History of the Treasury Direction
On Friday 22 May 2020 a further Treasury Direction (dated 20 May) was published modifying the legal framework for the Coronavirus Job Retention Scheme (CJRS). Claims for payment under the Coronavirus Job Retention Scheme made after the publication of the amended Treasury Direction on 22 May will have to comply with the new, amended version of the Direction. Claims made on or before 22 May should comply with either the original Treasury Direction published on 15 April or the new Treasury Direction (as a whole). The 20 May Treasury Direction extends the scheme until 30 June 2020 so a further Treasury Direction will be needed for the extension of the current terms until 31 June, and for the new terms applicable from 1 July.
Many of the changes are on issues where the 15 April Treasury Direction conflicted with HMRC Guidance and have now brought the Treasury Direction into line with that Guidance or clarified areas of uncertainty. There are also some new provisions, which presumably will be reflected in further iterations of the HMRC Guidance in due course.
Requirements For Placing An Employee On Furlough
Perhaps most significant is the amendment to the requirements for placing an employee on furlough. The 15 April Direction required a written agreement between employer and employee that the employee would cease all work in relation to their employment, whereas the HMRC’s Guidance initially suggested that only written confirmation of being furloughed was required for the purposes of eligibility under the CJRS, and subsequent versions stated that furloughing should be consistent with employment law but didn’t otherwise need a written agreement. The 20 May Direction now provides that, for the purposes of eligibility to make a claim, the required instruction to cease work is satisfied if:
- The employer and employee have agreed that the employee will cease all work in relation to their employment – and this can be made by means of a collective agreement between employer and trade union
- The agreement/collective agreement specifies “the main terms and conditions upon which the employee will cease all work” (presumably it would be sufficient to set out the extent to which the pre-furlough terms and conditions have been varied, e.g. agreed reductions in pay or benefits, and perhaps also the extent to which the employee is permitted to work for other employers or can study or volunteer during furlough)
- The agreement is incorporated expressly or impliedly in the employee’s contract
- The agreement is in writing or is confirmed in writing by the employer (and writing includes in electronic form)
- The employer keeps the agreement/collective agreement/confirmation until at least 30 June 2025.
This clarifies the requirement for agreement, and for a written record to be made of that agreement (covering both the cessation of work and the applicable terms). It remains unclear whether the agreement itself can be retrospective or implied (although there is nothing expressly prohibiting this). It would obviously be prudent to ensure these new provisions are satisfied for newly furloughed employees and to provide written confirmation of the agreement for those already furloughed if this has not yet been done.
Other Changes To The Treasury Direction
- It seems that the employer and employee can now agree to end a period of Statutory Sick Pay (SSP) in order to start furlough (notwithstanding continuing SSP eligibility) – this is presumably aimed at allowing employers to agree to furlough individuals whose eligibility for SSP is due to being in the extremely vulnerable category advised to shield (but who are not actually unwell);
- Where a period of unpaid leave started before 1 March, and the employer and employee reached an agreement before 20 March 2020 to end it earlier than originally planned, the employee can be put on furlough after the revised end-date;
- No claim under the CJRS can be made for a period of unpaid leave between 1 March and 30 June and furlough cannot begin during that period; there is no express prohibition on ending that leave earlier than planned in order to furlough;
- A Director will not be treated as doing work (and therefore outside the CJRS) where they are simply making a CJRS claim for, or paying wages to, an employee of the company; the carrying out of duties as a trustee or manager of an occupational pension scheme is also permitted (save where the employer’s business is the provision of occupational pension scheme independent trustee services);
- Furloughed employees can now study or do training even if not directly relevant to the employee’s job and agreed in advance – its purpose can be to generally improve an employee’s effectiveness in the employer’s business or the performance of the employer’s business, provided it does not contribute to business activities, generate income or profit, or significantly contribute to the production of goods or services for sale;
- It is now clearer that, when calculating the reference salary (80% of which is to be paid, subject to the cap of £2,500 per month), benefits provided through salary sacrifice are not included, but variable payments for overtime, timing of shifts or additional duties will be included provided there is no discretion about how the amount is to be calculated;
- Reference salary for those taking furlough after a period of unpaid leave, paid statutory family-related or sick leave, or other reduced rate paid leave immediately after statutory leave, should be calculated as if the employee had been on paid annual leave receiving normal pay required under the Working Time Regulations during those periods;
- An employer no longer needs to deduct from the CJRS claim any amount of SSP for which an employee is eligible, even if not claiming it during furlough;
- The relevant date for TUPE transfers has been changed to 28 February in line with the current HMRC Guidance, a new provision extends the CJRS coverage to TUPE business transfers from an insolvent transferor (where the automatic transfer of employment contracts does not apply) and transferors may also be able to claim for employees whose furlough periods do not last 21 days only because of a TUPE transfer.
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