by The Aspire Business Partnership

Updated Guidance at 15th April 

  • Employers can now furlough employees that were on the PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020.
  • Employers must have created and started a PAYE payroll scheme on or before 19 March 2020.
  • This has been updated from the initial announced date of 28 February 2020.
  • An RTI submission notifying payment to that employee must have been issued to HMRC on or before 19 March 2020.
  • Employees that were employed as of 28 February 2020 and on the PAYE payroll and were made redundant or stopped working for the employer prior to 19 March 2020, will be eligible for the scheme if the employer chooses to re-employ them and furlough them.

The Chancellor published a Treasury Direction, setting out the legislation behind the Coronavirus Job Retention Scheme (CJRS). On the same day, version 4 of the CJRS was released.

The Direction confirmed:

  • Employees can be furloughed providing that they were on the PAYE payroll on or before the revised date of 19 March 2020.
  • If a TUPE transfer takes place after 19 March 2020, the transferee will be eligible to claim under the Scheme even though the incoming employees were not on its payroll as at 19 March 2020.
  • If an employee started unpaid leave after 28 February 2020, their employer can put them on furlough. However, if the employee was on unpaid leave, such as a sabbatical, on or before 28 February, the employer cannot furlough them until the date on which it was agreed they would return from unpaid leave.
  • Employers are required to write to employees in order to confirm that they have been furloughed and that they must cease all work in relation to their employment and will need to receive acceptance in writing. This can be in an email format.
  • The furlough period must be 21 calendar days or more.
  • If an employee is receiving Statutory Sick Pay (SSP), they can be furloughed when this period ends. If they need to take further sick leave in the furlough period, the employer can decide whether to transfer them to SSP/sick pay or leave them on furlough.
  • Furloughed directors will only be permitted to carry out very limited duties such as filing accounts.
  • CJRS will not pay out in relation to anything that is not “a regular salary or wage”. This means that the Scheme will disregard payments such as:
    • Payments that are conditional on any matter
    • Related to the performance of the employee
    • Payable at the discretion of the employer
  • The direction defines the key terms used throughout, such as an “employee”.
    • The legislation confirms that Personal Service Companies (PSCs) working in the public sector caught by IR35 and so, paid via PAYE are “employees” for the purposes of the CJRS.

Contradictory matters between the Direction and HMRC’s guidance:

  • The Direction doesn’t provide a time period for which written correspondence issued to furloughed employees must be kept. HMRC’s guidance states that written correspondence must be kept for 5 years.
  • The Direction states that the furlough period is 21 calendar days or more, with no reference to these days being consecutive as is referenced in HMRC’s guidance “3 consecutive weeks”.
  • The Direction states that a furloughed employee cannot work for a “connected” employer. HMRC interpreted this to also include “associated” employers.
  • The Direction makes no reference to claiming for regular payments such as “compulsory commissions” and “past overtime” referred to in the HMRC guidance. In fact, the Direction states that any payment that varies due to the performance of the employee should not be deemed as “regular” for the purposes of the calculation of the CJBS claim.

View the Direction here.

Aspire Comment

The Direction confirms, within the definition of “employee”, that employers may claim via the CJRS for PSCs working in the public sector being paid PAYE due to being deemed inside IR35. However, the Draftsman seems to have ignored those self-employed subcontractors who are paid PAYE under s44 ITEPA (‘the Agency Legislation’) due to being under the supervision, direction and control of any party. In including PSCs inside IR35 providing services to the public sector it seems tenable that those subcontractors paid PAYE due to the Agency Legislation are also eligible.

Furthermore, the umbrella calculation and stance on profit related pay is still very ambiguous when it comes to calculating your 80% claim for furloughed employees. It will very much depend on your contractual documentation and commerciality.

Holiday leave and pay has not been mentioned in either the guidance or the Direction.

Overall, the Direction is complex and is contradictory to the guidance we have seen published surrounding the CJRS. The uncertainty of the Direction read alongside the guidance will undoubtably force business owners to make decisions on aspects that remain to be a “grey area”. It is imperative that you keep evidential documentation to support the commercial decisions you have taken and the advice sought in order to have a “reasonable care” defence.

However, we particularly like clause 6.4, referring to those who were “enjoying” unpaid leave or a sabbatical before 28 February 2020. Does the clause not apply if they weren’t enjoying it?

Guidance at 4th April 2020

On 4 April 2020, Government published updated guidance on the Job Retention Scheme (JRS) “Claim for your employees’ wages through the Coronavirus Job Retention Scheme”, to clarify many key areas that had not previously been considered or fully explained.

  • Employers must notify employees of their furlough status in writing and keep the record of that written notification for five years.
  • Employees who have been furloughed in their current job can start a new job (subject to their contractual terms with their original employer), allowing them to claim 80% of their wages and a further 100% in a new job.
  • Individuals will not be eligible to be furloughed in their second job if they were not on the PAYE payroll on or before 28 February 2020.
  • If an employer made an individual redundant, or they stopped working for the employer on or after 28 February 2020, they can be re-employed, put through on furlough and the employer can claim for their wages through the scheme.
  • Employers will not be able to claim for employees while they’re getting SSP, but they can be furloughed and claimed for once they are no longer receiving SSP.
  • Employees who are unable to work because they have caring responsibilities resulting from COVID-19, such as childcare, can be furloughed.
  • Providing an agency worker is being paid through PAYE they can join the JRS, including where they are employed by umbrella companies.
  • This should be agreed between the agency, as the deemed employer, or the umbrella company and the worker. It would be good practice to ensure the necessity to furlough workers is communicated with the end client in the supply chain.
  • Limb (b) workers, i.e. those who have worker rather than employee status, who are paid via PAYE can be furloughed and access the JRS.
  • Employers can claim for any regular payments such as wages, overtime, fees (although this is not defined) and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.
  • The reference salary for the application should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind.
  • Employees can be furloughed multiple times meaning that they can be furloughed, brought back to work and then re-furloughed (subject to each furlough period being at least three consecutive weeks).

See the full updated guidance here.

Aspire Comment

It is essential that employers are aware of their obligation to notify employees of their furlough status in writing and keep the record of that written notification for five years. This requirement was not detailed in previous guidance.

When the government ends the scheme, employers will need to consider whether an employee can return to their duties or whether it may be necessary to consider termination of employment.

How with HMRC audit the Coronavirus Job Retention Scheme