NI and Pension Calculations For Furloughed Workers
National Insurance for Furloughed workers in July
There are changes proposed with the way employer’s National Insurance is calculated for the period of July. The proposal is more in line with the original guidance issued up to the 20th April.
The secondary NI threshold is taken and divided across the number of calendar days in the period, it is then multiplied by the number of furloughed days. This value is deducted from the furlough payment, and the claimable employer’s NI is then 13.8% of the remainder.
Secondary threshold for NI = £169 per week or £732 per month for July 2020
Employers should still take the employment allowance into account where necessary.
For example: An employee is on furlough of £300 per week and is paid 2-weekly. They are furloughed for the whole of a two-week period in July, are NI category A, but also receiving a top up of £100 per week.
£300 x 2 = £600 total furlough pay
£600 – £338 = £262
Maximum employers NI to claim = 13.8% of £262 = £36.16
The National Insurance on the £100 is disregarded for the claim, unlike at the moment where the claimable amount can actually increase.
For workers on flexible furlough the equation is the same but using hours instead of days. This is a little less clear in the guidance but appears to be:
NI threshold for period / usual number of hours in that period = NI threshold per hour
NI threshold per hour x number of hours furloughed = threshold available for furlough pay
Furlough pay – available threshold = furlough pay subject to NI
Furlough pay subject to NI x 0.138 = Employers NI that can be claimed where applicable.
From 1st August the employers NI can no longer be claimed anyway, so this only needs to be managed for one month.
Employer’s Pensions for Furloughed workers in July
For the employer’s pension that can be claimed for furloughed workers in July there does not appear to be any changes from June other than they have a separate section in the guidance. This proposal is similar to the NI in as that it is similar to the initial proposals before 20th April, but then in the more recent changes was already moved to this anyway.
Take the relevant lower threshold for qualifying earnings and divide it by either days for a part furlough period, or hours if flexible furlough. You then multiply this by the number of days or hours furloughed to get the threshold to deduct from the furlough pay.
The lower qualifying earnings threshold is £120 per week, or £520 per month.
The maximum employers auto-enrolment pension to claim is either the actual amount or 3% of the furloughed workers wage, whichever is lower.
For example: Monthly paid employee furloughed for whole period paid £2000 furlough pay and £1000 top up. The employers pension contribution is £90
2000 – 520 = £1480
3% of 1480 = £44.4
£44.4 < £90
Therefore, for this employee £44.4 can be claimed in July for the employer’s pension contribution.
From 1st August the employer’s pension contribution can no longer be claimed.