Furlough: Maternity and other parental pay: changes to calculation of Average Weekly Earning (AWE)

H & DD by PSP (c)2016

As a result of the #COVID19 #coronavirus pandemic with millions of employees being placed on furlough, new rules are introduced to protect those who are going on parental leave and receiving statutory payments for maternity, adoption, paternity, bereavement and shared parental responsibilities.

HMRC now advise:

If your employee was on furlough and you paid them with help from the Coronavirus Job Retention Scheme (CJRS) during any part of the relevant 8-week period, there are slightly different rules about how you calculate their Average Weekly Earnings (AWE) if they are due to start a period of family-related statutory pay on or after 25th April 2020.

This is to ensure your employee’s:
• eligibility for Statutory Maternity Pay, Statutory Adoption Pay, Statutory Paternity Pay, Statutory Shared Parental Pay, or Statutory Parental Bereavement Pay; and
• earnings-related rate of Statutory Maternity Pay or Statutory Adoption Pay
are not affected if their earnings are lower than normal as a result of being furloughed.

If your employee was on furlough for part or all of the relevant 8-week period, the earnings used to calculate AWE for that period will be the higher of:
a) What they actually receive from their employer; or
b) What they would have received from their employer had they not been on furlough

Where it is not clear what the employee would have received had they not been on furlough, a helpful starting point is likely to be the reference salary which is used to determine how much you claim through the CJRS. However, you should also consider any bonus payments, commission payments, or other payments which would have qualified as earnings and which the employee was due to receive in the relevant period.

If you are claiming your employee’s wage costs (the lower of 80% of their reference salary or £2500 per month) through the CJRS but you are topping up their wages to full pay at your own cost, no change will be required as the employee’s earnings will not be lower than they would have been had the employee not been on furlough.

Similarly, no change will be required where, as a result of the coronavirus crisis, you and your employee agreed a reduction in their pay during the relevant period outside of the Government’s CJRS.

Opinion

This change is welcome in protecting employees who are due to start parental leave and would have been affected by a drop in earnings due to furlough.

Employers need to take care and are likely to have to manually adjust automated calculations in payroll systems. Normally the AWE is assessed on actual earnings for Class 1 purposes, however, during furlough those earnings may be lower than if in work.

Review cases of new statutory parental leave from 25th April as the AWE may need to be adjusted especially for the higher weeks of Statutory Maternity and Adoption Pay (SMP & SAP).

PAYadvice.UK 20/6/2020

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