On 15 April, the Government published a Treasury Direction under the Coronavirus Act 2020. This Direction sets out the legal framework for the Coronavirus Job Retention Scheme (CJRS). Read more
As well as the Direction, an update to the government guidance was also released on 15 April. This guidance amended the date on which employees had to have been on the employer's payroll to qualify under the CJRS from 28 February to 19 March 2020. The guidance also sets out more detail as to how to claim under the scheme, including how to bulk claim where 100 or more employees have been placed on furlough. It is anticipated that the portal for claiming under the CJRS will be open to all employers on 20 April 2020. Read more
Set out below are some headline points of note from the Direction:
- An employer can only make a claim under the CJRS if it has a PAYE scheme registered on HMRC’s real time information (RTI) system on 19 March 2020 and by 19 March 2020 it had submitted RTI payroll data about the employee that is subject to the claim. Although the extension of the qualifying date to 19 March could bring many more employees into the scope of the CJRS, those who started new employment after 28 February may not have had any RTI payroll data submitted by 19 March and therefore will not benefit from the extension.
- The CJRS applies to employees who are furloughed "by reason of circumstances arising as a result of coronavirus or coronavirus disease", not just those who would otherwise have been ‘laid off’, as referred to in previous government guidance. The wording does suggest that the ‘affordability’ point will not be the issue that some feared it might have been when the scheme was announced. However, employers should still retain information as to the reason/reasons why the decision to furlough staff was taken.
- Employees must have been instructed to cease all work in relation to their employment in order to be furloughed under the CJRS (and, crucially, qualify for the grant). The Direction states (our emphasis) that “an employee has been instructed by the employer to cease work in relation to their employment only if the employer and employee have agreed in writing … that the employee will cease all work in relation to their employment”. The requirement of an agreement in writing between the parties to cease work is a shift from previous government guidance and many employers may not have included this express wording in their furlough letters. Given many employers have already furloughed staff before the Direction was released, it would seem a harsh by HMRC if it refused claims made which were based on previous government guidance.
- The Direction states that if an employee was on a period of unpaid leave or a sabbatical on 28 February, they cannot be furloughed until the planned end date of that leave. It then goes on to say that no claim may be made in respect of a period of unpaid leave or sabbatical beginning before or after 19 March. This appears to expressly contradict the government guidance issued on 15 April, which states that “if an employee started unpaid leave after 28 February 2020, you can put them on furlough”. Given that the Direction is the legal framework to the CJRS, employers are likely to want to approach this issue with caution.
- Once on furlough, subsequent sickness will not break furlough, but employers cannot claim statutory sick pay under the CJRS and would effectively deduct SSP from costs claimed.
- Training during furlough, whilst encouraged under the government guidance, must be agreed with employees under the Direction before being undertaken, rather than employers mandating that training must take place. This leaves open a possibility that employees may refuse training during periods of furlough.
- For a “fixed rate employee” (broadly, those with fixed hours and pay) the reference salary to be included in the claim is the amount payable in the last salary period ending on or before 19 March 2020. If, prior to the Direction being issued, employers had determined the employee’s reference salary as the last salary period ending on or before 28 February, this date can be used instead of 19 March.
- Employers who have had employees TUPE in after 19 March or where there is otherwise a legal change in employer which does not break continuity of employment can make use of the CJRS.
Significantly, there is no comment in the Direction, or the updated government guidance, as to the treatment of annual leave during periods of furlough. This is an important area in which employers await guidance.