Worked Examples
Worked Examples of the Coronavirus Job Retention Scheme
Example 1
Tech Ltd employs Mr Gates at an annual salary of £24,000, so £2,000 per month. Mr Gates has opted out of auto-enrolment.
Each month, Mr Gates currently receives net pay of £1,655 which is after deducting PAYE of £191 and employees NIC of £154. On this salary, the employer pays employers' NIC of £177.
The available grant for the business is the lower of
(a) 80% of £2,000, and
(b) £2,500
Plus employers' NIC on this amount.
So Tech Ltd claims a grant of £1,600 plus £122 = £1,722.
The net amount of cash required by Tech Ltd to furlough Mr Gates based on maintaining the existing salary is £2,000 + £177 - £1,722 = £455 per month.
It is a matter for employment law whether the business is actually required to pay this top-up. Employees and employers can agree to a different arrangement during the furlough.
Example 2
Tech Ltd employs Mr Jobs at an annual salary of £42,000, so £3,500 per month. Mr Jobs has opted out of auto-enrolment. Each month, Mr Jobs currently receives net pay of £2,675 which is after deducting PAYE of £492 and employees NIC of £333. On this salary, the business pays employers' NIC of £383.
The available grant for the business is the lower of:
(c) 80% of £3,500 = £2,800, and
(d) £2,500
Plus employers NIC, £245, on this amount
So Tech Ltd claims a grant of £2,500 plus £245 = £2,745.
The net amount of cash required by Tech Ltd to furlough Mr Jobs based on maintaining the existing salary is £3,500 + £383 - £2,745 = £1,138 per month.
It is again a matter for employment law whether the business is actually required to pay this top-up. Employees and employers can agreed to a different arrangement during their furlough.
Notes to examples:
- If the employees had not opted out of auto-enrolment, Tech Ltd would also be making pension contributions on their behalf.
- We understand that the rules for the scheme are being designed with underlying reference to employment law. If the individual is still under contract, Mr Gates can expect to receive his salary in full. The grant paid to Tech Ltd should not be taken as the new maximum cost of employment to the business unless the contract has been redrafted.
- Subject to the employment contract and any amendment, the salary which the business actually pays the employee during the furlough period may be different to the pay in the relevant period and upon which the grant figure is based. However, the business must pay at least the amount of the grant.