HMRC confirms usual hours calculation for flexible furlough

30 June: The day before flexible furloughing is introduced to the CJRS, HMRC has confirmed to ICAEW how usual hours should be calculated. The answer is not the logical one, but it aligns with the published guidance.

On 18 June, ICAEW’s Tax Faculty highlighted the confusion over how to calculate usual hours for partially furloughed employees for claims under the second iteration of the Coronavirus Job Retention Scheme (CJRS V2).

Key to getting the answers HMRC expects from its furlough grant claim calculator, are the hours that employers feed in.

For the period of the claim the employer must enter:

• usual working hours, and
• actual working hours.

The difference between these is the furloughed hours on which the grant claim is based.

HMRC has now confirmed that the following approach is the correct one, as applied for July 2020 to Bob who works 35 hours a week and is paid on the last working day of each month:

HMRC's published guidance gives instructions for working out an employee’s usual hours for an employee who is contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work, as follows:

"You need to calculate the usual hours for each pay period, or part of a pay period, that falls within the claim period.

"To calculate the number of usual hours for each pay period (or partial pay period)":

Instruction		As applied to Bob
1.	Start with the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020.	35
2.	Divide by the number of calendar days in the repeating working pattern, including non-working days.	35/7=5
3.	Multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for.	5x31=155
4.	Round up to the next whole number if the outcome isn’t a whole number.	155

The answer, confirmed by HMRC, is 155 usual hours in July for Bob.

HMRC has confirmed that the guidance to software developers which gave alternative answers is out of date although the Tax Faculty understands that it has not actually been withdrawn or superseded.

The common sense answer, which you would get if you look at a calendar and count the hours, is 161 hours for July (23 working days Monday to Friday days x 7 hours), but HMRC has confirmed that this is wrong.

Following HMRC’s guidance means that for many employers the grant they receive will be slightly less than they may have expected if they were working on an employee returning to work for a percentage of their usual working week.

However, the legislation covering the implementation of the CJRS has been published and, as with earlier debates about working versus calendar day calculations, HMRC is sticking to its position.