Job Retention Scheme: Updated Guidance issued 9 April 2020
On 9 April 2020, the government issued a further update to the Job Retention Scheme (the Scheme) guidance in order to provide greater clarity to employers. We set out a summary of the main updates below:
Furlough and sick leave/pay
- Whereas previously the Scheme guidance said you couldn’t furlough someone who was entitled to SSP, the new guidance says you can furlough someone who is off sick but “short term illness/ self-isolation shouldn’t be a consideration in deciding whether to do so. Employers are free to switch employees from sick pay to furlough and vice versa, although the Scheme is “not intended for short-term absence from work due to sickness”. Therefore, employers should not use furlough to ‘top up’ small amounts of SSP for short-term absences.
- Employers can furlough ‘shielding’ employees or those on long term sick leave, and they do not have to be placed on sick pay. It is the employer’s decision as to whether to place an employee on furlough.
- In an important update to the Scheme guidance, the previous wording that suggested you could only furlough shielding employees (or those who have to stay home with them) if “you would otherwise have to make them redundant” has been removed from the updated guidance.
- If an employee falls ill whilst on furlough, employers can keep them on furlough or move them to SSP. Employees must receive at least the SSP rate.
- Employers are required to pay SSP themselves, although they may qualify for a rebate for up to two weeks of SSP if it is Covid-19 related. Employers can claim under the Scheme and SSP rebate for the same employee but not in respect of the same period. Therefore, if the employee is furloughed, employers should claim under the Scheme.
TUPE
- We flagged that the previous Scheme guidance did not deal with the question of what would happen to employees who transferred to a new employer after 28 February in our previous update.
The updated guidance clarifies that employers of newly TUPE’d employees can place them on furlough: “A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 28th February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.”
Return from statutory leave
- The updated guidance contains a section providing that if you furlough someone returning from maternity/paternity/ share parental/ adoption/ parental bereavement or sick leave you use their ordinary salary to calculate furlough pay and not what they received on leave.
- Where those on variable pay are returning from statutory leave, claims should be calculated using the higher of (1) the same month’s earnings from the previous year; or (2) their average monthly earnings for the 2019-2020 tax year.
Other updates
- The updated guidance confirms that those with certain work visas will not be regarded as breaching their visa conditions if they receive funds under the furlough scheme: “Grants under the scheme are not counted as ‘access to public funds’, and you can furlough employees on all categories of visa.”
- HMRC has clarified that it will fund Employer NICs and up to minimum auto enrolment pension contributions on “furlough pay” and not on the usual monthly wage. Employers cannot claim for additional NICs or pension contributions made because they have chosen to top up the employee’s salary or any pension contributions made that are above the mandatory employer contribution.
- Furloughed employees cannot work for organisations that are linked to or associated with the employer, as well as not working for the employer.
- Where a group of companies merged multiple individual PAYE schemes into a new consolidated PAYE scheme after 28 February 2020, the updated guidance states that this doesn’t mean that employees are to be treated as not having been on PAYE as at 28 February, even if they are now, technically, on a different PAYE payroll. Therefore, businesses that engaged in payroll consolidation schemes after 28 February can place employees on furlough.
- No part of the reclaimed grant can be used to fund benefits or a salary sacrifice scheme; the entire grant must be paid to the employee (with no deductions for fees, administration charges).
- Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) “are not taxable on grants received under the Scheme”. Domestic staff are subject to income tax and NICs on their wages as normal
- New additions to the list of requirements for employers to make a claim now include:
- National Insurance numbers for the employees to be furloughed;
- Names of employees to be furloughed;
- Payroll/Works numbers for those employees;
- Employer’s Self-Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
Outstanding issues
The updated Scheme guidance is still silent on a couple of crucial areas, including:-
- Holiday during furlough and holiday pay
In our last update, we noted that the Scheme guidance was silent on the issue of how to deal with holiday and furlough. That position has not changed. However, during a Twitter Q&A last week, HM Treasury indicated that a question regarding the treatment of holidays was a “very fair question” and that a further update dealing with holiday and furlough would be issued this week.
Otherwise, ACAS guidance states that furloughed employees can request and take their holiday (including bank holidays) in the usual way (subject to agreement by their employer) and must receive their usual full pay. However, ACAS guidance has been subject to change and is not binding on HMRC.
- Employers eligibility to access the Scheme – alternative to be redundancy only?
The original aim of the Scheme was to “to safeguard workers from being made redundant”. Previous versions of the Scheme guidance stated that the scheme was aimed at supporting employers “whose operations have been severely affected by coronavirus”. On 4 April, the updated guidance stated that the Scheme will apply “if you cannot maintain your current workforce because your operations have been severely affected by coronavirus” yet in the same guidance, confirmed that those shielding could be furloughed. In the latest guidance issued on 9 April, such wording has not changed. Therefore, there is still a question mark over how bad things need to be for the business as a result of the COVID-19 outbreak, if at all, for the employer to be eligible under the Scheme, or if the Scheme will only apply when the alternative is redundancy.
In order to tackle the potential for fraud and abuse of the Scheme, HMRC announced that it is setting up an online “whistle-blower” service for workers to use to report employers who abuse the system. Therefore, if employers plan to access the Scheme, they should document how their business has been affected by the COVID-19 outbreak and their business reasons for accessing the Scheme.
It is unclear when any Regulations governing the Scheme will be published or even if they will be published. The above information is based on our best understanding of the government guidance issued on 9 April 2020. It does not constitute advice. Advice should be sought to address specific circumstances. Should you wish to seek advice, please do not hesitate to contact us with your queries.
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Rebecca Butler is an employment managing associate of counsel
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