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Job Retention Scheme Module - Summary of Phase 2 Calculations

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Summary

This guide will help talk you through the changes to calculations in Phase 2 of the Job Retention Scheme in Sage 50cloud Payroll.

Description

The calculations done by the Job Retention Scheme (JRS) module changed in Phase 2 of the Job Retention Scheme. You can now choose to flexibly furlough employees, which will change the calculations done by Sage 50cloud Payroll. 

Phase 2 of the Job Retention Scheme applies from 1st July 2020. 

You can find more detailed guidance on the Job Retention Scheme module calculations here >

This guide will summarise the calculations done in Phase 2 of the JRS module, and will work through an example calculation.

NOTE: If an employee was not submitted on an FPS prior to 19th March 2020, they will not be eligible for CJRS between March 2020 and 31 October 2020. 

NOTE: As part of the extension to CJRS from 1 November 2020, employees who were not previously eligible for CJRS can now qualify for the scheme as long as they were submitted on an FPS prior to 30 October 2020.

Resolution


NOTE: All calculations done by the JRS module are broken down per tax period. If the period you are claiming for covers more than 1 tax period, you should break the calculation down into each tax period, then add the totals together.

Calculate the Furloughed Hours

If you are flexibly furloughing your employees, then you need to enter their Normal Hours Worked and Actual Hours Worked in Step 2: Choose the employees you'd like to furlough of the JRS module. 

The JRS module will use this to work out the employee's furloughed hours to use later in the calculation. 

 TIP: You can find more information on how to work out the Normal Hours Worked, and how to split it across tax periods here > 

Calculate the Furloughed Hours

To work out the Furloughed Hours for an employee:

  1. Normal Hours Worked - Actual Hours Worked

If nothing is entered in Normal Hours Worked and Actual Hours Worked, or if the Furloughed Hours is the same as the Normal Hours Worked, then the program will treat the employee as if they were furloughed for the full claim period. 

Example

A monthly employee normally works 160 hours. They are being furloughed from 1 July - 31 July.

They would normally have worked 21 hours in Month 3, and 140 in Month 4. They actually worked 7 hours in Month 3, and 63 in Month 4.

  1. Month 3's Furloughed Hours = 21 - 7 = 14.
  2. Month 4's Furloughed Hours = 140 - 63 = 77.

Calculate the Reference Earnings - Employees eligible for CJRS between March 2020 - 31 October 2020, and beyond

Their reference earnings are calculated differently depending on their employment type, and whether they qualified for the CJRS between March 2020 and October 2020, or only from November 2020 onwards. This section refers to employees who were eligible from March 2020 onwards.

NOTE: For employees who didn't qualify between March and October 2020, but do qualify from November 2020, skip to the next section.

Fixed salary

If the employee's earnings are fixed, you should use their earnings as of 19 March 2020.

The JRS module will use their earnings from the last updated date on or before 19 March 2020.

Variable pay and the employee was employed on 06/04/2019

If the employee's earnings vary and the employee was employed by you for the full 2019/2020 tax year, the module calculates the higher of:

  • how much the employee earned in the same tax period last year, or
  • the average earnings in the 2019/2020 tax year, based on the employee's pay frequency and number of pay periods - this includes both paid and unpaid.
Variable pay and the employee started part-way through the 2019/2020 tax year

If the employee's earnings vary and the employee started in your employment on or after 7 April 2019, the module uses the average earnings from when they started until either the start of the claim period or the end of the 19/20 tax year, whichever is sooner. For Phase 2 calculations, this will be the end of the 19/20 tax year - 5 April 2020.

  1. Calculate the number of calendar days between the employee start date and 5 April 2020.
  2. Divide their total earnings beteween their start date and 5 April 2020, by the number of days from Step 1.
  3. Multiply this by the number of days in their pay frequency
    • For monthly paid employees, you should use 30.436875 (the average number of days in a month)
If the employee has variable pay and hasn't been paid for a full period up to 19/03/2020 yet

If the employee has variable pay but you haven't paid them for a full period up to 19 March 2020 yet, the module automatically assigns their employment type in the assessment to manual. This means that you can enter the required 100% earnings value. The module then calculates the 80% value when you click recalculate.

TIP: If the employee has a variable employment type, you must work out the reference earnings for each tax period in the claim period. Their reference earnings may be different for each tax period so you must calculate their earnings for each period to accurately reconcile the calculation.

NOTE: You can now skip the next section and go to the "Calculate the Furloughed Earnings" section


Calculate the Reference Earnings - Employees eligible for CJRS from November 2020 only

Their reference earnings are calculated differently depending on their employment type, and whether they qualified for the CJRS between March 2020 and October 2020, or only from November 2020 onwards. This section refers to employees who were not eligible between March 2020 and 31 October 2020, but are now eligible from November 2020.

Fixed salary

If the employee's earnings are fixed, you should use their earnings as of 30 October 2020.

The JRS module will use their earnings from the last updated date on or before 30 October 2020.

Variable pay

If the employee's earnings vary and as long as they had been included on an FPS prior to 30 October 2020, the module uses the average earnings between 6 April 2020 and the day before the employee was furloughed.

  1. Calculate the number of calendar days between 6 April 2020 and the day before furlough began.
  2. Divide their total earnings beteween 6 April 2020 and the day before furlough began, by the number of days from Step 1.
  3. Multiply this by the number of days in their pay frequency
    • For monthly paid employees, you should use 30.436875 (the average number of days in a month)

 TIP: If the employee has a variable employment type, you must work out the reference earnings for each tax period in the claim period. Their reference earnings may be different for each tax period so you must calculate their earnings for each period to accurately reconcile the calculation.


Calculate the Furloughed Earnings

Next, the JRS module will use the reference earnings for the tax period to calculate the furloughed earnings.

This is calculated by annualising the reference earnings, then working out a daily rate of pay from this. The module then multiplies this daily rate by the number of days furloughed in the tax period.

If the employee is flexibly furloughed, this is then pro-rata'ed for the number of hours they were furloughed. 

Calculate the Furloughed Earnings for the period
  1. Multiply the reference earnings to get an annual figure
    • If they are weekly paid, multiply by 52.
    • If they are fortnightly paid, multiply by 26.
    • If they are four weekly paid, multiply by 13.
    • If they are monthly paid, multiply by 12.
  2. Divide by 365.2425 (the average days in a year)
  3. Multiply by the number of days furloughed in the tax period.
Flexible Furlough

If they are flexibly furloughed, follow the steps above then also do the following:

  1. Divide by the Normal Hours Worked
  2. Multiply by the Furloughed Hours

TIP: For calculating the Furloughed Hours, please refer to the first section Calculate the Furloughed Hours

Example

The monthly employee has a fixed employment type. Their reference earnings were £2228.17.

The employee was flexibly furloughed and their furloughed hours were worked out earlier. 

Month 3 (1 July 2020 - 5 July 2020):

  1. 2228.17 x 12 = 26738.04
  2. 26738.04 / 365.2425 = 73.206
  3. 73.206 x 5 = 366.031 (furloughed earnings for the whole period)
  4. 366.031 / 21 = 17.430
  5. 17.430 x 14 = 244.02 (furloughed earnings for time furloughed)

Month 4 (6 July 2020 - 31 July 2020)

  1. 2228.17 x 12 = 26738.04
  2. 26738.04 / 365.2425 = 73.206
  3. 73.806 x 26 = 1903.363 (furloughed earnings for the whole period)
  4. 1903.363 / 140 = 13.595
  5. 13.595 x 77 = 1046.85

Total furloughed earnings = 244.02 + 1046.85 = 1290.87


Calculate the Furloughed Pay

After calculating the furloughed earnings, the JRS module will then use this to work out their furloughed pay (80% of their furloughed earnings). 

Once calculating 80% of the furloughed earnings, the JRS module will then compare this to the furlough cap and use whichever figure is lower for each tax period as the employees furloughed pay. 

The furlough cap is £2500 per month, and is also pro-rataed if the employee is flexibly furloughed. 

Calculate 80% of the Furlough Earnings
  1. Multiply the furloughed earnings by 0.8.
Calculate the Furlough Cap
  1. 2500 divided by number of days in the calendar month
    • For January, March, May, July, August, October and December, this is 31.
    • For April, June, September and November, this is 30.
    • For February, this is 28.
  2. Multiply by days furloughed in the tax period
Flexible Furlough

If the employee is flexibly furloughed, follow the steps above then also do the following:

  1. Divide by Normal Hours Worked
  2. Multiply by Furloughed Hours.

TIP: For calculating the Furloughed Hours, please refer to the first section Calculate the Furloughed Hours

Work out the Furloughed Pay

To work out the furloughed pay for the tax period, you should compare the furlough cap to 80% of their furloughed earnings and use whichever value is lower. 

Example

Month 3: 

  • 80% of furloughed earnings = 244.02 x 0.8 = 195.22
  • Furlough Cap = 
    • 2500 / 31 = 80.65
    • 80.65 x 5 = 403.25
  • Furloughed pay used = 195.22

Month 4:

  • 80% of furlough earnings = 1046.85 x 0.8 = 837.48
  • Furlough Cap = 
    • 2500 / 31 = 80.65
    • 80.65 x 26 = 2096.90
  • Furloughed pay used = 837.48

Total Furloughed Pay = 195.22 + 837.48 = 1032.70


Calculate the HMRC and Employer Funded amounts

NOTE: This step only applies to claims in September 2020 and October 2020. For claims up until 31 August 2020, or from 1 November 2020 onwards, no further calculations are required.

From 1 September 2020 until 31 October 2020, some of the furloughed pay is funded by HMRC and some is funded by the Employer.

  • Between 1 September - 30 September, 70% is funded by HMRC, and 10% is funded by the Employer.
  • Between 1 October - 31 October, 60% is funded by HMRC, and 20% is funded by the Employer.

After calculating the relevant furloughed pay, the JRS module will then calculate how much is funded by HMRC and how much is funded by the Employer. 

Work out how much is funded by HMRC
  1. Divide the Furloughed Pay by 80.
  2. Multiply by the HMRC funded percentage.
    1. For September 2020, you should multiply by 70.
    2. For October 2020, you should multiply by 60.
Work out how much is funded by the Employer
  1. Divide the Furloughed Pay by 80.
  2. Multiply by the Employer funded percentage.
    1. For September 2020, you should multiply by 10.
    2. For October 2020, you should multiply by 20.

Calculate the Employer's National Insurance

NOTE: In Phase 2, Employer's National Insurance only applies to claims up to the 31 July 2020. From 1 August 2020, Employer's National Insurance is no longer reclaimable under the Job Retention Scheme.

To calculate the Employer's National Insurance Contribution (NIC), the JRS module will work out a pro-rataed Secondary Threshold based on the time the employee was furloughed, and then subtract this from the furloughed pay. It then calculates 13.8% of this as the Employer's NIC. 

Calculate the adjusted Secondary Threshold

TIP: If the employee is fortnightly or four weekly paid, you should divide the furloughed pay by either 2 or 4 to get a weekly value. You should follow the steps below to work out the Employer's NIC and then multiply the result by 2 or 4 again to get the correct Employer's NIC.

  1. Divide the Secondary Threshold for the period by the total days in the tax period.
    • For weekly, the Secondary Threshold is £169
    • For monthly, the Secondary Threshold is £732
  2. Multiply by days furloughed in the tax period
Flexible Furlough

If the employee is flexibly furloughed, follow the steps above then also do the following:

  1. Divide by the Normal Hours Worked
  2. Multiply by the Furloughed Hours

TIP: For calculating the Furloughed Hours, please refer to the first section Calculate the Furloughed Hours

Calculate the Employer's NIC
  1. Furloughed Pay - Adjusted Secondary Threshold
  2. Multiply by 0.138
Example

Month 3: 

  • Adjusted Threshold =
    1. 732 / 30 = 24.4 
    2. 24.4 x 5 = 122 (adjusted threshold for the whole period)
    3. 122 / 21 = 5.81
    4. 5.81 x 14 = 81.34 (adjusted threshold for time furloughed)
  • Employer's NIC = 
    1. 195.22 - 81.34 = 113.88
    2. 113.88 x 0.138 = 15.72

Month 4:

  • Adjusted Threshold = 
    1. 732 / 31 = 23.613
    2. 23.613 x 26 = 613.94 (adjusted threshold for whole period)
    3. 613.94 / 140 = 4.385
    4. 4.385 x 77 = 337.65 (adjusted threshold for time furloughed)
  • Employer's NIC = 
    1. 837.48 - 337.65 = 499.81
    2. 499.81 x 0.138 = 68.97

Total Employer's NIC = 15.72 + 68.97 = 84.69


Calculate the Employer's Pension

NOTE: In Phase 2, Employer's Pension only applies to claims up to the 31 July 2020. From 1 August 2020, Employer's Pension is no longer reclaimable under the Job Retention Scheme.

To calculate the Employer's Pension, the JRS module will work out a pro-rataed Lower Qualifying Earnings threshold based on the time the employee was furloughed, and then subtract this from the furloughed pay. It then calculates 3% of this as the Employer's Pension. 

Calculate the adjusted Lower Qualifying Earnings threshold
  1. Divide the Lower Qualifying Earnings threshold for the period by the total days in the tax period.
    • For weekly, the threshold is £120
    • For fortnightly, the threshold is £240
    • For four weekly, the threshold is £480
    • For monthly, the threshold is £520
  2. Multiply by days furloughed in the tax period
Flexible Furlough

If the employee is flexibly furloughed, follow the steps above then also do the following:

  1. Divide by the Normal Hours Worked
  2. Multiply by the Furloughed Hours

TIP: For calculating the Furloughed Hours, please refer to the first section Calculate the Furloughed Hours

Calculate the Employer's Pension
  1. Furloughed Pay - Adjusted Lower Qualifying Earnings threshold
  2. Multiply by 0.03
Example

Month 3: 

  • Adjusted Threshold = 
    1. 520 / 30 = 17.33
    2. 17.33 x 5 = 86.67 (adjusted threshold for the whole period)
    3. 86.67 / 21 = 4.13
    4. 4.13 x 14 = 57.77 (adjusted threshold for time furloughed)
  • Employers Pension =
    1. 195.22 - 57.77 = 137.44
    2. 137.44 x 0.03 = 4.12

Month 4:

  • Adjusted Threshold = 
    1. 520 / 31 = 16.77
    2. 16.77 x 26 = 436.13 (adjusted threshold for whole period)
    3. 436.13 / 140 = 3.12
    4. 3.12 x 77 = 239.87 (adjusted threshold for time furloughed)
  • Employer's Pension = 
    1. 837.48 - 239.87 = 597.61
    2. 597.61 x 0.03 = 17.93

Total Employer's Pension = 4.12 + 17.93 = 22.05




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