Client Login

Hallett
Employment Law Services Ltd

Job Retention Scheme about to go live and to be extended- but beware of the changes

20th April 2020
The Government has announced that the Job Retention Scheme will be open from Monday 20th April 2020. HMRC has published guidance on accessing the Scheme and on calculating the details of the pay for staff that will be covered by the Scheme. In addition, the Government has also announced that the Scheme will be extended by one month, in order to reflect the continuing social distancing measures. The Government extended the social distancing measures on the 16thApril, and so, as a consequence of that decision, the Chancellor said that the Coronavirus Job Retention Scheme will be extended by another month- meaning that it will remain open until the end of June 2020. In a statement published on the 17th April, the Government has said that “Future decisions on the scheme will take into account further developments on the wider measures to reduce the spread of coronavirus, as well as the responsible management of the public finances.”

In an interview with the BBC, Jim Harra, the Chief Executive of HMRC said that he was confident that employers will get the money in time to pay people by the end of the month (ie April 2020).

With thousands of UK businesses having to close or reduce their capacity, and an estimated 9 million people being placed on “furlough leave” (see BBC news article on the 8th April 2020- “Coronavirus : More than 9 million expected to be furloughed”), the opening of the scheme cannot come soon enough.

In another recent announcement, the Government extended the number of workers that will be able to access the scheme, by covering those workers employed on the payroll of their employer as at the 19th March 2020 (rather than it being limited to those that were on the payroll as at the 28thFebruary 2020). In a report by the BBC, it is stated that this change could increase the numbers of those that can benefit from the scheme by some 200,000people.

Workers will need to have been on the payroll by the 19th March, which was the day before the scheme was originally announced. This means that it will not cover those people that were not put on the PAYE system until later in the month. Employers would need to have notified HMRC that a new employee was on the payroll. This process is done through the Real Time Information (RTI) system, which updates HMRC when someone is paid.

There is widespread opinion that the extension has been prompted, at least in part, by the fact that large businesses would have been obliged to start redundancy consultation exercises on the 17th April 2020 in order to comply with the 45 days minimum consultation period requirement where 100 or more employees are being made redundant, in order to time that process to end by the31st Mary- the original date proposed for the end of the Job Retention Scheme. We should point out that while an article on the BBC news website (“Coronavirus: More newly-hired staff will get paid”) referred to this as the minimum consultation period, that the 45 days consultation period only applies where 100 or more people are being made redundant, so it would not cover the situation faced by the vast majority of businesses in the UK- which do not employ that many people anyway. However, the extension has in reality become necessary in order to provide assurance to business and individuals while the social distancing is to continue, and that it has become necessary because it has taken a full month to even open the scheme. This delay has undoubtedly caused levels of uncertainty and stress for a lot of businesses and individuals - not least because the details of the guidance from the Government about the scheme has changed a number of times already, and has at points included inconsistencies and many gaps.

The legal basis for the Scheme has been published at last. It can be found in a Treasury Direction of the 15th April 2020. The Direction is produced under the provisions of the Coronavirus Act 2020, and it sets out the legal framework, together with dates, definitions, purpose, and details of what can be recovered by the employer, and how the figures that can be recovered are to be calculated.

A rather frustrating aspect of the process adopted by the Government in setting up this Scheme, is that it has published sets of Guidance weeks before the actual Direction was issued. More alarmingly, the Guidance has not been consistent, and it was amended three times (on the 4th April, the 9thApril and the 15th April). There have also been some differences between the Guidance for employers and that for employees.

There have been significant numbers of employers that relied on the first version of the Guidance, who may now discover that the approach they adopted may not fully comply with the actual Treasury Direction- therefore risking the possibility that their claims to HMRC could be rejected!

The problem that is likely to face many businesses is how they went about implementing the furlough leave in March, following the first version of the Government’s Guidance, compared to the requirements set out in the Treasury Direction (which is the legal basis of the Scheme). The initial Guidance suggested that an employer simply had to write to their employees confirming that they had been placed on furlough leave. The text also indicated that the letter could be sent at any time after the employee had been sent on furlough leave, and did not have to be sent before or on the first day of furlough commenced. Furthermore, there will also be those employers that simply told their staff that they were on furlough leave, and did not write to the staff to place them on furlough leave.

The Treasury Direction does clarify some areas of doubt on the operation and extent of the Scheme. It makes it clear that directors can be sent on furlough leave, and that will not be jeopardised by the individual director carrying out purely essential statutory obligations -such as filing accounts with Companies House.

The Direction also makes it clear that in working out the salary that is payable, the amounts that are not regular salary or wages must be disregarded. This would include performance - related bonuses, or discretionary payments (including tips), and any conditional payments, and non-financial benefits in kind.

The minimum blocks of furlough leave are 21 consecutive calendar days.

Payments under the Scheme will cover the appropriate amount of gross pay, plus the employer’s National Insurance contributions, plus the amount allowable as a claimable pension contribution (subject to a cap).

In most cases, staff that had their employment transferred to a new employer under the Transfer of Undertakings Regulations (TUPE) will be covered by the Scheme.

An employee cannot choose to put themselves on furlough leave, they will only be covered by the Scheme if they have agreed with their employer to be on furlough leave.

The Treasury Direction does not mention annual leave and furlough periods. However, the latest version of the Employees Guidance on the Scheme indicates that an employee that has been put on furlough leave can take annual leave. However, if they do so, the employer must top-up the pay to the usual 100% (ie they cannot just pay the 80% of normal pay that is being paid through the furlough scheme). This may have an impact in relation to staff that had booked holiday around the May bank holidays. It is unclear if an employer can require an employee to spend part or all of the furlough period as annual leave. The Employees’ Guidance states that “During this unprecedented time, we are keeping the policy on holiday pay during furlough under review.” So, watch this space! It should be noted during the current health crisis the Government has already introduced an amendment to the Working Time Regulations to specifically allow accrued holiday entitlement to carried over two years.

Potential contradictions are still to be found between the latest Guidance published by the Government on the 17th April and the actual text of the Treasury Direction. Of the greatest concern is the contradiction between the two documents relating to the mechanism of agreeing that an individual goes on furlough leave. The Employers’ Guidance suggests that an employer does not need the express written response of the employee agreeing to go on furlough leave. However, the Treasury Guidance makes it clear that written agreement is required (ie not just a written instruction from the employer, but the actual written agreement of both parties). HMRC will be operating by the basis of the Treasury Direction. So employers must beware of the risk of not getting written agreement from each employee on going on furlough leave.

The need for an agreement, and the danger to employers

The Treasury Direction states at paragraph 6.7 that the furlough agreement will only be valid if “the employer and employee have agreed in writing (which may be an electronic form such as an e-mail) that the employee will cease all work in relation to their employment.” (our emphasis).

This means that an agreement cannot be inferred from conduct alone, because it has to be in writing to be valid, and the requirements go beyond just notification. The agreement itself must be in writing. This suggests that an employer that has simply written to their staff telling the staff that they are now on furlough leave may not amount to a written agreement to go on furlough leave.

Asignificant number of employers need to be aware that the inconvenience of getting each employee to write to agree to the furlough arrangement is necessary in order to reduce the risks of HMRC subsequently rejecting the application for support through the Job Retention Scheme.

Practical guidance from HMRC

HMRC have also published two new guidance documents to assist people in accessing and using the Coronavirus Job Retention Scheme. The “Step by step guide for employers” explains how employers should access the Scheme, and lists the information they will need to provide, as well as outlining the processes that they need to follow. The second document is a “guide to calculating 80% of an employee’s wages” for the purpose of the Scheme. This document includes guidance on which payments can be taken into account (eg “regular wages”, non-discretionary overtime, non-discretionary commission payments) and which payments cannot be taken into account (eg tips, bonuses, discretionary commission payments, and non-money benefits). Employers should read these two documents carefully, in order to be sure that they apply correctly and provide the right information for their staff.

We can help you prepare a form of agreement for your staff to being on furlough leave. You should note that if you send an employee on furlough without their agreement, there is a risk that you may still be obliged to pay the employee their full rate of pay.

If you need any further advice on any matter raised in this article do not hesitate to contact us at Hallett Employment Law Services Ltd.
The Government has announced that the Job Retention Scheme will be open from Monday 20th April 2020. HMRC has published guidance on accessing the Scheme and on calculating the details of the pay for staff that will be covered by the Scheme. In addition, the Government has also announced that the Scheme will be extended by one month, in order to reflect the continuing social distancing measures. The Government extended the social distancing measures on the 16thApril, and so, as a consequence of that decision, the Chancellor said that the Coronavirus Job Retention Scheme will be extended by another month- meaning that it will remain open until the end of June 2020. In a statement published on the 17th April, the Government has said that “Future decisions on the scheme will take into account further developments on the wider measures to reduce the spread of coronavirus, as well as the responsible management of the public finances.”

In an interview with the BBC, Jim Harra, the Chief Executive of HMRC said that he was confident that employers will get the money in time to pay people by the end of the month (ie April 2020).

With thousands of UK businesses having to close or reduce their capacity, and an estimated 9 million people being placed on “furlough leave” (see BBC news article on the 8th April 2020- “Coronavirus : More than 9 million expected to be furloughed”), the opening of the scheme cannot come soon enough.

In another recent announcement, the Government extended the number of workers that will be able to access the scheme, by covering those workers employed on the payroll of their employer as at the 19th March 2020 (rather than it being limited to those that were on the payroll as at the 28thFebruary 2020). In a report by the BBC, it is stated that this change could increase the numbers of those that can benefit from the scheme by some 200,000people.

Workers will need to have been on the payroll by the 19th March, which was the day before the scheme was originally announced. This means that it will not cover those people that were not put on the PAYE system until later in the month. Employers would need to have notified HMRC that a new employee was on the payroll. This process is done through the Real Time Information (RTI) system, which updates HMRC when someone is paid.

There is widespread opinion that the extension has been prompted, at least in part, by the fact that large businesses would have been obliged to start redundancy consultation exercises on the 17th April 2020 in order to comply with the 45 days minimum consultation period requirement where 100 or more employees are being made redundant, in order to time that process to end by the31st Mary- the original date proposed for the end of the Job Retention Scheme. We should point out that while an article on the BBC news website (“Coronavirus: More newly-hired staff will get paid”) referred to this as the minimum consultation period, that the 45 days consultation period only applies where 100 or more people are being made redundant, so it would not cover the situation faced by the vast majority of businesses in the UK- which do not employ that many people anyway. However, the extension has in reality become necessary in order to provide assurance to business and individuals while the social distancing is to continue, and that it has become necessary because it has taken a full month to even open the scheme. This delay has undoubtedly caused levels of uncertainty and stress for a lot of businesses and individuals - not least because the details of the guidance from the Government about the scheme has changed a number of times already, and has at points included inconsistencies and many gaps.

The legal basis for the Scheme has been published at last. It can be found in a Treasury Direction of the 15th April 2020. The Direction is produced under the provisions of the Coronavirus Act 2020, and it sets out the legal framework, together with dates, definitions, purpose, and details of what can be recovered by the employer, and how the figures that can be recovered are to be calculated.

A rather frustrating aspect of the process adopted by the Government in setting up this Scheme, is that it has published sets of Guidance weeks before the actual Direction was issued. More alarmingly, the Guidance has not been consistent, and it was amended three times (on the 4th April, the 9thApril and the 15th April). There have also been some differences between the Guidance for employers and that for employees.

There have been significant numbers of employers that relied on the first version of the Guidance, who may now discover that the approach they adopted may not fully comply with the actual Treasury Direction- therefore risking the possibility that their claims to HMRC could be rejected!

The problem that is likely to face many businesses is how they went about implementing the furlough leave in March, following the first version of the Government’s Guidance, compared to the requirements set out in the Treasury Direction (which is the legal basis of the Scheme). The initial Guidance suggested that an employer simply had to write to their employees confirming that they had been placed on furlough leave. The text also indicated that the letter could be sent at any time after the employee had been sent on furlough leave, and did not have to be sent before or on the first day of furlough commenced. Furthermore, there will also be those employers that simply told their staff that they were on furlough leave, and did not write to the staff to place them on furlough leave.

The Treasury Direction does clarify some areas of doubt on the operation and extent of the Scheme. It makes it clear that directors can be sent on furlough leave, and that will not be jeopardised by the individual director carrying out purely essential statutory obligations -such as filing accounts with Companies House.

The Direction also makes it clear that in working out the salary that is payable, the amounts that are not regular salary or wages must be disregarded. This would include performance - related bonuses, or discretionary payments (including tips), and any conditional payments, and non-financial benefits in kind.

The minimum blocks of furlough leave are 21 consecutive calendar days.

Payments under the Scheme will cover the appropriate amount of gross pay, plus the employer’s National Insurance contributions, plus the amount allowable as a claimable pension contribution (subject to a cap).

In most cases, staff that had their employment transferred to a new employer under the Transfer of Undertakings Regulations (TUPE) will be covered by the Scheme.

An employee cannot choose to put themselves on furlough leave, they will only be covered by the Scheme if they have agreed with their employer to be on furlough leave.

The Treasury Direction does not mention annual leave and furlough periods. However, the latest version of the Employees Guidance on the Scheme indicates that an employee that has been put on furlough leave can take annual leave. However, if they do so, the employer must top-up the pay to the usual 100% (ie they cannot just pay the 80% of normal pay that is being paid through the furlough scheme). This may have an impact in relation to staff that had booked holiday around the May bank holidays. It is unclear if an employer can require an employee to spend part or all of the furlough period as annual leave. The Employees’ Guidance states that “During this unprecedented time, we are keeping the policy on holiday pay during furlough under review.” So, watch this space! It should be noted during the current health crisis the Government has already introduced an amendment to the Working Time Regulations to specifically allow accrued holiday entitlement to carried over two years.

Potential contradictions are still to be found between the latest Guidance published by the Government on the 17th April and the actual text of the Treasury Direction. Of the greatest concern is the contradiction between the two documents relating to the mechanism of agreeing that an individual goes on furlough leave. The Employers’ Guidance suggests that an employer does not need the express written response of the employee agreeing to go on furlough leave. However, the Treasury Guidance makes it clear that written agreement is required (ie not just a written instruction from the employer, but the actual written agreement of both parties). HMRC will be operating by the basis of the Treasury Direction. So employers must beware of the risk of not getting written agreement from each employee on going on furlough leave.

The need for an agreement, and the danger to employers

The Treasury Direction states at paragraph 6.7 that the furlough agreement will only be valid if “the employer and employee have agreed in writing (which may be an electronic form such as an e-mail) that the employee will cease all work in relation to their employment.” (our emphasis).

This means that an agreement cannot be inferred from conduct alone, because it has to be in writing to be valid, and the requirements go beyond just notification. The agreement itself must be in writing. This suggests that an employer that has simply written to their staff telling the staff that they are now on furlough leave may not amount to a written agreement to go on furlough leave.

Asignificant number of employers need to be aware that the inconvenience of getting each employee to write to agree to the furlough arrangement is necessary in order to reduce the risks of HMRC subsequently rejecting the application for support through the Job Retention Scheme.

Practical guidance from HMRC

HMRC have also published two new guidance documents to assist people in accessing and using the Coronavirus Job Retention Scheme. The “Step by step guide for employers” explains how employers should access the Scheme, and lists the information they will need to provide, as well as outlining the processes that they need to follow. The second document is a “guide to calculating 80% of an employee’s wages” for the purpose of the Scheme. This document includes guidance on which payments can be taken into account (eg “regular wages”, non-discretionary overtime, non-discretionary commission payments) and which payments cannot be taken into account (eg tips, bonuses, discretionary commission payments, and non-money benefits). Employers should read these two documents carefully, in order to be sure that they apply correctly and provide the right information for their staff.

We can help you prepare a form of agreement for your staff to being on furlough leave. You should note that if you send an employee on furlough without their agreement, there is a risk that you may still be obliged to pay the employee their full rate of pay.

If you need any further advice on any matter raised in this article do not hesitate to contact us at Hallett Employment Law Services Ltd.

Advanced Site Search