Guidance for calculating statutory parental pay for furloughed employees
27 April 2020
HMRC has published guidance that advises employers how to calculate Average Weekly Earnings (AWE) for statutory payments for furloughed employees due to take periods of family-related leave on or after 25 April 2020.
Updates have been made to guidance relating to the calculation of Statutory Adoption Pay (SAP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Shared Parental Pay (ShPP) and Statutory Parental Bereavement Pay (SPBP), in instances where employees have been placed on furlough.
The fundamental difference for employees who are on furlough and commencing a period of family-related leave, who have been paid under the Coronavirus Job Retention Scheme (CJRS), is that instead of using the standard calculation for AWE, a different method should be operated. This is to ensure that those furloughed individuals taking a period of family-related leave are not penalised for being on furlough and therefore, are not negatively impacted by COVID-19.
Ordinarily, an employer would base an employee’s eligibility for statutory parental payments on the average of earnings they had actually received. However, if part of the eight week period used to calculate AWE and establish eligibility and pay figures included payments that were subject to the furlough rules, and paid at 80% of normal pay, then the employer would use the higher of either:
- What the employee actually received from their employer
- What the employee would have received from their employer, if they had not been on furlough
If an employer is unsure what the employee would have received, then the guidance suggests using the reference salary originally used to determine how much an employer could claim through the CJRS. Employers should also include any payments that the employee was due to receive in the relevant period, including bonus and commission payments.
If an employer is claiming the employee’s wages through the CJRS but has been topping up pay to their normal rate, and paying for that amount themselves, then there is no need to adjust the calculation for AWE. Similarly, if an employer and employee reached an agreement relating to a reduction in pay outside of the CJRS as a result of the coronavirus crisis, then no changes would be made for the purposes of calculating AWE.
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.