Any questions: Will my furlough pay be based on my old minimum wage rate or the new one?

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Question

I have been in a minimum wage job for the past few years. From 1 April, my minimum wage pay rate has gone up from £8.21 to £8.72. I was paid at the end of March as normal and have now been 'furloughed'. I understand the 80% rule but when I get paid at the end of April, will I get 80% of £8.21 or £8.72?

Answer

Your employer will receive a grant to cover up to 80% of your wages up to a maximum of £2,500 per month, which they should then pass on in full to you (they can top it up if they wish, but they do not need to do this).

If you are a salaried employee who receives regular pay, they should claim a grant of 80% of your salary as at 28 February 2020, subject to the £2,500 cap. This means that if your gross (before tax) pay in February was £1,231.50 (based on your contracted hours x £8.21), then in April 2020, your employer will receive a grant of 80% of £1,231.50, which is £985.20.

If your pay varies, and you have been in the job for over a year then, subject to the £2,500 cap, your employer can claim the higher of:

• 80% of the same month’s earning from the previous year
• 80% of average monthly earnings from the 2019/20 tax year

If this applies, this means that what your employer can claim will be based on what you were paid in April 2019, or on your pay for the 2019/20 tax year – both of which will have presumably been based on the old £8.21 minimum wage rate.

All of this means, essentially, that you won't get the pay rise that you may have been expecting. However, when your period of furlough ends, and you return to work, then you should be paid the £8.72 rate from that point.  

Note, that being paid less than £8.72 during the period of furlough, does not mean that you will have been underpaid the minimum wage because you are not actually working, click here to read this government guidance explanation.

If, however, you are asked to undertake training by your employer while you are furloughed, then those hours should be paid at £8.72. Having said that, assuming you receive the £985.20 mentioned above, you would have to be asked to undertake training for 113 hours in April 2020, for there to be an underpayment problem, which seems unlikely.   

If you think you are going to struggle with your finances over the next few months, then you may be eligible for support through the welfare system. We strongly advise you speak to a welfare rights adviser who will be able to go through things in detail with you and help you identify your best options.