Matthew Clayton, Willans: Coronavirus Job Retention Scheme guidance clarified. COVID-19

Written by: Matthew Clayton, partner at Willans | Posted 24 April 2020 15:55

Matthew Clayton, Willans: Coronavirus Job Retention Scheme guidance clarified. COVID-19

Our employment lawyers summarise the latest developments on the Coronavirus Job Retention Scheme to emerge from HMRC.

On Friday 17 April 2020 there were two developments in relation to the government’s Coronavirus Job Retention Scheme (CJRS). Firstly, the Chancellor of the Exchequer announced that the CJRS would run until 30 June 2020 rather than 31 May 2020.

Secondly, HMRC changed its online guidance to clarify that it is possible to take annual leave while on furlough, as we had previously (if tentatively) thought was the case. The guidance now also says that the employer must  ‘top up’ holiday pay to 100% of normal pay. What workers on furlough should be paid for holiday pay is really something for the employment tribunals, and not HMRC, to decide. However, as expressed in our earlier article, we think there are strong HR policy reasons for doing this anyway, and the HMRC guidance probably gives a good indication of which way the employment tribunals would decide the question, if asked.

The HMRC guidance does not comment on whether an employer can compel an employee to take annual leave while on furlough.  The advantage for an employer of doing this would be to reduce the glut of holiday requests which can be expected later in the year when restrictions are (hopefully) lifted.  There is some divergence of legal opinion on this question, but we think that, if annual leave can be taken during furlough leave, then the normal rules about directing workers to take holiday on particular dates must apply.

As we have come to expect by now, the picture is an ever-changing one, and the updated guidance warns us that “during this unprecedented time, we are keeping the policy on holiday pay during furlough under review.”  So – watch this space!

On 15 April 2020 HMRC further updated its guidance on the Coronavirus Job Retention Scheme. HM Treasury also published its ‘Direction’ to HMRC under the Coronavirus Act 2020. This document forms the legal basis for the CJRS and is likely to be the most definitive form of the scheme rules that we will see, although it is subject to change at any stage!

The main things we have learned from these two developments are as follows:

1. It is now beyond doubt that there is no need to prove that employees being furloughed would otherwise have been made redundant.

The scheme applies to employees who have been furloughed “by reason of circumstances arising as a result of coronavirus or coronavirus disease.” This would seem wide enough to encompass employees furloughed because they need to look after their children as a result of the Covid-19 related closure of education and childcare settings, and employees furloughed because they have been officially advised to ‘shield’ due to being in an ‘extremely vulnerable’ category.

2. The employee must have been instructed by the employer to cease all work in relation to their employment, and this will only occur if it has been agreed in writing between employer and employee (including in an email).

Note the word ‘agreed’; any unilateral furloughing which has already taken place may not be valid.

3. The only work a company director can do while furloughed is “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 very narrow in scope and does not encompass any commercial activity.

4. A claim on the CJRS can be made in respect of employees who were taken on between 1 March and 19 March inclusive, however only if they were the subject of an RTI submission to HMRC within that period.

This effectively means that monthly paid employees taken on during that period (who would not be paid until the end of the month and hence would not have been the subject of an RTI submission on or before 19 March) would not be eligible. However weekly paid employees might be, if they had been on the payroll on or before 19 March. The reason for the distinction is that RTI submissions are the only realistic way that HMRC has of checking the validity of claims.

5. A claim on the CJRS can only be made in respect of salary or wages which “is not conditional on any matter.”

If the employer has stipulated that pay during furlough is conditional on receiving funding from the CJRS, or can be recouped if that funding is not forthcoming, it may be disqualified from making a valid claim on the CJRS.

The guidance is still fairly vague; there are lots of questions that need to be answered and gaps to be filled. That may be done by amendments to the Treasury Direction or further guidance. We will keep you updated.

We’re here to help

We appreciate that it is a confusing and uncertain times for employers, but we’re here to help.

Our employment law team is fully equipped to advise you on your rights and obligations in this most unusual situation and how best to implement this guidance across your workforce.

Our legal services are operating as normal, with all of our lawyers able to work safely from home.

Please call 01242 514000 or email Matthew Clayton in our employment law team and we will be delighted to help.

Willans is regularly updating its website with more COVID-19 legal insights. Visit this page for the latest legal perspectives relating to the coronavirus.