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New Treasury Direction on flexible furlough published
The updated Treasury Direction on the Coronavirus Job Retention Scheme (the Scheme) was published last Friday (26 June 2020). This codifies the amendments made to all of the Government guidance documents on 12 June 2020 (as explained in our update of 15 June 2020).
The Direction is now split into two parts: Part 1 deals with the ‘original’ Scheme (i.e. claims made under the provisions of the Scheme in force from 1 March 2020 to 30 June 2020), and Part 2 deals with the new provisions to the Scheme which begin on 1 July 2020 and end on 31 October 2020 (essentially, ‘flexible furlough’).
At well over 30 pages long, with numerous complicated cross-references, it is a challenging read. For the most part, it repeats, in more technical language, the changes to the Government guidance made on 12 June 2020. We set out the key points, below, but suggest that this is read in conjunction with our update of 15 June.
Part 1: the ‘Original Scheme’
Much of the content is already set out in the Government guidance documents but, for ease, we highlight the main points here:
- A claim in respect of any period of furlough up to, and including, 30 June 2020, must not be made to HMRC after 31 July 2020.
- Where a previously-furloughed employee starts a new period of furlough prior to 1 July 2020, this furlough period must be for a minimum of 3 consecutive weeks, regardless of whether this minimum period ends before or after 1 July 2020.
Part 2: the ‘New Scheme’
Eligibility
To be eligible to claim under the ‘New Scheme’, an employer must have made a qualifying claim under the Original Scheme on or before 31 July 2020. Essentially, this means that, by 31 July 2020, the employer must have made a claim to HMRC, in accordance with the Original Scheme directions and guidance, for one or more employees who were furloughed for the first time on or before 10 June 2020.
Flexible furlough
Under the New Scheme, employees can continue to be fully-furloughed, as with the Original Scheme (albeit with monetary contributions required from the employer from 1 August 2020), but they can also be ‘flexibly-furloughed’. The definition of a ‘flexibly-furloughed’ employee in the Direction is someone who has been instructed to, and does not, work the full amount of their usual hours in relation to their employment during the relevant claim period, and there is an agreement to this effect.
The Direction includes formulas to calculate ‘usual hours’ for the purposes of the New Scheme, depending on whether an employee works fixed or variable hours. These can be found at paragraphs 23 and 24 of the Direction. The number of furloughed hours for which an employer could then claim under the New Scheme will need to be calculated by subtracting the number of hours that an employee works in the relevant period from their usual hours for that period.
Agreement to ‘fully-furlough’ or ‘flexibly-furlough’
Broadly, it seems (as before) that the agreement can be made verbally, as long as it is confirmed in writing. It is confirmed that such confirmation can be by email.
The written agreement/confirmation needs to:
- Include the main terms and conditions upon which the employee will do no work in relation to their employment, or will not work the full amount of their usual hours.
- Be made before any period of furlough commences (but can be varied subsequently to reflect any change in agreement between employer and employee).
- Be incorporated (expressly or impliedly) into the employee’s contract.
- Be retained by the employer until 30 June 2025.
Claim period
The Direction confirms the Government guidance (as set out in our update of 15 June 2020) that claim periods must start and end with the same calendar month and must last a minimum of 7 days.
There are a couple of exceptions to the 7-day rule:
- Where an employer is claiming for the first few days or last few days in a month. Such a period of time is called an “orphan period”, and is a period of no more than 6 consecutive days that begins on the first day of a calendar month or ends on the last day of the month. However, such a claim can only be made in respect of an employee where an employer also makes a claim for the 7-day period immediately prior to the orphan period.
- Where a “returning employee” returns to work on a day which is not during an orphan period, but the employee reasonably considers that the making of a claim which begins on the return-to-work day would be simplified if it were made for a period of fewer than 7 consecutive days. Broadly, a “returning employee” is an employee who commenced maternity, adoption, shared parental, paternal or parental bereavement leave, or who was called into service under the Reserve Forces Act 1996, prior to 10 June 2020, and such leave/service has expired after 10 June 2020. It has also been deemed to include those employees transferred to a new employer under TUPE (see below). We know from the Government guidance that such employees can be furloughed even though they will not have met the usual 10 June 2020 cut-off. It is unclear from the Direction what HMRC would regard as being “reasonable consideration…” and in what precise circumstances this exception could be used.
Maximum number of employees in any one claim
The Direction codifies the Government guidance that the maximum number of employees for whom an employer can claim in any single claim period cannot exceed the highest number of employees for whom they claimed in any one claim period under the Original Scheme.
However, where a claim includes one or more days where a “returning employee” is back at work (albeit furloughed), that employee can be added to the maximum number for whom the employer can claim.
Employer National Insurance and pension contributions
The Direction confirms that claims can only be made in respect of such contributions for July 2020. From 1 August 2020 onwards, these costs will have to be borne by the employer.
TUPE transfers
The Direction confirms that employers can claim under the New Scheme for employees who have been transferred under TUPE after 10 June 2020, as long as their previous employer had furloughed them for at least three consecutive weeks between 1 March 2020 and 30 June 2020.
Where an employer is claiming for a period which includes a day falling on or after the relevant transfer, any transferring employee claimed for during that period can be treated as a “returning employee” and be added to the maximum number of employees for which the employer is permitted to claim.
[CONTENT CORRECT AS AT 29 JUNE 2020]
If you would like to discuss any of the issues raised in this article or have other concerns about the impact of Coronavirus, please contact Rachael Lloyd, James Baker or Andrew Tobey in Michelmores’ Employment team.
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This article is for information purposes only, is not a substitute for legal advice, and should not be relied upon as such. Please contact our specialist lawyers to discuss any issues you are facing.
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