The Coronavirus Job Retention Scheme – latest guidance

The Government issued updated guidance regarding the Coronavirus Job Retention Scheme (the Scheme) on 4 April 2020. We have summarised the key points it has either clarified or introduced below: –

1. In a new development, as well as getting their consent, employers must notify employees of their furlough status in writing and keep the record of that written notification for five years. It also points out that if sufficient numbers of staff are involved it may be necessary to engage collective consultation processes.
2. The employer must not only have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account, but it must also have enrolled for PAYE online. Employers can enrol for PAYE online before a claim is made (enrolment can take up to 10 days).
3. Employers can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and where employers “would otherwise have to make them redundant”. This suggests that a shielding employee should only be furloughed where the statutory definition of redundancy is satisfied and not where their role still exists but they cannot perform it because they are shielding.
   However, the reference to “otherwise making them redundant” is not included in the employee guidance, or in respect of any other individuals. The new guidance been expanded to state the Scheme will apply “if you cannot maintain your current workforce because your operations have been severely affected by coronavirus”. It is unclear why there is a different test for those who are shielding. It may be that this is an error, or that the term “redundant” is not being used in the strict legal sense of the word. It seems logical that employers should feel able to furlough people who are shielding, in the same way as other employees as otherwise, employees in a vulnerable position would be in a worse position than all other employees. However, urgent clarity is required from the government on this point.
4. Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) (including childcare) can be furloughed. This is a welcome development for many working families, and there now seems to be no requirement that they would have to be otherwise made redundant – which takes pressure off both employers and employees. However, this highlights the inconsistent nature of the wording referred to above in relation to shielding employees.
5. Confirms that employees who were on payroll on 28 February but have since left that job for whatever reason (i.e. not just redundancy) can be re-employed by their old employer and placed on furlough. However, the decision to re-employ, or to allow an employee to retract their resignation, lies solely with an employer, and there is no obligation for an employer to agree to this.
   As the portal will not be open until the end of April (at the earliest, it may be later than this), there will be an inevitable delay in being reimbursed for wage costs, which, given the current economic uncertainty, may mean that employers might be unwilling or simply unable to rehire employees.
6. Employees can start a new job when on furlough (meaning they can earn 80% of the old salary and 100% of a new one).  The new guidance expressly allows employees to take a second job but only if their contract and existing employer allows them to do so. Employers will also need to consider whether the employee will be able to return to their original job should their main employer end their period of furlough.
7. Employees on fixed term contracts can be furloughed, and it has now been confirmed that their contracts can be renewed or extended during that period without affecting eligibility.
8. The previous guidance did not specify what happened to benefits. The new guidance states that the 80% does not include non-monetary benefits (e.g. the value of health insurance or a car). However, where an employer provides benefits to furloughed employees, these should be continued in addition to the wages paid under the Scheme unless something different is agreed with the employee. As a result, the employer may still find themselves bearing some significant costs.
   Employers that offer permanent health insurance or death-in-service benefits should check with their scheme provider about what salary would be used in the event of a claim (i.e. pay during furlough or normal annual salary?).
   Benefits provided through salary sacrifice schemes should not be included in calculating the reference salary. However, the guidance confirms that the COVID-19 outbreak counts as a “life event” for the purposes of salary sacrifice schemes, with the result that employers can allow employees to make changes to their salary sacrifice arrangements, provided this is reflected as a change in the employment contract.
9. Both employees and workers (including ‘limb b’ workers) are covered under the scheme and can be furloughed. So too are:
   Agency workers, including those who supply their services via an umbrella company. However, an agency worker who has been furloughed is not permitted to do any work for, through or on behalf of the agency that has furloughed them, including for the agency’s clients. The agency worker would be free to carry out work for a different agency;
   Office holders, including company directors who are salaried. It would also seem to include the fee-paid judiciary most of whom have received no work (and thus no pay) since lockdown began and some of whom rely upon judicial work as their primary income;
   Salaried LLP members who are classified as employees for tax purposes. The terms of the LLP agreement may require formal amendment if a member of an LLP is to be furloughed;
   Apprentices, and they can continue to train whilst furloughed. Apprentices must be paid at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage, as appropriate, for time spent training.
10. Where company directors are furloughed (i.e. where they are directors on payroll), they can still perform their statutory duties, provided they do no more than is reasonably necessary for that purpose. Directors must not, however, do work of the kind they would normally carry out to generate commercial revenue or provide services for or on behalf of their company. Where the decision to furlough a director is taken by the board, it should be formally adopted, noted in the company records and communicated to the relevant director in writing.
11. Employers can rotate employees on furlough multiple times, provided that each furlough period is at least three weeks>
12. Employees who are on sick leave or self-isolating should receive Statutory Sick Pay (SSP) but can be furloughed thereafter. A sick or self-isolating employee, who would otherwise be furloughed, therefore has an incentive to report as fit even when they are not. Neither the previous nor the updated government guidance deals with the position where a furloughed employee becomes sick or self-isolates during a period of furlough. This indicates that the government expects the employee to be on SSP and therefore not eligible for the 80% salary subsidy under the Scheme.
13. An employer can reclaim 80% of compulsory commission (presumably meaning contractual) back from HMRC, as well as basic salary. However, as furloughed employees cannot work during a period of furlough, the reference to compulsory commission must be in reference to commission from past sales. Discretionary commission and bonuses are excluded from the wage cost calculation.
14. In a change from the previous guidance, employers can reclaim 80% of fees from HMRC. This may be relevant for office holders.
15. Employees who are employed by an individual e.g. nannies can be furloughed, provided that the employer pays them through PAYE and they were on the payroll on or before 28 February 2020.
16. The previous guidance set out that the normal rules regarding Statutory Maternity Pay (SMP) (or equivalent) applied and eligible employees would continue to receive up to 39 weeks of statutory pay when furloughed. The new guidance reiterates that employers may claim enhanced contractual pay for furloughed employees who qualify for maternity pay, adoption pay, paternity pay or shared parental pay.
    The guidance is silent on whether an employee would have to bring their maternity leave to an end and be placed on furlough for an employer to be able to claim these wage costs, or whether they can be furloughed while on maternity leave.
    Where an employee is receiving the flat rate of SMP, or no maternity pay, they may want to request to be furloughed, allowing them to receive 80% of their wages (up to £2,500 per month). However, it is unclear from the guidance if an employee can remain on maternity leave while they are furloughed or if they can return to maternity leave after a period of furlough. In the event an employee ended their maternity leave to be furloughed, they may not have the right to go back on maternity leave at the end of the period of furlough leave and may be required to start work immediately. Further clarification is required from the government.

Further comments

While the new guidance provides helpful clarification, it still does not represent actual law and there are a variety of issues which it still does not deal with. For example, whether those employees who transferred under TUPE on or after 28 February 2020 can be furloughed and how holiday and pay for holiday should be treated.

In respect of TUPE, we understand that separately the Treasury have now indicated that the Scheme will apply to those transferred under TUPE under TUPE after 28 February 2020 but this has not yet been reflected in updated guidance.

We eagerly await updated guidance dealing with outstanding issues, as well of course, the Regulations which will underpin the Scheme. We will provide further updates as new information becomes available.

Please note that the above information is based on our best understanding of the government guidance issued on 4 April 2020. It does not constitute advice. Advice should be sought to address specific circumstances, and please do not hesitate to contact us with your queries.

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