Furloughed Employees – Reference Pay

Qtac utilises a reference pay value in order to automatically calculate an employee’s furlough pay and assist with the submission of Coronavirus Job Retention Scheme claims. 

Reference pay is calculated based on the employee’s employment start date and whether they’re paid a fixed wage or variable.  The reference pay should be entered into Qtac as an 100% value and this pay should be calculated using HMRC’s guidance. Qtac will automatically reduce the reference pay by 80% as part of the calculation to comply with the claim rules.

The information provided within this article is based on the guidance supplied by HMRC and is accurate at time of publish. Guidance can be checked using HMRC’s website and links to the relevant guidance are supplied within each section. 

What is considered as wages?

Before calculating your reference pay you should consider what payments qualify as ‘wages’. HMRC state that wages are regular payments that you are obliged to make. HMRC have issued guidance that details what payments qualify – view guidance.

Employees who were employed on or before 6^th April 2019

Fixed Wages/Salary Employee (Full & Part Time)

This section will assist you in obtaining your reference pay for an employee who was employed by the company on or before 6^th April 2019 and whose wages are deemed fixed, regardless of whether they are full or part time. 

In this scenario the employees reference pay should be set to the employee’s wages which were earned on their last pay period before 19 March 2020.

When entering the reference pay into the software you must enter 100% of the pay. Qtac will calculate 80% of the reference pay automatically during its calculations.

Guidance for this calculation can be found on HMRC’s website: Work out 80% of wages for fixed rate full or part time employees on a salary 

Employees whose pay varies

This section will assist you in obtaining your reference pay for an employee who was employed by the company on or before 6^th April 2019 and whose wages are deemed variable.

Your reference pay should be set to the highest of either:

1. The same month’s wages from the previous tax year.
2. The average monthly wages for the 2019/2020 tax year

When entering the reference pay into the software you must enter 100% of the pay. Qtac will calculate 80% of the reference pay automatically during its calculations.

This assessment of their reference pay is required to be carried out each period to ensure the highest value is being used. If when carrying out this assessment the highest value is different to the previous period, the reference pay must be updated. 

Guidance for this calculation can be found on HMRC’s website: Work out 80% of wages for empoyees whose pay varies

Employees who joined the company after 6^th April 2019

Employees who did not receive a full pay period up to 19^th March 2020

This section will assist you in obtaining your reference pay for an employee who was employed by the company after 6^th April 2019 and did not receive a full pay period up to 19^th March 2020. 

The reference pay is calculated by:

1. Take the amount they’ve been paid in the last pay period
2. Divide it by the number of days in their last pay period (including non-working days)
3. Multiple by the number of days that would have been in that pay period

When entering the reference pay into the software you should enter 100% of the pay. Qtac will calculate 80% of the reference pay automatically.

Guidance for this calculation can be found on HMRC’s website: Work out 80% of wages for empoyee who has not been paid for a full pay period up to 19th March

Employees whose pay varies

This section will assist you in obtaining your reference pay for an employee who was employed by the company after 6^th April 2019 and whose wages are deemed variable. 

The reference pay is calculated by:

1. Take the amount they earned in the tax year up to the day before they were furloughed
2. Divide it by the number of days they’ve been employed since the start of the tax year – including non-working days (up to the day before they were furloughed or 5^th April 2020 – whichever is earlier)
3. Multiply by the number of days within the next furlough period. 

When entering the reference pay into the software you should enter 100% of the pay. Qtac will calculate 80% of the reference pay automatically.

The reference pay will require updating each pay period, to reflect the number of days in the pay period, repeating step 3.

Guidance for this calculation can be found on HMRC’s website: Work out 80% of wages for empoyees whose pay varies

A little bit about us...

Qtac, a recognised payroll solutions provider in the UK, has been serving businesses for 30 years. Specializing in both payroll software and outsourced payroll services, Qtac caters to small businesses, large corporations, and payroll bureaux. Our software, recognised by HMRC, streamlines the payroll process, featuring RTI submissions, workplace pensions management, and a cloud-based portal for payslips and employee self-service. This software is supported by top-tier customer assistance, ensuring a smooth payroll experience.

Additionally, Qtac offers tailored ‘white-labelled’ outsourcing services. These services are particularly attractive to accountancy firms, as they save time, reduce stress, and mitigate payroll-related risks. By outsourcing to Qtac, companies can be confident in the knowledge that their payroll needs are being expertly managed.

Qtac's solutions are not just about functionality; they are about building long-lasting relationships with clients, offering them a combination of technology and expertise. Their commitment to adapting to client needs and providing reliable, efficient services has established Qtac as a trusted name in the payroll solutions sector in the UK. In essence, Qtac simplifies and enhances the payroll process for a diverse range of clients, ensuring compliance, efficiency, and customer satisfaction. 

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