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Since the scheme was first announced, it has seemed to me like not a day has gone by without an update being published to the Coronavirus Job Retention Scheme (CJRS), so it is not surprising if you have found it difficult to keep up. However, on Wednesday 15 April 2020, a Treasury Direction was issued to HMRC setting out the detailed rules of the scheme, hopefully signalling that the CJRS has now reached its final form. The updated guidance can be found here, and the Treasury Direction can be found here.
So, what does the final scheme look like, and how does this differ from the previous incarnations? I have set out below the details of the main changes since the last update. However, this should not be seen as a substitute to full legal advice and if you are at all unsure of the application of the scheme, we would always recommend taking advice on your specific circumstances.
What date must employment have commenced in order for an employee to be furloughed?
Any individual who was on the employer’s payroll prior to 19 March 2020 and had been notified to HMRC on an RTI submission before this date will now be eligible to be furloughed. This is a significant change from the previous guidance which set the date at 28 February 2020.
What if an employee was on our payroll but stopped working for us before the CJRS was introduced?
If an employee was made redundant or stopped working for you on or after 28 February 2020, provided they were on your payroll prior to 28 February and had been notified to HMRC on an RTI submission before this date, you may re-employ them and furlough them. The guidance now makes clear that this will not only apply where the individual was made redundant but will also include any individual who stopped working for you for any reason. Note that you are not obliged to reinstate in these circumstances, but it is open to you to do so, should you wish.
Does this only apply to employees who would otherwise have been made redundant?
No. The Treasury Direction to HMRC states that it applies to anyone who is furloughed ‘by reason of circumstances arising as a result of coronavirus or coronavirus disease’. There is not therefore a requirement that this is to avoid redundancy.
What if an employee was shielding, off sick or self-isolating – can they be furloughed?
Yes. The updated guidance has now clarified that an employee who is on sick leave/ self-isolating and in receipt of SSP, or any employee who is shielding can be furloughed. The fact that the individual is on sick leave should not be a factor when deciding whether to furlough an employee, but if an employer wants to furlough an employee for business reasons, even where they are off sick they can do so. In these circumstances, sick leave and SSP would cease and furlough pay would commence.
What if an employee becomes sick during a period of furlough?
In this case, they would retain the right to SSP but the employer can decide whether to place them on SSP or to leave them on furlough. Note that if an employee is moved onto sick leave, this would end the period of furlough which may impact on the employer’s ability to claim under the CJRS if that meant that the period of furlough was shorter than the minimum 3-week period.
Do employees continue to accrue holiday during furlough and can they take holiday?
Yes, employees will continue to accrue holiday. However, the question of whether they can take holiday, or be required to take holiday, during furlough leave is less clear. ACAS guidance seems to suggest that they can and should be allowed to take holiday, but legal commentators are not so sure. The problem question is whether taking a period of holiday, and receiving holiday pay, will break a period of furlough – which could then mean that employers are no longer able to claim under the CJRS if the period of unbroken furlough reduces below the three-week minimum. Our view is that unless and until this is confirmed, it is safer not to allow or to require holiday to be taken – including bank holidays – during furlough.
A number of employees transferred to us under TUPE or were moved onto another group company’s payroll since the scheme was announced – can they be furloughed?
Yes. The updated guidance has made clear that employees in these circumstances will be considered to satisfy the requirements provided they were on the transferring employer’s payroll prior to 19 March 2020.
Can an employee be furloughed by one employer but still carry out work for another ‘associated’ employer?
No. The guidance is clear that employees who are furloughed cannot work at all for the employer or any associated employer – which will include all group companies as well as any other employer who is ‘controlled’ (generally speaking, owned) by the same person/ people. However, provided it is allowed under the terms of their contract/ the employer agrees, furloughed employees can take on additional employment with a third party during furlough.
What happens to benefits paid on a salary sacrifice basis?
These should continue to be paid in addition to the 80% / £2,500 salary which is recouped under the CJRS. The 80% / £2,500 cannot be further reduced by a salary sacrifice scheme, and employers cannot reclaim the cost of the benefits under the scheme.
What payments should be included when calculating the amount to be paid to furloughed workers?
Payments should be based on ‘regular salary or wages’. Anything else should not be included. Performance related pay or bonuses, discretionary payments, conditional payments – e.g. payments which depend on certain targets being met and benefits should not be included in the calculation of the 80% / £2,500. As noted above, benefits will need to be maintained at the employer’s cost in addition to salary paid under the CJRS.
Importantly, employers also cannot claim for any payments which are ‘conditional on any matter’. This means that if an employer makes a payment to an employee conditional on the CJRS paying out, this may prevent the employer from claiming under the scheme.
Can we furlough Directors and if so, what work can they carry out to comply with their statutory duties?
The guidance has now finally been updated to confirm definitively that directors can be furloughed and can continue to carry out work to ‘carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose’.
The direction to HMRC goes further and states that directors may only do work ‘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’.
This is a very narrow interpretation of the work which Directors may carry out whilst furloughed and directors should be careful to ensure that they do not exceed the permitted work as this would preclude the company from claiming under the CJRS.
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