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Changes to Average Weekly Earnings (AWE) calculations for furloughed employees and SMP/SSP

by Intuit Updated 2 years ago
The Coronavirus Job Retention Scheme (CJRS) will be ending on 30 September, 2021. Claims for September must be submitted by 14 October and any amendments must be made by 28 October, 2021.

If an employee was on furlough and the employer paid them with help from the Coronavirus Job Retention Scheme (CJRS) during any part of the relevant 8-week period, there are slightly different rules about how to calculate their Average Weekly Earnings (AWE). 

  • If the employee is due to start a period of family-related statutory pay on or after 25 April 2020.

This change is to ensure that employees eligibility for Statutory, and other parental pay, is not affected if their earnings are lower than normal as a result of being furloughed.

  • If an employee was on furlough for part or all of the relevant 8-week period, the earnings used to calculate AWE for that period will be the higher of:

a) What they actually receive from their employer; or

b) What they would have received from their employer had they not been on furlough

Where it is not clear what the employee would have received had they not been on furlough, a helpful starting point is likely to be the reference salary which is used to determine how much the employer can claim through the Coronavirus Job Retention Scheme (CJRS).

However, employers should also consider any bonus payments, commission payments, or other payments which would have qualified as earnings and which the employee was due to receive in the relevant period.

No change will be required

  • If an employer is claiming their employee’s wage costs (the lower of 80% of their reference salary or £2500 per month) through the CJRS but the employer is topping up their wages to full pay at their own cost, no change will be required as the employee’s earnings will not be lower than they would have been had the employee not been on furlough.
  • Similarly, no change will be required where, as a result of COVID-19, an employer and their employee agreed to a reduction in their pay during the relevant period outside of the Government’s CJRS.

To calculate an employees’ average weekly earnings you will need to average the gross earnings over a period of at least eight weeks up to and including the last payday before the end of the qualifying week. The qualifying week is the 15th week before the week the employee’s baby is due.

Expected Week of Confinement (EWC)

This is the calendar week, which begins on a Sunday, in which a baby is due. This determines qualifications and calculations.

Qualifying Week (QC)

This is the 15 weeks before the expected week of childbirth (also referred to as EWC). 

Relevant Period 

a) Starts with the last payday to fall on or before the end of the employee’s QW; and

b) ends with the day after the last payday which fell at least eight weeks before the payday in (a) above.

In this example, the employee is normally paid at the end of each month. The week the baby is due is Sunday 26/04/2020 to Saturday 02/05/2020. The latest start date the employee is 27/07/2019 (41 weeks earlier from the baby due date).

Note: You can use the Statutory Maternity Pay Tables 2020 to work out what the qualifying weeks are.

In this example, the Qualifying Week will be Sunday 12/01/2020 to Saturday 18/01/2020. 

The Relevant Period in this example is 01/11/2019 to 31/12/2019 (average earnings are taken between these dates).

Earnings between 01/11/2019 to 31/12/2019 are £5,000 (the employee was furloughed under the Coronavirus Job Retention Scheme and only earned £3000, but £5000 is what they would have earned normally).  

The employee's salary is £30,000 per year so the monthly amount (rounded up) is £2,500.

  • First, multiply this figure by 2 for the 8 weeks which will be £5,000.
  • Then divide by 2 (number of months in the relevant period) which is £2,500.
  • Next, multiply by 12 (number of months in the year) which equals £30,000.
  • Finally, divide by 52 (number of weeks in the year) for a total of £576.92307 to 5 decimal places (do not round the figure up or down).
  • Finally, enter this figure into the SMP AWE field.
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