On 27 April 2020, we wrote about the payroll processing nightmare about manually calculating the following payments where individuals had lower earnings as a result of being a furloughed employee opposed to being an employee:
- Statutory Maternity Pay (SMP)
- Maternity Allowance (MA)
- Statutory Adoption Pay (SAP)
- Statutory Paternity Pay (SPP)
- Statutory Shared Parental Pay (ShPP) and
- Statutory Parental Bereavement Pay (SPBP)
The Maternity Allowance, Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay (Normal Weekly Earnings etc.) (Coronavirus) (Amendment) Regulations 2020 ensured that individuals will not suffer a reduced statutory payment, just because their Average Weekly Earnings value was reduced in the ‘relevant period’ (the 8 weeks prior to the Qualifying Week).
The legislation came after the Department of Business, Energy and Industrial Strategy (BEIS) and the Department for Work and Pensions (DWP) issued a joint press release on 24 April 2020 regarding the above family-related statutory payments (SMP, SAP etc).
Where the conditions are satisfied, the legislation requires us to look at the earnings that would have been paid had the employee not been on temporary (furloughed) absence. The Explanatory Memorandum calls this Normal Weekly Earnings (NWE), as opposed to our usual calculation which is based on Average Weekly Earnings (AWE) or Average Weekly Amount (AWA) in Maternity Allowance cases.
An important consideration about the announcement and the legislation was that it applied in Great Britain only.
On 24 April 2020, Economy Minister Diane Dodds and Communities Minister Deirdre Hargey announced that similar legislation would be introduced in Northern Ireland with the same intentions, i.e. to ensure that where earnings have been reduced as a result of furloughing, individuals will not suffer a reduction in the statutory payment that they may have been expecting to receive.
Note that Statutory Parental Bereavement Pay (SPBP) does not exist in Northern Ireland, therefore, that is why it is excluded from the following pieces of legislation that mirror the changes in Great Britain:
- The Statutory Paternity Pay, Statutory Adoption Pay and Statutory Shared Parental Pay (Normal Weekly Earnings etc.) (Coronavirus) (Amendment) Regulations (Northern Ireland) 2020
- The Maternity Allowance and Statutory Maternity Pay (Normal Weekly Earnings etc.) (Coronavirus) (Amendment) Regulations (Northern Ireland) 2020
Both come into force on 25 April 2020.
As stated previously, this is a fundamental change to software functionality and is not just a question of grossing up the furloughed pay and assuming that will be equal to normal pay. There are occasions where furloughed pay will be higher than normal pay. For example, employees that are paid variably and pay is calculated over a 12-month period (including some elements like contractual bonuses and overtime that may be excluded in the Average Weekly Earnings calculation).
Employers are advised to contact their payroll provider, as this will result in the need for a manual override of a system-generated calculation.
- AWE is where the employee has not been furloughed, has not had a furlough contractual reduction in pay and the employer is not making a claim for any part of the wages under the CJRS
- NWE is a calculation that must be performed where the employee has been furloughed AND they have had a contractual reduction in pay AND the employer is not making a claim for any part of the wages under the CJRS