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The Coronavirus Crisis - The Furlough Scheme – Update

An update to our recent bulletin

It has been drawn to our attention that there are two possible interpretations of the Guidance on the 80% ceiling. The Guidance states:

Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020.

It appears that the £2500 per month is to be calculated gross and then you add on NI and the pension contributions. The limits on the Scheme will mean that a higher earner will not be receiving 80% of their wages.

There appear to be two possible interpretations of the Guidance, depending on whether you gross up or down:

  • Given that the ceiling for 80% is £2,500 per month, this is £30,000 on an annualised basis. If you commence with the £2500 as 80%, this means that someone on £36,000 will get £30,000 (on an annualised basis) or £2500 a month, which will be 80% of £36,000.
  • If you commence with a gross figure of £37,500 and reduce it by 20% you get to £30,000 annualised or £2500 a month. This would mean an employee on £36000 would not get the ceiling figure of £2500 but would get £2400.

Given that the Guidance is unclear we are seeking clarification from the Government about the correct stage approach to adopt. The Government have said they will give further Guidance on how to calculate the amount claimed so the position should become clear.

We are working with clients across our international network to help them minimise the impact of COVID-19 on their business and to prepare for what's next. To find out more, visit our dedicated Covid-19 hub.

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