Firstly, please note that the calculation set out below is only relevant for employees whose pay varies. For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80% (fees, commission and bonuses should not be included).

If an affected employee has been employed (or engaged by your business) for a full 12 months prior to your claim under the Coronavirus Job Retention Scheme, you as their employer can claim for the higher of either:

• The same month’s earning from the previous year.
• Average monthly earnings from the 2019-20 tax year.

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work. If the employee started employment in February 2020, their earnings so far should be pro-rated.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.

It is advised that you undertake this calculation before you agree to place an employee with irregular earnings on furlough leave because that employee will be agreeing to a contractual variation in terms of payment. By undertaking this calculation first, you will be able to ensure that you do not commit to payment in excess of that which may be recovered from HMRC.