The government released new guidelines yesterday on how to handle furlough pay (see link below for full details).

We are creating a furlough pay type for S4labour to support our customers through this challenging time but I wanted to write and share how we’re calculating this so others have the information to do so.

The government has said for employees it will pay a grant of 80% of earnings up to £2,500. This will be based on the higher of the average earnings in the whole previous 12 months (or fewer if they have worked for less time than this, including a part-month calculation if they were taken on in February) or the earnings in the same pay period in the previous year.

This is helpful for salaried staff but much more complicated for weekly paid employees on variable-hours contracts. We are therefore required to interpret how to calculate the above earnings for our weekly paid employees. We are going to apply the following logic:

We will calculate their average monthly earnings for the previous 12 months from the date they were furloughed. For example, if they were furloughed from 21 March we would reference 21/03/19 to 20/03/20 and work out a monthly average.

We will recalculate the last year’s monthly earnings every week based on the month that starts on the same date as the week last year. For example, for the week that runs 23/03/20 to 29/03/20, we’ll look at the monthly earnings from 23/03/19 to 22/03/19.

We will then take the higher of these monthly earnings and use this to calculate the weekly pay for the employee. This is good news for our teams whose earnings typically increase as we head into the summer months as they will benefit from this uplift.

All employees are eligible as long as they were employed by the organisation on 28 February.

We were pleased to see the government will additionally cover the National Insurance contributions and pension contributions for employers.

Employers are also able to top up their employees’ pay and we will support this functionality, although NI and pension contributions on the top-up aren’t covered by the scheme.

There’s still no announcement on how to treat holiday while staff are furloughed. In the short term, we’re going to maintain their accruals so we have an accurate picture of holiday entitlement as we come out of the pandemic but will amend this if further advice from government suggests we need to. Our thoughts are that the government is delaying making an announcement on holiday as it’s unsure how long the pandemic will last and to commit to any specific stance in the short term could have longer-term consequences.

We will continue to do what we can to support our customers and the wider industry. If anyone has any specific questions, email richard@s4labour.co.uk and I will do my best to answer. Click here to view the new government guidelines in full.

Richard Hartley is chief product officer of Catton Hospitality

Catton Hospitality is a member of our BeatTheVirus campaign