Guidance

Steps to take before calculating your claim using the Coronavirus Job Retention Scheme

Decide the length of your claim period, find out what to include when calculating wages and work out your employees’ usual and furloughed hours before you calculate how much you can claim.

You can now submit claims for periods starting on or after 1 July.

31 July is the last day that you can submit claims for periods ending on or before 30 June.

If you’re using the Coronavirus Job Retention Scheme to claim for employees’ wages, the steps you’ll need to take are:

  1. Check if you can claim.

  2. Check which employees you can put on furlough.

  3. Steps to take before calculating your claim.

  4. Calculate how much you should claim.

  5. Claim for your employees’ wages online.

  6. Report a payment in PAYE Real Time Information.

Before you can calculate how much you can claim from the Coronavirus Job Retention Scheme you’ll need to work out your employees’ wages. To do this you must work out:

  • the length of your claim period
  • what you can include when calculating wages
  • your employees’ usual hours and furloughed hours

Deciding the length of your claim period

Your claim period is made up of the days you are claiming a grant for. The start date of your first claim period is the date your first employee was furloughed. You can backdate your claim to 1 March 2020 where employees have already been furloughed from that date.

There is no maximum length for claim periods that end on or before 30 June. However, claims for any periods starting before 1 July must end on or before 30 June. This is the case even where an employee furloughed in June continues to be furloughed full time in July. Separate claims will need to be submitted to cover the days in June and the days in July that you want to claim for, even if employees are furloughed continuously. This may mean that your claim periods will differ from the pay periods you use.

Claims for periods ending on or before 30 June 2020 must be made by 31 July 2020.

Claim periods starting on or after 1 July must start and end within the same calendar month and must last at least 7 days unless you’re claiming for the first few days or the last few days in a month. You can only claim for a period of fewer than 7 days if the period you are claiming for includes either the first or last day of the calendar month, and you have already claimed for the period ending immediately before it.

You should match your claim period to the dates you process your payroll, if you can. You can only make one claim for any period so you must include all your furloughed or flexibly furloughed employees in one claim even if you pay them at different times. If you make more than one claim, your subsequent claim cannot overlap with any other claim that you make. Where employees have been furloughed or flexibly furloughed continuously (or both), the claim periods must follow on from each other with no gaps in between the dates.

You can claim before, during or after you process your payroll; you can usually make your claim up to 14 days before your claim period end date and do not have to wait until the end of a claim period to make your next claim. Claims for periods after 30 June can be made from 1 July.

When claiming for employees who are flexibly furloughed you should not claim until you are sure of the exact number of hours they will have worked during the claim period. This means that you should claim when you have certainty about the number of hours your employees are working during the claim period. If you claim in advance and your employee works for more hours than you have told us about, then you will have to pay some of the grant back to HMRC. If you make an error in your claim, you can find out how to correct it.

Payments will be made 6 working days after you make your claim.

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Example of a first claim - The image shows an employer who furloughs two employees at the start of the pay period and adds a third a short time later. The start date of the claim period is when the first employee was put on furlough. The employer should include all employees who were furloughed during this claim period, even if they were put on furlough at different times within the period or are paid at different times in the pay period. The claim is then made 6 days before the end of the pay period, ensuring that the grant is available to be paid out then

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Example of a second claim – The image shows an employer who makes another claim after the first one has ended. Two employees have been furloughed continuously since the first claim, and the claim periods follow on with no gaps in between the dates – though one returns to work before the end of the pay period. One employee worked for two days at the start of the second period but is then furloughed again. The employer should include all employees who were furloughed during this claim period, even if they were put on furlough at different times or are paid at different times in the pay period. The claim is made 6 days before the end of the pay period, ensuring that the grant is available to be paid out then.

If the pay period you are claiming for includes days in more than one month

From 1 July, the scheme rules will change each month. This means that claim periods starting on or after 1 July must start and end within the same calendar month.

If your pay period includes days in more than one month, you’ll need to submit separate claims covering the days that fall into each month. You should calculate each of those claims separately. Claim periods cannot overlap, so you will need to make sure you include all of the employees you want to claim for in each claim you make.

Find an example of a pay period spanning June and July.

Find an example of a pay period spanning July and August.

What to include when calculating wages

The amount you should use when calculating 80% of your employees’ wages for hours not worked, is made up of the regular payments you are obliged to make, including:

You cannot include the following when calculating wages:

  • payments made at the discretion of the employer or a client - where the employer or client was under no contractual obligation to pay, including:
    • any tips, including those distributed through troncs
    • discretionary bonuses
    • discretionary commission payments
  • non-cash payments
  • non-monetary benefits like benefits in kind (such as a company car) and benefits received under salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay

The entirety of the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.

Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.

Normally, an employee cannot switch freely out of most salary sacrifice schemes unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.

Non-discretionary payments

When you’re working out if a payment is non-discretionary, only include payments which you have a contractual obligation to pay and to which your employee has an enforceable right.

When variable payments are specified in a contract and those payments are always made, then those payments may become non-discretionary. If that is the case, they should be included when calculating 80% of your employees’ wages.

Non-discretionary overtime payments

If your employee has been paid variable payments due to working overtime, you can include these payments when calculating 80% of their wages as long as the overtime payments were non-discretionary.

Payments for overtime worked are non-discretionary when you are contractually obliged to pay the employee at a set and defined rate for the overtime that they have worked.

Apprenticeship Levy and Student Loans

You should continue to pay the Apprenticeship Levy as usual. Grants from the Job Retention Scheme do not cover the Apprenticeship Levy.

You should also continue to make Student Loan deductions from the wages you pay to employees.

National Minimum Wage

Individuals are entitled to the National Living Wage, National Minimum Wage or Apprentices Minimum Wage for the hours they are working or treated as working under minimum wage rules.

At least minimum wage rates must be paid for all hours worked. Furloughed workers who are not working can be paid the lower of 80% of their wages or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage.

However, time spent training whilst furloughed is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage rate. As such, employers will need to ensure that the wages and furlough payment provide sufficient monies to cover all working time including these training hours. Where the pay is less than the appropriate minimum wage entitlement, the employer will need to pay additional amounts to ensure at least the appropriate minimum wage is paid for both working time and 100% of the training time whilst furloughed.

Where a furloughed worker is paid close to minimum wage levels and asked to complete training courses for a substantial majority of their usual working time, employers are recommended to seek independent advice or contact Acas.

If you’re claiming for a member of a Limited Liability Partnership (LLP)

If a member of an LLP is treated as an employee (because of salaried members rules), you must only include payments that are either:

  • fixed
  • variable, but are varied without reference to the overall amount of the profits or losses of the LLP
  • not affected by the overall amount of the LLP’s profits or losses

Holiday Pay

Furloughed employees continue to accrue leave as per their employment contract.

The employer and employee can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

Employees can take holiday while on furlough. If an employee is flexibly furloughed then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours. Employees should not be placed on furlough for a period simply because they are on holiday for that period. Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.

Employers will be obliged to pay additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need. This applies for both the furlough period and the recovery period.

If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.

Find out more information on holiday pay during furlough.

Family-related statutory leave includes maternity leave, paternity leave, shared parental leave, adoption leave, parental bereavement leave and unpaid parental leave.

For employees on fixed pay, claims for full or part time employees furloughed on return from family-related statutory leave should be calculated against their salary, before tax, not the pay they received whilst on family-related statutory leave. The same principles apply where the employee is returning from a period of unpaid statutory family-related leave.

Claims for those on variable pay, returning from statutory leave should be calculated using the higher of either:

  • 80% of the same month’s wages from the previous year (up to a maximum of £2,500 a month)
  • 80% of the average monthly wages for the tax year 2019 to 2020 (up to a maximum of £2,500 a month)

Employees returning to work after being on sick pay

For employees on fixed pay, claims for full or part time employees furloughed on return to work after time off sick should be calculated against their salary, before tax, not the pay they received whilst off sick.

Claims for those on variable pay, returning to work after time off sick should be calculated using the highest of either:

  • 80% of the same month’s wages from the previous year (up to a maximum of £2,500 a month)
  • 80% of the average monthly wages for the tax year 2019 to 2020 (up to a maximum of £2,500 a month)

Unpaid sabbatical or unpaid leave

If your employee has been on unpaid sabbatical or unpaid leave, you’ll need to use the amount they would have been paid if they were on paid leave when calculating 80% of their wages.

Work out your employee’s usual hours and furloughed hours

If your employee is fully furloughed, you do not need to work out their usual and furloughed hours and you should work out the maximum wage amount. An employee is fully furloughed if they do not do any work for you during the claim period.

If your employee is flexibly furloughed, you’ll need to work out your employee’s usual hours and record the actual hours they work as well as their furloughed hours for each claim period.

You can calculate the usual hours for the entire claim period or for each pay period, or part of a pay period, that falls within that claim period. This guidance assumes that you will calculate on a pay period basis but either method is acceptable.

If you calculate the usual hours for the entire claim period and the result is not a whole number, you should round it up to the next whole number. If you calculate the usual hours on a pay period basis you should round the result up or down to the nearest whole number.

There are two different calculations you can use to work out your employee’s usual hours, depending on whether they work fixed or variable hours.

You should work out usual hours for employees who work variable hours, if either:

  • your employee is not contracted to a fixed number of hours
  • your employee’s pay depends on the number of hours they work

If neither of these apply, you should work out your employee’s usual hours for an employee who is contracted for a fixed number of hours.

The employee’s working pattern does not have to match their pay period (for example, an employee could be contracted to fixed 40 hours a week, but be paid a variable monthly amount because of shift allowances).

Work out your employee’s usual hours for an employee who is contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work

To calculate the number of usual hours for each pay period (or partial pay period):

  1. Start with the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020.

  2. Divide by the number of calendar days in the repeating working pattern, including non-working days.

  3. Multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for.

  4. Round up or down if the result isn’t a whole number.

If an employee with fixed hours was on annual leave, off work sick or on family related statutory leave at any time during the last pay period ending on or before 19 March, the usual hours should be calculated as if the employee had not taken that leave.

Find examples of how to work out usual hours for employees who are contracted for a fixed number of hours.

Work out your employee’s usual hours for an employee who works variable hours

Where the pay varies by the amount of time worked, you will have shown the number of hours worked on your employees’ payslips in line with legislation introduced by BEIS in April 2019 (Employment Rights Act 1996, section 8). You are therefore likely to have records of the number of hours worked.

Employers should identify the hours the employee worked using pay records, time sheets and other records which show time worked. If these aren’t available then use other records, such as rotas or work diaries. If these records are not available, employers may use the pay rate to work back from gross pay.

The ‘usual hours’ for an employee who works variable hours will be calculated based on the higher of either:

  • the average number of hours worked in the tax year 2019 to 2020
  • the corresponding calendar period in the tax year 2019 to 2020

If your employee has variable pay you will complete a similar comparison to calculate their usual wages but the result may be different.

When you calculate the usual hours, you should include:

  • any hours of leave for which the employee was paid their full contracted rate (such as annual leave)
  • any hours worked as ‘overtime’, but only if the pay for those hours was not discretionary

If you are calculating the usual hours for an employee who is part of a flexible work time arrangement (“flexi-leave”), you should:

  • not count hours as hours worked that the employee worked but was not paid for because they accrued paid time off which they could take later
  • count the hours as hours worked that the employee took as paid time off, which they had accrued by working additional hours at some other time

To work out the usual hours for each pay period (or partial pay period) based on the average number of hours worked in the tax year 2019 to 2020:

  1. Start with the number of hours actually worked (or on paid annual leave or flexi-leave) in the tax year 2019 to 2020 before the employee was furloughed, or the end of the tax year if earlier.

  2. Divide by the number of calendar days the employee was employed by you in the tax year 2019 to 2020, up until the day before they were furloughed, or the end of the tax year if earlier.

  3. Multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for.

  4. Round up or down if the result isn’t a whole number.

When you calculate the number of calendar days in step 2, you should not count any calendar days where the employee was on a period of:

  • statutory sick pay related leave
  • family related statutory leave
  • reduced rate paid leave following a period of statutory sick pay related leave
  • reduced rate paid leave following a period of family related statutory leave

Find examples of how to work out the average number of hours worked in the tax year 2019 to 2020 for an employee who works variable hours.

To work out the usual hours for a pay period or partial pay period based on the corresponding calendar period in the tax year 2019 to 2020:

  1. Identify the pay periods in the 2019 to 2020 tax year that correspond to at least one calendar day in the pay period (or partial pay period) you are claiming for.

  2. If the pay period (or partial pay period) you are claiming for starts and ends on the same calendar days as the identified pay period in the tax year 2019 to 2020 - use the number of hours they actually worked in that pay period.

  3. If the pay period (or partial pay period) you are claiming for does not start and end on the same calendar days as the identified pay periods in the tax year 2019 to 2020 – you’ll need to add together a proportion of the hours worked in each of the pay periods you’ve identified.

Find an example of how to work out the usual hours worked in the same period last year for an employee who works variable hours and the pay period (or partial pay period) being claimed for starts and ends on the same calendar days as the identified pay period.

If you have to work out the usual hours based on the hours worked in more than one pay period in the tax year 2019 to 2020:

  1. Start with the number of hours worked in the first pay period identified in the tax year 2019 to 2020.

  2. Multiply by the number of calendar days in that pay period which correspond to at least one calendar day in the pay period (or partial pay period) you are claiming for.

  3. Divide by the total number of calendar days in the pay period in the tax year 2019 to 2020.

  4. Repeat steps 1, 2 and 3 for each subsequent identified pay period in the tax year 2019 to 2020.

  5. Add them all together.

  6. Round up or down if the result is not a whole number.

Find an example of how to work out the usual hours based on the hours worked in more than one pay period in the tax year 2019 to 2020.

Work out your employee’s usual hours if they are paid per task or piece of work done

You should work out the usual hours for these employees in the same way as for other employees who work variable hours, if possible.

If you do not know what hours the employee worked, you can estimate the hours based on the number of ‘pieces’ they produced and the average rate of work per hour (which you should already have worked out to comply with National Minimum Wage rules).

Calculating the number of working and furloughed hours for each employee

You will have agreed how many hours your flexibly furloughed employee is going to work in the claim period. They will be furloughed for the rest of their usual hours.

To calculate the number of furloughed hours:

  1. Start with your employee’s usual hours.

  2. Subtract the number of hours they actually worked in the claim period – even if this is different to what you agreed.

If you claim in advance and your employee works for more hours than you agreed, then you’ll have to pay some of the grant back to HMRC. This means that you should not claim until you have certainty about the number of hours your employees are working during the claim period. If you make an error in your claim, you can find out how to correct it.

You must pay the employee their contractually agreed rate for any hours they work. Check the latest National Minimum Wage rates.

Find an example for calculating the number of furloughed hours where an employee does not take leave during the claim period.

If your employee takes leave while they are flexibly furloughed

You cannot claim for an employee under the scheme for any time they are on unpaid leave or statutory sick pay related leave.

You can claim for an employee who is on:

  • annual leave
  • leave taken on account of time worked under a flexible work time arrangement (flexi-leave)
  • family related statutory leave
  • reduced rate paid leave following a period of family related statutory leave

Any time they are on these types of leave while flexibly furloughed counts as furloughed hours and does not count as time actually worked.

What to do next

Once you’ve finished these steps, you can calculate your claim.

Published 12 June 2020
Last updated 1 July 2020 + show all updates
  1. Page updated with information on holiday pay that employees can be recorded as on furlough during time spent on holiday. Also added information on how to calculate furloughed hours for different sets of circumstances.

  2. First published.