COVID-19 Employment update 26 May 2020 – Job Retention Scheme

New Treasury Direction

On Friday 22 May 2020, the Government published a new Treasury Direction on the Coronavirus Job Retention Scheme (the Scheme). This reflects the extension to the Scheme announced by Chancellor Rishi Sunak on 17 April 2020.

Note that we are only referring to the Chancellor's first announcement that the Scheme was to be extended by one month, from the end of May 2020 to the end of June 2020. This is because the "Duration of CJRS" paragraph in the new Direction states that: "CJRS has effect only in relation to amounts of earnings paid or payable by employers to furloughed employees in respect of the period beginning on 1 March 2020 and ending on 30 June 2020". It seems that another Treasury Direction will be required to take account of the further extension which is planned to last until October 2020.

The wording of the new Treasury Direction makes it clear that it "modifies the effect" of the Scheme. We have summarised our interpretation of the changes, below. As always, these are likely to be subject to further discussion and clarification in the coming days. We will keep you updated.

Further clarification on "agreement" to furlough

The original Direction introduced the requirement for the employer and employee to agree in writing that the employee will be placed on furlough. This seemed to conflict with the Scheme guidance. There were a significant number of employers who had relied upon such guidance and, as a result, had not sought written agreement with their employees. The original Direction left these employers wondering whether they would be able successfully to reclaim monies from HMRC.

The new Direction has tempered the old wording and is consistent with the answers which worried employers have been receiving from the HMRC Twitter "Help" function. For eligibility under the Scheme, the following will need to be satisfied:

  • The employer and employee need to agree that the employee will cease all work in relation to their employment (NB this can be achieved by way of a collective agreement between employer and trade union).
  • The agreement must specify the main terms and conditions upon which the employee will cease all work in relation to their employment.
  • It must be incorporated (expressly or impliedly) into the employee's contract.
  • It must be made in writing or confirmed in writing by the employer (such agreement or confirmation may be in an electronic form such as an email).
  • The agreement or confirmation must be retained by the employer until at least 30 June 2025.

Key Points

The words in bold, above, indicate that an employer can obtain verbal agreement from an employee to be furloughed, and that this can be confirmed in writing.

The sentence "the agreement must specify the main terms and conditions upon which the employee will cease all work in relation to their employment" is somewhat clunky, and gives no further indication of what the Government might intend this to mean. However, it is likely that this will require employers to set out the agreed variations to pay and benefits during furlough, and the fact that the employee is not permitted to carry out any work for the employer or associated employer, with limited exceptions for studying or training. We have been advising our clients and contacts to do this as a matter of course since the Scheme began.

Statutory Sick Pay

The previous wording in respect of the interaction between SSP and furlough was confusing at best. The words "where Statutory Sick Pay is liable to be paid…whether or not a claim to Statutory Sick Pay [SSP] is made" seemed to suggest that any individual who was entitled to be paid SSP could not be furloughed until they had exhausted their full 28-week entitlement. This has now been amended in the new Direction, and the wording "whether or not a claim to Statutory Sick Pay is made" has been removed.

The new Direction states: "where Statutory Sick Pay is in payment or due to be paid in respect of an employee [at the time an employee is furloughed, the period of furlough] does not begin until immediately after the end of the period of incapacity for work for which the Statutory Sick Pay is in payment or due to be paid (provided that the time of the end of that period of incapacity for work is determined by an agreement between the employer and employee)".

Unfortunately, the wording is not much clearer, but it does seem to suggest that the employer and employee can now agree that a period of SSP is brought to an end and the employee furloughed instead. There has been much concern and media commentary, particularly in the care sector, about the frustrating position in respect of SSP and furlough in the original Direction.

It was also particularly unsatisfactory in respect of those individuals who are required to shield for a minimum of 12 weeks. A strict interpretation of the original Direction prevented employers from placing shielded employees on furlough until they had exhausted their SSP entitlement. This seemed to constitute a failure to protect the income of the more vulnerable. The amendment in the new Direction is likely to be an attempt to address that.

Unpaid Leave

This has also been expanded in the new Direction. The position is now as follows:

Where an employee takes a period of unpaid leave between 1 March 2020 and 30 June 2020:

  • No claim may be made from the Scheme in respect of that unpaid leave; and
  • The minimum three-week period of furlough cannot commence during that unpaid leave.

Where an employee commenced a period of unpaid leave before 1 March 2020, the minimum three-week period of furlough must not begin before:

  • The expiry of the period of unpaid leave (either agreed or contemplated at the time it began); or
  • Where the period of unpaid leave would expire on the occurrence of an event, the occurrence of that event.

Finally, where an employee commenced a period of unpaid leave before 1 March 2020, and the employer and employee reached agreement before 20 March 2020 to end it earlier than planned, then the employee can be placed on furlough after the varied end-date.

Study or training

Both the original Direction and the Scheme guidance have indicated that an employee who undergoes training will not negate their entitlement to furlough. However, the parameters of this were not particularly clear. The new Direction states as follows:

Study or training will not negate furlough if the purpose of the study or training is to improve (i) an employee's effectiveness in the employer's business, or (ii) the performance of the employer's business, as long as:

  • This does not directly provide a service to the employer or the business activities of the employer; or
  • Contribute to the business activities of the employer or anything generating income or profit for the employer; and
  • Does not contribute to any significant degree, to the production of paid goods or the making of paid services.

When talking about providing services or contributing to the business activities of the employer, this is also deemed to include associated companies or individuals of the employer.

Directors' duties

The list of director duties which will not break the furlough rules has now been updated to include:

  • Making a claim under the Scheme in respect of an employee of the director's company (which could, presumably, include the director him/herself).
  • Making a payment of salary or wages to an employee of the director's company; and
  • Carrying out duties as a trustee or manager of an occupational pension scheme (apart from where that is the employer's business).

Calculation of reimbursement costs under the Scheme

What can be included in the reference salary

Two further types of payment have now been included in the list of items which should not be included in the calculation of an employee's reference salary:

  • A benefit in kind (such as a company car or private medical insurance); and
  • Anything provided or made available in lieu of a cash payment otherwise payable to the employee (including salary sacrifice schemes).

What remains the same is that: "anything which is not regular salary or wages" must not be included in the calculation of an employee's reference salary. However, the new Direction clarifies that "regular" wages or salary "cannot vary according to a relevant matter except where the variation in the amount arises from a non-discretionary payment".

This means payments:

  1. In respect of overtime, fees, commissions or a piece rate.
  2. Made in recognition of the employee undertaking additional or exceptional responsibilities.
  3. Made in recognition of the circumstances in which the employee undertakes the employee's duties or time when they are undertaken (such as shift premiums); or
  4. Made in recognition of "other matters" similar to those described in a) to c) above.

the details of which are set out in a legally enforceable agreement, understanding, scheme, transaction or series of transactions.

Sick Pay

The original Direction made clear that employers cannot claim through the Scheme for reimbursement of statutory payments, such as statutory maternity pay, and all that can be claimed is any contractual "top-up" paid by employers during such leave. In the new Direction, Statutory Sick Pay has been removed as such a statutory payment to which this applies – this is presumably because, as the new Direction has clarified, an employee is either on sick leave or furlough – they cannot be subject to both at the same time.

Reference salary following a period of leave

The new Direction has clarified that the appropriate reference salary for those placed on furlough after a period of unpaid leave, paid statutory family leave or sick leave, should be that to which the employee would have been entitled if they had been on annual leave.


Change of applicable transfer date

The original Direction enabled employers who have taken on new employees by virtue of the Transfer of Undertakings (Protection of Employment) Regulations 2006 to utilise the Scheme even if the new employer's PAYE scheme was registered on HMRC's real-time information for PAYE after 19 March 2020. The new Direction has both amended and expanded this concept.

Under the new Direction, an employee will qualify for the Scheme if:

  • On 28 February 2020, the employee was employed by a former employer.
  • After 28 February 2020, the employer changed to the current employer, whilst the employee remains in employment in the same business.
  • Immediately before the change, the former employer's PAYE scheme was a qualifying scheme under the Direction; and
  • One of a list of certain circumstances apply. As indicated above, the most likely scenario which will be applicable to our clients and contacts will be a transfer under TUPE.

The date of 28 February 2020, above, has been changed from 19 March 2020 in the previous Direction. This potentially covers a larger number of TUPE transfers than the previous Direction, which only dealt with transfers which occurred on or after 19 March 2020.

Extension of Scheme to insolvency

The new Direction also provides that the Scheme will be available to new "employers" where the employees have been dismissed and re-engaged, between 1 March 2020 and 30 June 2020, in circumstances where a winding-up order has been made in respect of the former employer (and, therefore, TUPE does not apply, unlike in administrations, for example).

Where TUPE transfer occurs before expiry of a three-week furlough period

The new Direction also clarifies the situation where a TUPE transfer happens before the employees of the former employer have undertaken the requisite three weeks of furlough. In this situation, as long as the new employer makes a claim under the Scheme for an employee in respect of a period beginning immediately after the transfer, the former employer can still make a claim in respect of the employee, even though they had not completed a three-week period of furlough. However, all other criteria relating to the Scheme must still be satisfied.


We are still awaiting the detail promised by Rishi Sunak regarding the landscape of the Scheme from 1 August 2020 onwards. We understand that an announcement will be made towards the end of this week, and we will update you when we know more.

Employers will be able to make claims through the Coronavirus Statutory Sick Pay Rebate Scheme from TODAY (26 May 2020)

The Coronavirus Statutory Sick Pay Rebate Scheme was announced at the Budget as one of a number of support measures for businesses affected by Coronavirus (COVID-19).

Those employers with fewer than 250 employees are able to apply to HMRC to recover some of the costs of Statutory Sick Pay which has been paid for Coronavirus (COVID-19)- related illness or self-isolation on or after 13 March 2020. For those who have been shielding, the repayment is only available to be reimbursed for periods on or after 16 April 2020. The repayment will cover up to two weeks of SSP per employee.

This new online service is open from today, and you will need to log into the Government portal using your Government Gateway user ID.


If you would like to discuss any of the issues raised in this briefing, 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.