24 April 2020

This update explains:

  • The varied pay calculation and if you should use it when claiming under the government’s job retention scheme.
  • What you can and cannot include when claiming 80% of your employees’ wages

When to use the varied pay calculation

The way you should work out 80% of your employees’ usual wages is different depending on the way they’re paid.

  • You will not need to use the varied pay calculation if you pay your employees a fixed amount for each pay period.
  • However, you will need to use the varied pay calculation if your employees’ wages include, for example, non-discretionary commission payments.

The different methods of claiming are explained on the government website. The first step is to find out what you can include as wages. This is listed below.

What to include when calculating wages

The amount you should use when calculating 80% of your employees’ wages is regular payments you are obliged to make, including:

  • Regular wages you pay to employees.
  • Non-discretionary overtime.
  • Non-discretionary fees.
  • Non-discretionary commission payments: i.e. those expressly included in employment contracts. If commission payments are target-related we suggest contacting HMRC to establish whether these payments should be included in your claim. Find HMRC contact details.
  • Piece-rate payments.

You cannot include the following when calculating wages:

Payments made at the discretion of the employer or a client - where the employer or client was under no contractual obligation to pay, including:

  • Tips.
  • Discretionary bonuses.
  • Discretionary commission payments.
  • Non-cash payments.
  • Non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay.

See all updates