Coronavirus Job Retention Scheme: update on calculating variable hours

In a few weeks we’ll be reaching the anniversary of the launch of the Coronavirus Job Retention scheme, now due to end on 30 April 2021. The latest stats produced by HMRC last month show that in December 1.2 million employers were using the scheme to protect 9.9 million jobs.

There are already calls for the Prime Minister to clarify now whether the scheme will be extended at the end of April. This would avoid the situation businesses faced at the end of October 2020, when the scheme was given a last-minute reprieve within hours of being replaced by the Job Support Scheme. Unfortunately, this announcement came too late for many employers who had already implemented redundancy plans on the assumption that this support would not be available.

So far, the government has refused to comment on any possible extension of the scheme past April and has said that the next phase of measures to protect jobs will be announced in the budget on 3 March. They hope this will give employers sufficient opportunity to evaluate how ongoing support will benefit them and still give them time to put in place any business changes necessary before the end of the scheme.

New Treasury Direction published

In the meantime, a further Treasury Direction has been published which clarifies the position regarding calculating usual working hours and usual pay for variable hours employees on flexible furlough.

Normally when calculating this for employees whose earnings were reported on an RTI on or before 19 March 2020, the employer will take the higher of either the average number of hours worked in the tax year 2019/2020, or the number of hours worked in the corresponding calendar period in the previous year.

However, for claims submitted covering periods in March and April 2021, this would bring into the calculation periods where normal working hours were already disrupted by COVID. The Treasury Direction has dealt with this by adjusting the ‘lookback’ period so that, rather than use the March or April 2020 figure, employers should use the March/April 2019 figure.

This means the relevant lookback periods are as follows:

Where the employee was not working for the employer during the relevant lookback period, the employer can only use the averaging method to calculate usual hours and pay.

This method of calculation only applies where employees on variable hours were on an RTI on or before 19 March 2020. For those employed afterwards, the figure is the average hours worked from the 6 April and the day before their furlough period begins (these dates are inclusive).

The Direction also clarifies that:

• For the claim period February 2021, claims must be made by 15 March 2021 and any amendments made by 29 March 2021.
• For the claim period March 2021, claims must be made by 14 April 2021 and any amendments made by 28 April 2021.
• For the claim period April 2021, claims must be made by 14 May 2021 and any amendments made by 28 May 2021.

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