HMRC have issued updated guidance that confirms how employers should calculate Average Weekly Earnings (AWE) for statutory payments for furloughed employees due to take periods of family-related leave on or after the 25th April 2020.
The guidance has been updated for the calculation of Statutory Adoption Pay (SAP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Shared Parental Pay (ShPP) and Statutory Parental Bereavement Pay (SPBP), in instances where employees have been placed on furlough.
The main reason for the variance from the standard calculations for these statutory payments is to ensure that those furloughed individuals taking a period of family-related leave are not penalised for being on furlough and therefore, are not negatively impacted by COVID-19.
Ordinarily, you would base an employee’s eligibility for statutory parental payments on the average of earnings they had actually received. However, if part of the eight-week period used to calculate AWE and establish eligibility and pay figures included payments that were subject to the furlough rules, and paid at 80% of normal pay, then you would use the higher of either:
- What the employee actually received from their employer
- What the employee would have received from their employer, if they had not been on furlough
If unsure what the employee would have received, then the guidance suggests using the reference salary originally used to determine how much an employer could claim through the CJRS. Employers should also include any payments that the employee was due to receive in the relevant period, including bonus and commission payments.
If an employer is claiming the employee’s wages through the CJRS, but has been topping up pay to their normal rate, and paying for that amount themselves, then there is no need to adjust the calculation for AWE. Similarly, if an employer and employee reached an agreement relating to a reduction in pay outside of the CJRS as a result of the coronavirus crisis, then no changes would be made for the purposes of calculating AWE.