Furlough: claiming employer National Insurance contributions

in Employment Law, HR

Working out what you can claim

The total grant for employer National Insurance contributions cannot exceed the total amount of employer National Insurance contributions you are due to pay.

You can choose to provide top-up salary in addition to the grant. Employer National Insurance contributions on any additional top-up salary will not be funded through this scheme.

In calculating the total employer National Insurance contributions paid in any pay period, the employer should subtract any Employment Allowance used in that pay period. If you have not, or do not expect to pay any employer National Insurance contributions in a pay period as a result of the Employment Allowance, you should not claim any employer National Insurance contributions costs for furloughed employees in that pay period. If you expect to exhaust any Employment Allowance in a pay period then you should claim the lower of the employer National Insurance contributions grant calculation, and the employer National Insurance contributions costs that you paid, or expect to pay across your entire payroll.

The total employer National Insurance contributions due in a pay period should be apportioned on a daily basis, with the amount apportioned to any qualifying furlough days forming the basis of the amount that can be claimed through the scheme.

If your employee is furloughed for the whole pay period, and you do not top up their pay

To work out how much you can claim to cover employer National Insurance contributions:

  1. Start with the grant you’re claiming for employee’s wages.
  2. Minus the relevant secondary National Insurance contributions threshold.
  3. Multiply this amount by 13.8%.
Tax year National Insurance contribution thresholds
2019 to 2020 £166 per week, £719 per month or £8,632 per year
2020 to 2021 £169 per week, £732 per month or £8,788 per year

Example

A Ltd pays employees on a calendar monthly basis. An employee was furloughed on 1 April 2020 is paid £1,500 of furlough pay on 30 April 2020. A Ltd did not top up the employee’s pay.

  1. Start with £1,500 (the grant you’re claiming for employee’s wages)
  2. Minus £732 (the relevant secondary National Insurance contributions threshold)
  3. Multiply this amount by 13.8% – this is £105.98

The total amount of the grant that can be claimed towards employer National Insurance contributions is £105.98 for this employee. A Ltd should also consider whether the claim needs to be adjusted for any amount of Employment Allowance that A Ltd might claim.

If your employee is not furloughed for the whole pay period or you top up their pay

If the pay period covers both furloughed and working periods, or you top up your employees pay over the amounts covered by the grant the following steps will help you calculate the amount of employer National Insurance contributions for each employee:

  1. The amount of pay minus the relevant National Insurance contributions secondary threshold.
  2. To calculate the employer National Insurance contributions due on an employee’s total pay for the pay period, the result of Step 1 is multiplied by 13.8%.
  3. Divide the amount of employer National Insurance contributions due for the pay period by the number of days in the pay period.
  4. The grant is capped at the total amount of employers’ National Insurance contributions due to be paid in respect of an employee. Multiply the result of Step 3 by the number of qualifying furlough days in the pay period.
  5. Multiply the result of Step 4 by the proportion of pay received in respect of the qualifying furlough days that is funded by the grant.

Example

An employee who is paid a fixed amount monthly agrees to be furloughed by A Ltd on 16 April 2020. The employee’s gross pay at the end of the month is £2,160. This is made up of £1,200 of wages funded by A Ltd, in respect of 1 to 15 April (15 days), and £960 of pay wholly funded by a grant in respect of 16 to 30 April (15 days). The total employer National Insurance contributions due for the pay period is apportioned on a daily basis to determine how much can be covered by a grant for employer National Insurance contributions.

  1. £2,160 minus £732 (the amount of pay minus the relevant National Insurance contributions secondary threshold)
  2. Multiply by 13.8% (this gives you the amount employer National Insurance contributions due on an employee’s total pay for the pay period)
  3. Divide by 30 (the number of days in the pay period)
  4. Multiply by 15 (the number of furlough days in the pay period)
  5. Multiply by 100% (because the employee’s wage is not being topped up) – this is £98.53

A Ltd can claim £98.53 in respect of the employer National Insurance contributions due on the employee’s March pay. The total grant for employer National Insurance contributions cannot exceed the total amount of employer National Insurance contributions due to be paid.

Example

If A Ltd chooses to top up the same employee’s pay to 100% during the period of furlough, the employer National Insurance contributions must be apportioned between the pay funded by the grant and the pay funded by the employer. The employee’s total pay in this example is £1,200 in respect of 1 to 15 April and £1,200 (made up of £960 grant-funded pay and £240 employer-funded pay) in respect of 16 to 30 April, totalling £2,400.

  1. £2,400 minus £732 (the amount of pay minus the relevant National Insurance contributions secondary threshold)
  2. Multiply by 13.8% (this gives you the amount employer National Insurance contributions due on an employee’s total pay for the pay period)
  3. Divide by 30 (the number of days in the pay period)
  4. Multiply by 15 (the number of furlough days in the pay period) Step 5: Multiply by £960 / £1,200 (this is the furlough pay received for the furlough period divided by the total pay received for the furlough period) – this equals £92.07

A Ltd can claim £92.07 in respect of the employer National Insurance contributions due on the employee’s March pay. The total grant for employer National Insurance contributions cannot exceed the total amount of employer National Insurance contributions due to be paid.

Before you claim for employer National Insurance contributions

Employer National Insurance contributions is payable on all pay over the secondary threshold at a rate of 13.8%. Employers may be eligible for the Employment Allowance. In the 2019 to 2020 tax year the allowance was £3,000 and was available to all employers. From 6 April 2020 the Employment Allowance is £4,000 but is only available to employers whose Employer Secondary National Insurance contributions liability in the previous year was under £100,000.

Employers can use the Employment Allowance to reduce their employer National Insurance contributions bill across each payroll until the allowance is exhausted or the end of the tax year, whichever comes first.

No employer National Insurance contributions due

If there is no employer National Insurance contributions due then the amount of the grant towards employer National Insurance contributions is zero. This could be the case for:

  • apprentices under 25 (category H)
  • employees under 21 (category M)
  • employees under 21 who can defer NI because they’re already paying it in another job (category Z)
  • employers whose employer National Insurance contributions bill is reduced to £0 by the Employment Allowance