# Guidance on how to calculate wage figures through the Coronavirus Job Retention Scheme

**17 April 2020**

## HMRC has published **guidance **which explains how to calculate 80% of employee’s wages, National Insurance (NI) contributions and pension contributions to claim through the Coronavirus Job Retention Scheme (CJRS).

As expected, the guidance is lengthy and detailed but serves to answer many of the questions that payroll professionals have raised over the past few weeks.

Claims need to be started from the date that the employee stops working and starts furlough and not when the decision is made or the date on which they are written to confirming their furloughed status.

When the online service launches on 20 April 2020, a calculator will also be available to assist claimants in calculating how much they can claim.

__Calculating the maximum wage account that can be claimed__

There is a cap of £2,500 a month, or £576.98 a week that can be claimed via the CJRS, plus any associated employer National Insurance (NI) contributions and pension contributions.

For claims that don’t span either a week or month, daily maximum wage amounts will need to be used to work out the maximum amount that can be claimed per employee.

In order to calculate the maximum amount that can be claimed, multiply the daily maximum wage amount by the number of days the employee is furloughed for in the claim.

Month Daily maximum wage amount

March 2020 £80.65 per day

April 2020 £83.34 per day

May 2020 £80.65 per day

For any employees furloughed over a period of two calendar months, the maximum amount for each calendar month will need to be calculated and added together.

If a claim is being made for multiple pay periods in one claim, the total maximum can be calculated using a mixture of the daily maximum wage amount, the weekly maximum wage amount and the monthly maximum wage amount.

The following example is included:

- A Limited company pays all of their employees weekly on each Friday and puts all of their employees on furlough on Wednesday 8 April 2020.
- An Ltd will need to calculate the grant using the daily calculation for the first pay period, which ends on Friday 10 April 2020. This is £83.34 multiplied by three days, which is £250.02.
- For the next pay period, 11 April 2020 to 17 April 2020, the maximum amount is £576.92 because the pay period is a whole week, and the employee is furloughed on each day.
- An Ltd makes a claim for 8 April 2020 to 17 April 2020. The maximum wage amount that they can claim for is the two amounts added, £826.94.

__Calculate 80% of an employee’s normal wage__

The calculator that will be available on 20 April 2020 will assist in the calculation of how much can be claimed.

The method for calculating an employee’s usual wages will differ based on the way they’re paid. Claimants must check what can be included as wages first.

The claimant must use the calculation that best fits the way the employee is paid, e.g. if an employee is paid a regular salary, use the calculation for fixed pay amounts. The guidance confirms that HMRC will not decline or seek repayment of any grant on the sole basis of the particular choice of pay calculation, as long as a reasonable choice of approach is made.

If a claim spans multiple pay periods, this calculation should be done for each period and then added together.

**Calculate 80% of wages for fixed-rate full or part-time employees on a salary**

The claim must be made for 80% of the employee’s wages from their last pay period before 19 March 2020. If claims have already been calculated based on the employee’s wages as of 28 February 2020, then this calculation can still be used for the first claim.

80% of the employee’s wage is calculated as follows:

- Look at an employee’s wages, in their last pay period before 19 March 2020. If the claim is for a full pay period, skip to step four
- Divide by the total number of days in the pay period
- Multiply by the number of furlough days in the pay period
- Multiply by 80%

The following example is provided:

Worker started work for B Ltd in 1997 and is paid a regular monthly salary on the last day of each month. The worker agreed to be placed on furlough from 23 March 2020. The worker was paid £2,400 for the last full monthly pay period before 19 March 2020. There are nine days between 23 March and 31 March.

- Start with £2,400 (employee’s wages)
- Divide by 31 (the total number of days in March)
- Multiply by 9 (the number of furlough days in March)
- Multiply by 80% - which is £557.42

**If an employee has not been paid for a full pay period up to 19 March 2020**

If the employee has not been paid for a full pay period up to 19 March 2020, the normal wages will need to be worked out, and then 80% of that calculated. This should be done as follows:

- Start with the amount employee was paid in their last pay period
- Divide by the number of days in the last pay period (inclusive of non-working days)
- Multiply by the number of days that would have been in that pay period
- Divide by the total number of days in this pay period
- Multiply by the number of furlough days in this pay period
- Multiply by 80%

The following example is provided:

Employee started work for B Ltd on 21 February 2020 and is paid on the last day of each month. The employee had not had a full pay period up to 19 March 2020 but was paid £700 as a pro-rata of their salary on 29 February 2020. There are 9 days between 21 February and 29 February. The employee agrees to be furloughed from 25 March 2020. There are 7 days between 25 March and 31 March.

- Start with £700 (the amount they were paid in their last pay period)
- Divide by 9 (the number of days in their last pay period – including non-working days)
- Multiply by 29 (days in February)
- Divide by 31 (the total number of days in the March pay period)
- Multiply by 7 (the number of furlough days in the March pay period)
- Multiply by 80% - which is £407.46

**Calculation for employees whose pay varies, that were employed from 6 April 2019**

For employees who have been continuously employed from the start of the 2019-20 tax year, a claim can be made for the higher of either (up to the cap of £2,500 per month):

- 80% of the same month’s wages from the previous year
- 80% of the average monthly wages for the tax year 2019-20

**Where calculating 80% of the month’s wages from the previous year:**

- Start with the amount they earned in the same period last year
- Divide by the total number of days in this pay period – including non-working days
- Multiply by the number of furlough days in this pay period
- Multiply by 80%

The following example is included:

An Ltd pays an employee on a weekly basis. The employee’s pay period starts on 23 March 2020 and ends on 29 March 2020. The employee was paid £350 for 23 March 2019 to 29 March 2019. The employee was furloughed for the whole week.

- Start with £350 (the amount they earned in the same period last year)
- Divide by 7 (the total number of days in this pay period)
- Multiply by 7 (the number of furlough days in this pay period)
- Multiply by 80% - this is £280

**When calculating 80% of the average monthly wages for the last tax year:**

- Start with the amount they earned in the tax year up to the day before they were furloughed.
- Divide it by the number of days from the start of the tax year - including non-working days (up to the day before they were furloughed, or 5 April 2020 – whichever is earlier).
- Multiply by the number of furlough days in this pay period.
- Multiply by 80%.

The example below is given:

Worker started work for A Ltd in 2010 and was placed on furlough on 23 March 2020, earning £15,000 between 6 April 2019 and 22 March 2020 inclusive. There are 353 days between 6 April 2019 and 22 March 2020. An Ltd is claiming for 23 March to 31 March 2020. There are 9 days between 23 March and 31 March.

- Start with £15,000 (the amount they earned in the tax year up to the day before they were furloughed)
- Divide it by 353 (the number of days from the start the tax year, up to the day before they were furloughed)
- Multiply by 9 (the number of furlough days in this pay period)
- Multiply by 80% - this is £305.95

**Calculation for employees whose pay varies, who started employment after 6 April 2019**

For employees who started employment after 6 April 2019, the claim should be made for 80% of their average monthly wages since they started work until the date they were furloughed, up to a maximum of £2,500.

To work out 80% of the employee’s average monthly earnings:

- Start with the amount they earned in the tax year up to the day before they were furloughed.
- Divide it by the number of days they’ve been employed since the start of the tax year – including non-working days (up to the day before they were furloughed or 5 April 2020 – whichever is earlier).
- Multiply by the number of furlough days in this pay period.
- Multiply by 80%.

Every day or period after the employee commenced employment with the employer is used in this calculation, including days when no work was undertaken.

The following example is provided:

An employee started work for an Ltd on 1 May 2019 and was placed on furlough on 23 March 2020, earning £15,000 between 1 May 2019 and 22 March 2020 inclusive. There are 327 days between 1 May 2019 and 22 March 2020. An Ltd is claiming for 23 March to 31 March 2020. There are 9 days between 23 March and 31 March.

- Start with £15,000 (the amount they earned in the tax year up to the day before they were furloughed)
- Divide it by 327 (the number of days from the start the tax year, up to the day before they were furloughed)
- Multiply by 9 (the number of furlough days in this pay period)
- Multiply by 80% - this is £330.28

__Calculating employer National Insurance (NI) contributions to claim__

Claims can be made for all or some of the Class 1 employer NI contributions paid on the gross pay grant that is paid to an employee.

If an employee’s salary is topped up over the amount that will be covered by the grant, then the employer NI contributions on any additional top-up salary cannot be reclaimed through the scheme.

**Calculating what you can claim**

The total grant for employer NI contributions cannot exceed the total amount of employer NI contributions that are due to be paid.

When calculating the total employer NI contributions paid in any pay period, the employer should subtract any Employment Allowance used in that pay period. If there is no employer NI contribution to be paid as a result of the Employment Allowance in a pay period, then no claim should be made for any employer NI contribution costs for furloughed employees in that pay period.

If it is expected that any Employment Allowance will be exhausted in a pay period, then the lower of the employer NI contributions grant calculation, and the employer NI contributions costs that were paid, or are expected to be paid across an entire payroll should be claimed.

The total employer NI contributions due in a pay period should be apportioned on a daily basis, with the amount apportioned to any qualifying furlough days forming the basis of the amount that can be claimed through the scheme.

**Calculating employer NI contributions if an employee is furloughed for a whole pay period, and their pay is not topped up**

To calculate the amount of employer National Insurance contributions that can be claimed for:

- Start with the grant figure being claimed for employee wages
- Deduct the relevant secondary NI contributions threshold
- Multiply this amount by 13.8%

Tax year NI contributions thresholds

2019-20 £166 per week, £719 per month or £8,632 per year

2020-21 £169 per week, £732 per month or £8,788 per year

The following example is provided:

An Ltd pays employees on a calendar monthly basis. An employee was furloughed on 1 April 2020 is paid £1,500 of furlough pay on 30 April 2020. An Ltd did not top up the employee’s pay.

- Start with £1,500 (the grant you’re claiming for employee’s wages)
- Minus £732 (the relevant secondary National Insurance contributions threshold)
- Multiply this amount by 13.8% - this is £105.98

The total amount of the grant that can be claimed for employer NI contributions is £105.98 for this employee. The company should adjust the amount for any Employment Allowance it might claim, if applicable.

**Calculating employer NI contributions if an employee is not furloughed for the whole pay period or if their pay is topped up**

Where a pay period covers both furloughed and working periods, or if an employee has their pay topped up over the amounts covered by the grant, the following steps will help to calculate the employer NI contributions that can be claimed for each employee.

- The amount of pay minus the relevant National Insurance contributions secondary threshold
- To calculate the employer National Insurance contributions due on an employee’s total pay for the pay period, the result of Step 1 is multiplied by 13.8%.
- Divide the amount of employer National Insurance contributions due for the pay period by the number of days in the pay period.
- The grant is capped at the total amount of employers’ National Insurance contributions due to be paid in respect of an employee. Multiply the result of Step 3 by the number of qualifying furlough days in the pay period.
- Multiply the result of Step 4 by the proportion of pay received in respect of the qualifying furlough days that is funded by the grant.

The example provided for pay periods covering both furloughed and working periods is as follows:

An employee who is paid a fixed amount monthly agrees to be furloughed by A Ltd on 16 April 2020. The employee’s gross pay at the end of the month is £2,160. This is made up of £1,200 of wages funded by A Ltd, in respect of 1 to 15 April (15 days), and £960 of pay wholly funded by a grant in respect of 16 to 30 April (15 days). The total employer NI contributions due for the pay period is apportioned on a daily basis to determine how much can be covered by a grant for employer NI contributions.

- £2,160 minus £732 (the amount of pay minus the relevant National Insurance contributions secondary threshold)
- Multiply by 13.8% (this gives you the amount of employer National Insurance contributions due on an employee’s total pay for the pay period)
- Divide by 30 (the number of days in the pay period)
- Multiply by 15 (the number of furlough days in the pay period)
- Multiply by 100% (because the employee’s wage is not being topped up) - this is £98.53

An Ltd can claim £98.53 in respect of the employer NI contributions due on the employee’s March pay. The total grant for employer NI contributions cannot exceed the total amount of employer NI contributions due to be paid.

The example provided for employees who have their pay topped-up is as follows:

If A Ltd chooses to top up the same employee’s pay to 100% during the period of furlough, the employer NI contributions must be apportioned between the pay funded by the grant and the pay funded by the employer. The employee’s total pay in this example is £1,200 in respect of 1 to 15 April and £1,200 (made up of £960 grant-funded pay and £240 employer-funded pay) in respect of 16 to 30 April, totalling £2,400.

- £2,400 minus £732 (the amount of pay minus the relevant NI contributions secondary threshold)
- Multiply by 13.8% (this gives you the amount of employer NI contributions due on an employee’s total pay for the pay period)
- Divide by 30 (the number of days in the pay period)
- Multiply by 15 (the number of furlough days in the pay period) Step
- Multiply by £960 / £1,200 (this is the furlough pay received for the furlough period divided by the total pay received for the furlough period) - this equals £92.07

An Ltd can claim £92.07 in respect of the employer NI contributions due on the employee’s March pay. The total grant for employer NI contributions cannot exceed the total amount of employer NI contributions due to be paid.

**Claims where no employer NI contributions are due**

If no employer NI contributions are due, then the amount of the grant towards employer NI contributions will be zero. This will be true where:

- Apprentices are under 25 (category H)
- Employees are under 21 (category M)
- Employees are under 21 and can defer NI because they’re already paying it in another job (category Z)
- Employers whose employer National Insurance contributions bill is reduced to £0 by the Employment Allowance

__Calculating employer’s pension contributions to claim__

Pension contributions will still need to be paid on behalf of employees, and these can be reclaimed up to the level of the mandatory employer contribution, even if it isn’t for an auto-enrolment pension.

Claims cannot be made for any pension contributions if there are no contributions made or due to be made for an employee or for pension contributions made that are above the mandatory employer contribution.

To calculate how much can be claimed for the employer’s pension contributions:

- Start with the amount being claimed for the employee’s wages
- Deduct the minimum amount the employee would have to earn in the claim period to qualify for employer pension contributions – this is £512 a month for periods before 5 April 2020, and £520 a month for periods after 6 April 2020.
- Multiply by 3%.

Grants for pension contributions can be claimed up to this cap on the proviso that the employer pays the whole amount claimed to a pension scheme for the employee as an employer contribution.

**Calculating employer pension contributions if an employee is furloughed for a whole pay period, and their pay is not topped up**

The following example is provided:

An Ltd pays employees on a monthly basis. An employee was furloughed on 1 April 2020 and is paid £1,500 of furlough pay on 30 April 2020. An Ltd did not top up the employee’s pay. An Ltd pays employer pension contributions into the employee’s pension.

- Start with £1,500 (this is the gross pay grant)
- Deduct £520 (this is the Lower Level of Qualifying Earnings)
- Multiply by 3% = £29.40

An Ltd can claim £29.40 towards employer contributions it makes into the employee’s pension.

**Calculating employer pension contributions where the employer makes contributions above the minimum level of contributions for an auto-enrolment pension**

The following example is provided:

A salaried employee of A Ltd earns £2,125 per month and is furloughed from 1 May 2020 to 31 May 2020. An Ltd has agreed to top up the employee’s salary to its usual amount, including making employer pension contributions which are usually 3% of the employee’s entire salary. The amount of gross pay grant is 80% of £2,125, which is £1,700.

The grant that can be claimed towards the employer pension contributions is the lower of the minimum level of contributions for an auto-enrolment pension, based on the furlough payment, and the amount actually paid by A Ltd.

The minimum level of auto-enrolment contributions is:

- Start with £1,700 (this is the gross pay grant)
- Deduct £520 (this is the Lower Level of Qualifying Earnings)
- Multiply by 3% = £35.40

The total employer pension contribution made by A Ltd under the terms of the pension scheme is the gross pay to the employee of £2,125 multiplied by 3%, which equals £63.75.

As A Ltd can only claim the lower of the minimum level of contributions for an auto-enrolment pension (based on the furlough payment) and the amount actually paid into the employee’s pension, they can claim £35.40 to cover employer pension contributions.

**Calculating employer pension contributions where the employee is furloughed during the pay period**

If an employee is paid for a pay period in which not all days are furlough days then the Lower Level of Qualifying Earnings should be apportioned on a daily basis.

This example is given:

An Ltd pays employees on the last day of every month. An Ltd pays employer pension contributions into employees’ pensions in line with the minimum level of contributions for an auto-enrolment pension.

An employee agrees to be furloughed from 16 April 2020.

Their April 2020 gross pay is £1,501.20. This is made up of £810 which they earned before being furloughed, and £691.20 of furlough pay.

The amount of the grant which A Ltd can claim towards their employer pension contributions is:

- Start with £691.20 (this is the furlough pay)
- Deduct £260 (this is a proportion of the Lower Level of Qualifying Earnings)
- Multiply by 3% = £12.94

The minimum level of auto-enrolment pension contributions on the furlough pay is £12.94.

An Ltd can claim for the lower of £12.94 or the employer pension contributions due on the furlough pay under the terms of the pensions scheme in respect of the furlough pay.

The Lower Level of Qualifying Earnings in this example is calculated as £520 divided by 30 days (the number of days in April), and then multiplied by 15 days (the number of days that the employee is furloughed in April).

__When claiming__

Claims can only be made for periods when employees are on furlough.

Only one claim can be made during a claim period and this should be made shortly before payroll is run, when it is actually running or after the payroll has been run. All employees must be claimed for in each period at one time, and changes cannot be made.

Claims can be backdated from 1 March 2020 where employees have been furloughed from that date but a claim cannot start any earlier than the date the employee was first furloughed.

By making a claim, the agreement is made that:

- The grant received can only be used to pay employee salaries and the employer NI contributions and pension contributions that must be paid in relation to the salary paid to the employees
- Any grants will be returned to HMRC if it cannot be used or if any party is unwilling to use it to pay employee salaries and the associated employer NI and pension contributions

If these points cannot be accepted, then a claim must not be made.

__After a claim has been made__

HMRC will check the claim, and if the claimant is eligible, it will be paid out by BACS to a UK bank account.

Employers must not enter into any transaction with the worker that reduces the wages below this amount, including any administration charges, fees or other costs in connection with the employment.

The information in this article is accurate at the time of publication. For all the latest information, news and resources on how the COVID-19 pandemic is affecting payroll professions, visit our **Coronavirus hub.**