The Lowdown On Usual Hours For Flexible Furloughing

The government guidance on the Coronavirus Job Retention Scheme (CJRS) has been updated for the change to flexible furloughing. Although this commences on 1 July, any employee who commenced furlough before that date must complete a minimum of 3 consecutive weeks.

For example, a previously furloughed employee can start a new furlough period on 22 June which would have to continue for at least 3 consecutive weeks ending on or after 12 July. After this the employee can then be flexibly furloughed for any period.

Claims can no longer include 2 calendar months and claims for periods to 30 June must be made by 31 July.

Claims for staff flexibly furloughed should only be made once the exact number of hours to be worked during the claim period is known. If a claim is made in advance and the employee works for more hours than expected, the excess will have to be paid back to HMRC.

For employees who are flexibly furloughed, the employer must calculate the employee’s usual hours. This can be calculated for either the entire claim period or for each pay period, or part of a pay period, that falls within that claim period.

Unless the employee:

  • is not contracted to work a fixed number of hours; or
  • is paid depending on the number of hours worked

the fixed hours basis is used.

This requires the employer to:

  • Start with the contracted hours at the end of the last pay period ending on or before 19 March 2020. (This should be calculated ignoring annual leave, being off work sick or on family related statutory leave).
  • Divide by the number of calendar days in the repeating working pattern, including non-working days.
  • Multiply by the number of calendar days in the pay period (or partial pay period) included in the claim.
  • Round up or down if the result isn’t a whole number.

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

For employees who do not have fixed hours or are paid based on the hours worked, the variable hours method should be used. The ‘usual hours’ for the employee 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

The calculation 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

For employees on a flexible work time arrangement or “flexi-leave”

  • Exclude hours worked that accrued paid time off rather than being paid
  • Include time off taken which had been accrued by working additional hours at some other time

The usual hours based on the average number of hours worked in the tax year 2019 to 2020 is calculated by:

  • Starting 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.
  • Dividing by the number of calendar days the employee was employed in the tax year 2019 to 2020, up until the day before the employee was furloughed, or the end of the tax year if earlier. (exclude periods on sick pay or family related statutory leave)
  • Multiplying by the number of calendar days in the pay period (or partial pay period) being claimed for
  • Rounding up or down if the result isn’t a whole number.

The guidance includes 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.

The usual hours based on the usual hours for a pay period or partial pay period based on the corresponding calendar period in the tax year 2019 to 2020 is calculated by:

  • Identifying 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) being claimed for.
  • If the pay period (or partial pay period) being claimed for starts and ends on the same calendar days as the identified pay period in the tax year 2019 to 2020, then the number of hours actually worked in that pay period is used.
  • If the pay period (or partial pay period) being claimed for does not start and end on the same calendar days as the identified pay periods in the tax year 2019 to 2020, then the proportion of the hours worked in each of the pay periods identified is added together (see below).

The last step noted above requires that the employer, for each pay period identified in 2019 to 2020, to:

  • Start with the number of hours worked in the pay period identified in the tax year 2019 to 2020.
  • 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) being claimed for.
  • Divide by the total number of calendar days in the pay period in the tax year 2019 to 2020.

The amounts calculated for each pay period are then added together and rounded up or down if the result is not a whole number.

The guidance includes:

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.

And 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.

Where employees are paid per task or piece of work done, the same basis as employees who work variable hours should be used, if possible. If the hours worked is not known then this should be estimated using the number of ‘pieces’ produced and the “average rate of work per hour” calculated to comply with National Minimum Wage rules.

The number of hours furloughed is calculated by subtracting the number of hours actually worked in the claim period from the employee’s usual hours. Any time on annual or family related statutory leave while flexibly furloughed counts as furloughed hours and does not count as time actually worked.

The full updated guidance can be found here.

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