Confused about Discretionary and Non-Discretionary extra hours

[eddie1234567]

Hi folks, a friend of the family is on furlough from a local hotel. They are contracted for 10 hours a week, with extra hours available, which are not mandatory but he is expected to be flexible when needed i.e. contracted for Mon and Thu mornings, but is scheduled to work regular extra shifts (same days and times each week) as well as any ad-hoc he can pick up.

 

In chatting he said that they paid 80% of their contracted hours and not their Average Pay. I must admit I do not have a clue about this other than what I have heard on tv etc. From this I thought they should be on their average wage, inclusive of the overtime over the last 12 months. I "tried" to read the HMRC for the rules, but they left me even more confused around the definition of Discretionary / Non-Discretionary. Even the examples other sites and people give a clear steer.... that I can see anyway.

 

It seems that there are still people not having a clear steer on this. Anyone with real world experience on if he is being short changed as he is universal credit and like many others is trying to survive on a much reduced income, which could be helped by factoring in the regular extra hours.

 

Cheers in advance

[smithy49]

I would have thought that the furlough will be based on contracted hours only. Its my understanding that the average is paid when its zero hours contracts etc but I might be wrong

[Emmzzi]

This is not one with a straight answer I am afraid.

 

The difficulty is, there is no case law here, and there won't be any until after furlough is over.

 

The business needs to define who is a "fixed hours" worker and who is "variable." And there is no guidance on that. Pragmatically you're not going to do a variable calculation every month for someone who occasionally makes an extra fiver, it's too much work. I think my employer set ours at around 5 hours overtime or more a month = variable worker, but that is pure guesswork on what is acceptable, to HMRC.

 

The second question is, the employer could have simply made them redundant at this point, and furlough gets more expensive for employers from July - do they wish to rock the boat?

 

It seems quite late in the day to be querying this when furlough has been running for a year - why is this a question now and not, say, March 2020?

 

And they could of course refuse to go on furlough and request to be paid 100% of their wages, as another option. 

Edited April 4, 2021 by Emmzzi

[eddie1234567]

3 minutes ago, smithy49 said:

I would have thought that the furlough will be based on contracted hours only. Its my understanding that the average is paid when its zero hours contracts etc but I might be wrong

 

 

Cheers for the reply Smithy, one of the reasons for the thread. Gov site says Regular Wages. The definition of Discretionary seems to imply both are correct. In one way this is an education for me as well as trying to help out my friend.

 

"You can claim for employees on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed. Grants under the scheme are not counted as ‘access to public funds’, and you can furlough employees on all categories of visa."

 

and

"will pay you at least 80% of your regular wages, up to a maximum of £2,500 per month, for the hours you are furloughed (not working)" (my bold)

 

along with this bit

 

What to include when calculating wages

If you’ve already claimed for an employee who was on furlough during October, and they are paid a fixed salary, you will follow the same usual wage calculation for claim periods after 31 October 2020.

The amount you should use when calculating 80% of your employees’ wages for hours not worked, is made up of the regular payments you are obliged to make, including:

• regular wages you paid to employees
• non-discretionary payments for hours worked, including overtime
• non-discretionary fees
• non-discretionary commission payments
• piece rate payments

and finishing with

 

Non-discretionary payments

When you’re working out if a payment is non-discretionary, only include payments which you have a contractual obligation to pay and to which your employee has an enforceable right.

When variable payments are specified in a contract and those payments are always made, then those payments may become non-discretionary. If that is the case, they should be included when calculating 80% of your employees’ wages.

Non-discretionary overtime payments

If your employee has been paid variable payments due to working overtime, you can include these payments when calculating 80% of their wages as long as the overtime payments were non-discretionary.

Payments for overtime worked are non-discretionary when you are contractually obliged to pay the employee at a set and defined rate for the overtime that they have worked.

 

 

 

[eddie1234567]

7 minutes ago, Emmzzi said:

It seems quite late in the day to be querying this when furlough has been running for a year - why is this a question now and not, say, March 2020?

 

Cheers Emmzzi, basically it could come down to we never discussed it before, it never crossed my mind to ask, and he has never mentioned it.

 

It is a small hotel where the owners are more than likely to not understand the rules as much as my friend back then, and  just never revisited  since (without any knowledge of how they have to report to the schemes)

 

I do despair sometimes about my chosen town and some of the "thinkings" that go on. 

[Emmzzi]

Yes, we have quite a big finance and HR team who had time to investigate and go to briefings - small business owners probably haven't had that luxury. 

 

I'm not sure this would be "put right" at audit - I think HMRC would be more looking for fraud. It's way too late for the employer to make a retrospective CJRS claim at this stage so I suspect everyone will be living with the decision that he is "fixed hours" now.

 

Fingers crossed they can reopen soon. And of course, your friend could get a second job while on furlough - if they could find one, I know it is not easy. Many of our folk have been on deliveries/ supermarkets etc waiting for us to get busy again.

 

[eddie1234567]

If he got money back, no doubt the would be happy, but doubtful. My goal today was hopefully to get him a few extra quid going forward, I know the stress he is under, at least if I could get an understanding of this he might be able to talk to this boss going forward. He enjoys where he is and would like to stay, but as you say, not many other jobs just now; and here is hoping we can open safely soon.

 

Our org is quiet lucky, most of us have been able to stay at home working, and most of those that were going to be furloughed etc were able to be re-deployed to other areas that have been left fallow for years.