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Payroll processing your furloughed staff

While continuing to claim for continuously furloughed employees remains possible, phase two of the CJRS – now in operation until the end of the scheme in October 2020 – introduces new flexible furlough rules.

It’s a good idea to create a ‘Furlough’ pay element within your Sage payroll software, and process the normal pay as usual, then enter the amount of furlough pay in the new pay element. This will also make it easier to analyse and report at a later date.

How the flexible furlough works

With flexible furloughing, you again pay the employee’s salary, but it comprises two components.

You fund the employee’s salary for the hours or days they work for you, part-time or shift-based. This is calculated pro-rata based on their reference salary.

You can claim back under the CJRS all or part the wage paid for the flexible furlough period – the time when the employee is not working for you, but would normally do so according to their employment contract.

This is calculated pro-rata but otherwise in the same way under CJRS rules as it was before flexible furloughing (taking into account the diminishing amounts provided by the government as of August 2020).

Payroll Processing Time Line

July 2020 payroll: During phase two, claims can be made for employer National Insurance contributions (NICs) as well as the minimum statutory pension payments for the employee (assuming they were already paying this prior to the start of the CJRS).

August 2020 payroll: You can continue to claim up to 80% of a furloughed worker’s salary (flexible or otherwise). However, from August 2020 onwards, and until the termination of the CJRS in October 2020, you are required to contribute any employer National Insurance contributions (ER NICs), and mandatory (statutory) pension contributions for the employee.

September 2020 payroll: You can claim for 70% of wages, up to a maximum claim of £2,187.50 per employee. You must contribute the 10% shortfall yourself to bring the wage up to 80% – and remember that you cannot pay an employee less than 80% of their usual wage (or 80% of £3,125 if they normally earn more) if you use the CJRS. As with the August 2020 payroll, you also pay ER NICs and pension contributions.

October 2020 payroll: You can claim for 60% of wages, up to a maximum claim of £1,875

Calculating holiday pay

HMRC offers more detailed guidance about calculating holiday pay.