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On 15th April, the Government published further guidance on the Coronavirus Job Retention Scheme (CJRS) offering further clarity on who and what under the scheme are eligible. On the same date and under powers conferred by the Coronavirus Act 2020, the Treasury issued a Direction to HMRC giving legal effect to the CJRS. The Direction confirmed that HMRC will be responsible for the management and issuing of payments.
Claims under the Scheme can be made from 20th April 2020. The Direction contains technical information on how employers will be able to make an application using the HMRC portal and comprehensive guidance on how applications should be calculated.
Both the revised guidance and the Direction also introduced changes in operational terms of the CJRS that employers and employees must be aware of.
Changes employers must be aware of
Change in cut-off date. Employers are able to make a claim in relation to employees on their PAYE scheme on 19th March 2020. (Previous guidance stated this date to be 28th February 2020) and therefore significantly more employees will be able to benefit under the scheme.
However, the newly revised guidance also confirms that employers will only be able to claim for employees who were on their payroll on or before 19th March 2020 and who were notified to HMRC on an RTI (Real Time Information) submission on or before 19th March 2020. Special rules apply in relation to circumstances where there has been a transfer of a business or where there are complex PAYE arrangements
Agreement to furlough must be in writing. A critical change is that the new Direction requires that there is an agreement in writing that the employee will cease work in relation to their employment. This agreement can be in an informal form, such as an email, and must be kept for a minimum of 5 years. This revised requirement is a significant change to previous guidance issued by the Government which required only written notification of the furloughed status. Employers should take steps now to confirm the employee’s agreement in writing, if this has not already been obtained.
Purpose of the scheme. The Direction confirms the purpose of the CJRS is “to provide for payments to be made to employers on a claim made in respect of them incurring costs of employment in respect of furloughed employees arising from the health, social and economic emergency in the United Kingdom arising from coronavirus”, and no grant shall be paid if the furlough leave is abusive or otherwise contrary to the exceptional purpose of the scheme. The Direction also defines a furloughed employee (amongst other criteria) to be one that is instructed by the employer to cease all work in relation to their employment and such instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease. The scope of the Scheme is therefore wide and not limited to employees who would otherwise have been made redundant, which had been a previous indication.
However, in contrast to previous Government comment, the revised purpose of the CJRS might suggest that former employees who are re-engaged by employers and then placed on furlough are excluded from the Scheme, unless they were ‘let-go’ in the first instance by reason of the crisis.
Employees who were made redundant or stopped working for their employer on or after 28th February 2020 can be re-employed and placed on furlough and their wages claimed for through the scheme. This applies to employees who were made redundant or stopped working after 28th February 2020, even if they are not re-employed until after 19th March 2020. This applies as long as the employee was on the payroll as at 28th February and had been notified to HMRC on an RTI submission on or before 28th February 2020.
Statutory Sick Pay (SSP). The Direction provides further clarity as to interaction between furlough and entitlement to SSP confirming that if an individual is on SSP, the furlough leave cannot commence. If, however, the worker is already on furlough leave and again qualifies for SSP, the SSP period will not break the furlough period, which must be a minimum unbroken period of 3 weeks.
Employees on unpaid leave. The position for those on unpaid leave has been clarified. Employees who started unpaid leave after 28th February 2020 can be placed on furlough leave instead, and any employees who commenced unpaid leave on or before 28th February 2020 can be furloughed from the date upon which it was originally agreed that they would return from unpaid leave.
Holiday. Notably, the new Direction does not provide any further clarification in relation to the interaction between furlough leave and holiday leave or holiday pay.
Directors. The new Direction confirms that furloughed directors may only complete work when to do so is to fulfil a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the director’s company. In comparison to the previously issued guidance, this narrowed interpretation is prescriptive of the limited work a director can continue to complete whilst on furloughed leave.
Planning the end of the furlough period
Whilst earlier guidance suggested that the CJRS may be extended if necessary, the new Direction provides for an end date of 31st May 2020. If the Government decides not to extend the period of the CJRS then it’s likely a number of employers will need to start considering their position from 1st June. Where businesses are considering possible redundancies, steps may need to be taken quickly in light of the minimum length of consultation required when effecting multiple redundancies.
Where a company is proposing to make 100 or more redundancies within a period of 90 days of less, consultation must start at least 45 days before any dismissals take effect. Therefore, if there is no further extension to the CJRS and redundancies are proposed effective from 1st June 2020, consultation must commence on 17th April 2020 at the latest (being 45 days prior to 1st June).
Similarly, where a company is proposing to make 20 – 99 redundancies within a period of 90 days or less, consultation must start at least 30 days before any dismissals take effect. Using the same example as above, this would mean consultation must commence on 2nd May 2020 at the latest.
It is hoped that the Government will extend the CJRS however in the absence of any further clarification on this point, businesses are urged to consider their next steps sooner rather than later.
Due to the unprecedented nature of the Coronavirus pandemic, the guidance on how to adapt to its impact evolves daily and becomes out of date very quickly. We recommend that you keep checking to ensure you are following the most up to date guidance, particularly as there are still some unanswered questions about the CJRS. Further, in addition to the public guidance, there are always specific circumstances that individual employers must consider, such as a particular employee or employer arrangements or issues (contractual or otherwise). If in doubt, please take advice.