Yesterday afternoon (15 April), the Government published the fourth round of amendments to the Coronavirus Job Retention Scheme (‘the Scheme’) and the Treasury issued a Direction to HMRC, under powers conferred by the Coronavirus Act 2020. The Direction contains authority and instructions for making payments under the Scheme. Whilst it is possible that further amendments will be made, this is likely to be the definitive guidance on the Scheme.
The headline change is as follows: the qualifying date for furlough i.e. the date on which an employee has to be present on an employer’s payroll, and the date on which the employer must have enrolled on a PAYE scheme, has changed from 28 February 2020 to 19 March 2020.
The practical implication of this is that those employees who started work with a new employer after 28 February 2020, but on or before 19 March 2020, will now be eligible to be furloughed, bringing into scope a significant number of employees who previously would have not met the criteria.
This poses the question as to whether employees made redundant by an employer due to previous lack of eligibility for the Scheme, can be re-employed and then placed on furlough. Perhaps rather strangely, the answer appears to be no. The guidance states that employees made redundant on or after 28 February 2020, but before 19 March 2020, can be re-employed and furloughed, even if they are not re-employed until after 19 March, but as long as they were on the employer’s payroll as at 28 February 2020. Therefore, the qualifying date in this instance does not appear to have changed.
Eligibility criteria
There is confirmation that the Scheme is not limited to those employees who would otherwise have been made redundant. An employee can be furloughed ‘by reason of circumstances as a result of Coronavirus or Coronavirus disease’.
The updated guidance also states that ‘you can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI (Real Time Information) submission on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.
Claiming for reimbursement
The employer and employee must have agreed in writing that the employee will cease all work and be placed on furlough. This is a particularly important development, as the previous guidance only required notification. We have been advising our clients to seek written agreement in any event, as a belt and braces approach, but those employers who have not done so would be advised to try to seek retrospective written agreement wherever possible.
The guidance now states that employers should ‘claim for the 80% of the employee’s salary, as in their last pay period prior to 19 March 2020′. This is different to what was advised in previous guidance. However, if (based on the previous guidance) employers have calculated the claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) then employers can choose to use this ‘old’ calculation as the basis for the first reimbursement claim, and switch to the updated advice for any future claims.
In respect of the information required for making a claim for reimbursement, the guidance now clarifies that:
Treatment of bonuses / other payments
When calculating an employee’s salary for reimbursement purposes, employers must disregard anything which is not ‘regular salary or wages’. That means disregarding any performance-related bonuses or other payments where a condition, such as a threshold, must be met, as well as any non-financial benefits.
Employees on sick leave at the date of instruction
The Treasury Direction states that where, at the time an employer gives an instruction to ‘cease all work’ (i.e. an indication that furlough will take effect) and an employee to whom that applies is off work and entitled to Statutory Sick Pay, the period of furlough will not commence until that period of sickness has ended. However, any subsequent period of unfitness for work must be disregarded. This seems at odds with the updated guidance, which seems to suggest that employers can make a decision as to the classification of such employees – ‘if, however, employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee’. Although the situation is by no means clear, we would suggest that the Treasury Direction would take precedence over the guidance in this instance.
Employees on unpaid leave / sabbatical on 28 February 2020
The Treasury Direction states that, if an employee was undertaking an unpaid sabbatical or period of unpaid leave on 28 February 2020, then any period of furloughing does not begin until the expiry of the agreed leave period or, in situations where the duration was conditional upon a particular event, the occurrence of that event. The guidance supplements this by stating that, if an employee started unpaid leave after the 28 February 2020 (during which time it is likely that many employees will have been placed on unpaid leave, prior to the introduction of furloughing) then they can be placed on furlough immediately.
TUPE transfers
The ‘new’ employer / transferee is eligible to claim under the Scheme in respect of employees of a business transferred ‘after 19 March 2020′. This makes sense, as those employees transferred prior to this date will be eligible in any event, as they would have been on the payroll of the new employer as at the new qualifying date of 19 March 2020.
Directors’ duties
The previous guidance indicated that a director could be furloughed from his employment duties, but could still carry out those duties which were imposed upon him as a result of his statutory directorship. The Treasury Direction clarifies that a furloughed director can only undertake work to fulfil a duty or other obligation arising from an Act of Parliament, relating to the filing of the company’s accounts or provision of other information relating to the administration of the company. This is an extremely restrictive interpretation of directors’ duties.
Annual leave
The updated guidance, and the Treasury Direction, make no mention of the interplay between furlough and annual leave. As it stands, it seems unlikely that we will receive any definitive guidance on the matter. Please see our articles of 14 April, 06 April and 27 March for our views on how the issue of annual leave should be approached, or contact us to discuss.
[CONTENT CORRECT AS AT 16 APRIL 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 and 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.
