employers can claim a grant worth 80 percent of an employee’s usual salary, up to £2,500 a month, plus any associated employer National Insurance payments and pension contributions.
The scheme is meant to safeguard workers from being made redundant and can be backdated to March 1.
It was originally open for three months but has now been extended to October.
The scheme will continue running in its current format until the end of the July, after which the Government will ask workers to return part-time to work and for employers to cover part of the salary cost.
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How do employers claim the scheme?
To access the scheme, all UK employers must designate their employees as “furloughed workers”.
Then the employer should notify its employees of the change as changing their status remains subject to existing employment law and depending on the employment contract, may be subject to negotiation.
Once the new portal, currently being created by the HMRC, is live, employers must submit the information to the HMRC about its employees and those which have been furloughed and their earnings.
Will fees, bonuses and commission be paid on furlough?
Employers need to make a claim for wage costs through the Job Retention Scheme.
This scheme will receive a grant from HMRC to cover the lower of 80 percent of an employee’s regular wage up to £2,5000 a month.
This amount includes National Insurance contributions and minimum automatic enrolment employer pensions contributions.
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Fees, bonuses and commission should not be included as part of your monthly earnings.
It would seem to follow from this of course that any non-cash benefits will also be outside the scope of the scheme.
Allowances which are fixed part of the monthly salary will form part of the scheme.
Employees whose salary is variable can claim the higher of the same month’s earnings from the previous year or the average monthly earnings from the 2019 to 2020 tax year.
This means that fees, commission and bonuses are not included in “average monthly earnings” although the note does not say so expressly.
Therefore where allowances are not fixed, but fluctuate depending for example on the hours worked by an employee, the employer will be looking at using the variable calculation rather than the fixed calculation.
How to calculate your monthly earnings
If you have been employed for a full year, your employer should claim for the higher of either:
The amount you earned in the same month last year.
An average of your monthly earnings from the last year.
For those employed for less than a year, employers can claim for an average of monthly earnings since your employment began.
The same arrangements apply if your monthly pay varies such as if you are on a zero-hour contract.
If you began working in February 2020, your employer will pro-rata your earnings from that month.
Can you take another job while on furlough?
Some employers, such as supermarkets, are actively looking to hire more staff amid the coronavirus outbreak.
If your employer is unable or unwilling to top-up for furlough pay to 100 percent, you may wish to seek secondary employment during the coronavirus lockdown.
The governmental guidance does not prohibit workers seeking secondary employment while on furlough.
However, you are advised to speak to your employer first before you seek secondary employment as you are still technically working for them.
Some employment contracts may specifically prohibit employees from taking up other work, but this may be subject to negotiation.
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