Flexible Furlough from 1 July until 31 October 2020

When deciding to move employees onto flexible furlough, there are a number of considerations for payroll:

In general employees fall into two categories:

• Fixed salaried employees
• Variable hours worked employees

For fixed salaried employees, the flexible furlough calculation does require that hours and hourly rates are shown on the payslip alongside the furlough payment which is based on calendar days.

The furlough payment will relate to hours not worked.

For example, if an employee is contracted to 40 hours per week, their total usual hours for the flexible furlough is 40/7 days per week x 31 days, for July. Rounded up the total hours in the month are 178.  If the employee is working 100 actual hours, the furlough claim will be based on the remaining 78 hours.

As a salaried employee is usually averaged over 12 pay periods, this can give anomalies to their pay and consequently the pension contributions based on their pay. 

For variable hours worked employees, a calculation based on average hours for the prior year or the same period the previous year needs to be made to obtain the employees usual hours worked.

The furlough calculation is then worked out in the same way as the fixed, by taking the total actual hours worked and deducting them from their usual hours. The remaining hours are then the furlough hours.

Auto-enrolment

For Auto-enrolment the normal payroll process still runs as usual and the pension obligations remain unchanged.

HR implications

The HR update provided in our e-newsletter last week contained valuable advice concerning employees and their employment rights.

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.

Payroll

For monthly payrolls this can be in line with the payroll processing, but for weekly payrolls can be problematic due to additional part week calculations required for the furlough claim.

The payroll calculations that involve flexible furlough will give rise to many questions concerning contractual agreements, what actual hours are to be paid for and how these integrate with furlough hours.

In addition there may be holiday top up calculations to consider, accrued holiday payments and statutory absence payments.

It may be that employees are being put through a redundancy process alongside furlough which brings extra complexities to the payroll.

All of this has a significant impact on payroll processing times.

A new engagement will be available for existing payroll clients to enable the flexible furlough calculations. Please ask your Streets Partner for details.