Furlough Pay Calculator
Calculate your furlough pay entitlements under UK government schemes with our accurate tool
Comprehensive Guide to Furlough Calculation Examples (2024)
Understanding how furlough pay is calculated is crucial for both employers and employees during periods of temporary leave. This guide provides detailed furlough calculation examples, explains the different schemes available, and helps you navigate the complex regulations surrounding furlough payments in the UK.
1. Understanding Furlough Schemes in the UK
The UK government has implemented several furlough schemes to support businesses and employees during economic challenges. The two main schemes are:
Coronavirus Job Retention Scheme (CJRS)
- Introduced in March 2020 during COVID-19 pandemic
- Government pays 80% of wages up to £2,500/month
- Employers can top up to 100% if they choose
- Covers regular pay, not bonuses or commissions
Job Support Scheme (JSS)
- Replaced CJRS in November 2020
- Employees work at least 20% of normal hours
- Government and employer share cost of unworked hours
- Government contribution capped at £1,541.75/month
2. How Furlough Pay is Calculated
The calculation of furlough pay depends on several factors including the scheme used, employee type, and regular pay structure. Here’s the basic formula:
- Determine reference pay: For employees with fixed pay, this is their regular salary. For variable pay, it’s the average of the higher of:
- Same month’s earnings from previous year
- Average monthly earnings from 2019-2020 tax year
- Calculate 80% of reference pay: This is the base furlough amount (capped at £2,500/month under CJRS)
- Add employer contributions: Employers must pay employer National Insurance and minimum auto-enrolment pension contributions
- Apply deductions: Subtract employee National Insurance and income tax
3. Furlough Calculation Examples
| Employee Type | Regular Pay | Furlough Duration | 80% Furlough Pay | Employer Costs | Net Employee Pay |
|---|---|---|---|---|---|
| Full-time (monthly) | £2,800 | 1 month | £2,240 (capped at £2,500) | £242 (NI) + £84 (pension) | £1,850 |
| Part-time (weekly) | £450 | 4 weeks | £1,440 | £158 (NI) + £54 (pension) | £1,180 |
| Zero-hours (variable) | £1,200 avg/month | 2 months | £1,920 total | £211 (NI) + £72 (pension) | £1,580 |
Example 1: Full-time Employee on £3,200/month
Sarah earns £3,200 per month before tax. She is furloughed for 6 weeks under CJRS:
- Reference pay: £3,200 (capped at £2,500 for calculation)
- 80% of £2,500 = £2,000 per month
- For 6 weeks (1.5 months): £3,000 gross furlough pay
- Employer NI (13.8% on £3,000): £414
- Employer pension (3% on £3,000): £90
- Employee NI and tax deductions: ~£600
- Net pay to employee: ~£2,400
Example 2: Part-time Employee on £12/hour, 20 hours/week
James works 20 hours per week at £12/hour. He is furloughed for 8 weeks under CJRS:
- Weekly pay: 20 × £12 = £240
- 80% of £240 = £192 per week
- For 8 weeks: £1,536 gross furlough pay
- Employer NI (13.8% on £1,536): £212
- Employer pension (3% on £1,536): £46
- Employee NI and tax deductions: ~£150
- Net pay to employee: ~£1,386
4. Key Considerations for Furlough Calculations
Eligibility Criteria
- Must be on PAYE payroll on or before 30 October 2020
- Must have a UK bank account
- Cannot work for employer during furlough hours
- Can be on any type of employment contract
What’s Included in Reference Pay
- Regular wages
- Non-discretionary overtime
- Non-discretionary fees
- Non-discretionary commission
- Piece rate payments
What’s Excluded
- Discretionary bonuses
- Discretionary commission
- Non-cash payments
- Benefits in kind
- Salary sacrifice schemes
5. Common Mistakes in Furlough Calculations
Avoid these frequent errors when calculating furlough pay:
- Using incorrect reference period: For employees with variable pay, always use the higher of the two possible reference periods (same month previous year or 2019-20 average).
- Forgetting the cap: The £2,500 monthly cap applies to the 80% calculation, not the original salary. For example, someone earning £3,500 would have their furlough pay calculated as 80% of £2,500 = £2,000, not 80% of £3,500.
- Miscalculating part-time furlough: For flexible furlough, you must calculate the proportion of usual hours not worked and apply the 80% to that portion only.
- Ignoring National Insurance thresholds: Both employer and employee NI contributions have different thresholds that affect the final net pay.
- Incorrect pension calculations: Pension contributions should be calculated on the furlough pay, not the original salary, unless the employer chooses to top up.
6. Furlough vs Redundancy: Financial Comparison
| Furlough (3 months) | Redundancy | |
|---|---|---|
| Employee with £2,500/month salary | ||
| Gross pay received | £6,000 (80% of £2,500 × 3) | £7,500 (3 months notice + statutory redundancy) |
| Employer cost | £6,750 (including NI and pension) | £10,200 (including notice pay and redundancy) |
| Employee net receive | ~£5,100 | ~£6,300 |
| Job retention | Yes | No |
| Future employment possible | Yes | No |
While redundancy may provide slightly more immediate compensation, furlough schemes are designed to preserve jobs and allow businesses to retain skilled employees during temporary downturns.
7. Tax Implications of Furlough Pay
Furlough payments are subject to the same tax treatments as regular income:
- Income Tax: Deducted via PAYE as normal
- National Insurance: Both employee and employer contributions apply
- Pension Contributions: Minimum auto-enrolment contributions (3% employer, 5% employee) must be maintained
- Student Loans: Repayments continue as normal if earnings exceed threshold
- Benefits: Furlough pay counts as income for benefit calculations
Employees should receive a payslip showing these deductions as they would with normal pay.
8. How to Claim Furlough Payments
Employers must follow these steps to claim furlough payments:
- Designate employees: Decide which employees to furlough and obtain their agreement in writing
- Calculate claims: Use the government’s calculation tools or our calculator above
- Submit claims: Through the online portal with:
- PAYE reference number
- Number of employees being furloughed
- Claim period start and end dates
- Amount claimed
- Bank account details
- Contact name and phone number
- Keep records: Maintain records for 6 years including:
- Amount claimed and claim period
- Claim reference number
- Calculations showing how the claim amount was determined
- Pay employees: Ensure employees receive their furlough pay before submitting the claim
9. Recent Changes to Furlough Schemes (2023-2024)
The furlough schemes have undergone several updates. Key recent changes include:
- Extension of CJRS: Originally scheduled to end in October 2020, was extended multiple times with the final deadline being 30 September 2021
- Flexible furlough: Introduced in July 2020 allowing employees to work part-time while being furloughed for remaining hours
- Employer contributions: Gradually increased from August 2020:
- August 2020: Employers pay NI and pension
- September 2020: Employers pay 10% of wages
- October 2020: Employers pay 20% of wages
- Job Support Scheme: Introduced as CJRS wound down, requiring employees to work minimum hours
- New eligibility criteria: Employees must have been on payroll by 30 October 2020 (previously 19 March 2020)
10. Alternative Support for Businesses
If your business isn’t eligible for furlough schemes or needs additional support, consider these alternatives:
Bounce Back Loan Scheme
Provides loans from £2,000 up to 25% of turnover (max £50,000) with:
- 100% government guarantee
- 2.5% fixed interest rate
- No repayments for first 12 months
- 6-year repayment term
Coronavirus Business Interruption Loan Scheme
For larger businesses needing up to £5 million:
- 80% government guarantee
- No interest for first 12 months
- Up to 6-year repayment terms
- Available through accredited lenders
Self-Employment Income Support Scheme
For self-employed individuals:
- Grants worth 80% of average monthly profits
- Capped at £2,500 per month
- Based on 2018-19 tax returns
- Must have traded in 2019-20
11. Frequently Asked Questions
Can I work for another employer while on furlough?
Yes, unless your employment contract prohibits it. You can work for another employer while furloughed from your primary job, provided:
- Your contract allows it
- The work doesn’t violate any restrictions from your primary employer
- You’re not providing services to your furloughing employer
What happens to my holiday entitlement during furlough?
You continue to accrue holiday entitlement as normal during furlough. Key points:
- You can take holiday while on furlough
- Holiday pay should be at your normal rate (100%), not furlough rate (80%)
- Employers can require you to take holiday with proper notice
- Unused holiday can be carried over for up to 2 years
Can my employer make me redundant while on furlough?
Yes, but there are important considerations:
- Normal redundancy rules and protections apply
- Redundancy pay should be based on normal wages, not furlough pay
- Employers should follow fair redundancy procedures
- You have the right to appeal the decision
12. Expert Resources and Further Reading
For official guidance on furlough calculations and schemes:
- GOV.UK: Claim for wages through CJRS – Official government guidance on claiming furlough payments
- GOV.UK: Job Support Scheme – Details about the Job Support Scheme that followed CJRS
- ACAS: Coronavirus advice – Comprehensive advice on employment rights during COVID-19 from the Advisory, Conciliation and Arbitration Service
- CIPD: Furlough guidance – Professional guidance from the Chartered Institute of Personnel and Development
13. Conclusion and Key Takeaways
Understanding furlough calculations is essential for both employers and employees to ensure fair compensation during periods of temporary leave. The key points to remember are:
- Furlough pay is typically 80% of regular pay, capped at £2,500/month under CJRS
- Different calculation methods apply for fixed vs. variable pay employees
- Employers must cover National Insurance and pension contributions
- Flexible furlough allows for part-time work while still receiving support
- Accurate record-keeping is crucial for compliance and potential audits
- Alternative support schemes are available for businesses not eligible for furlough
Using our furlough calculator at the top of this page can help you quickly estimate payments, but for complex situations, we recommend consulting with a qualified accountant or employment law specialist.
As economic conditions evolve, stay informed about changes to furlough schemes and other business support measures by regularly checking official government sources.