New HMRC guidance on the Coronavirus Job Retention Scheme
HMRC has made some important updates to its guidance on the Coronavirus Job Retention Scheme (CJRS), effective 21 May 2020. Our employment team summarises those developments as follows:
Who can be furloughed
Inconsistencies in the dates of eligibility for the scheme have been corrected. The guidance now clarifies that employees can be furloughed if they have been re-employed by an employer after:
- being made redundant (or otherwise stopped working for that employer on (as well as after) 28 February 2020 (even if not re-employed until after 19 March 2020), provided that they were on the PAYE payroll on 28 February 2020;
- being made redundant (or otherwise stopped working for that employer on (as well as after) 19 March 2020 provided that they were on the PAYE payroll on or before 19 March 2020;
- the expiry of their fixed term contract on (as well as after) 28 February 2020 provided that an RTI payment submission for them was notified to HMRC on or before 28 February 2020; and
- the expiry of their fixed term contract on (as well as after) 19 March 2020 provided that an RTI payment submission for them was notified to HMRC on or before 19 March 2020
Employees are now directed to check the impact on any tax credits they have received.
Further information has been added to clarify that employee authorised salary deductions can be deducted from grant payments while employees are furloughed, provided that they are not charges, fees or other costs in connection with their employment.
Read the updated guidance for both employers and employees on these points here:
How to calculate 80% of an employee’s wages for CJRS claims
The updated guidance has been amended to reflect that the calculator can now be used to work out claims for employees who have received top up pay or discretionary payments in the claim period.
The guidance has also been updated to make clear that the amount claimed for NICs cannot be more than 13.8% of the grant claimed for an employee’s wages and relevant examples are provided.
Read the updated guidance on these points here:
How to deal with National Insurance Contributions (NICs) and pension contributions when making CJRS claims
The guidance has been updated to explain that employers will be asked to give HMRC the amounts separately for the NICs, pension and wages they are claiming for.
Information has also been added setting out that employee authorised salary deductions can be made from grant payments while employees are furloughed, provided that they are not administration charges, fees or other costs in connection with their employment.
Read the updated guidance on this point here:
Other notable CJRS developments
The Chancellor of the Exchequer has also issued a new Treasury Direction modifying certain aspects of the CJRS. We summarise the new directions as follows:
Need for written agreement to furlough done away with
Previously the Exchequer’s direction contained an explicit requirement that an agreement between an employer and employee to put the employee on furlough must be in writing. The modified direction now states that that agreement must specify ‘The main terms and conditions upon which the employee will cease all work in relation to their employment’ be incorporated (expressly or impliedly) into the employee’s contract, and be made in writing ‘or confirmed in writing’ by the employer (paragraph 6.7 (b)).
Practically speaking, this means that an employer can simply confirm an oral agreement by way of email or letter to the employee after the agreement has been reached.
The direction also states that an agreement to furlough can be incorporated into the original employment contract impliedly (i.e. by the conduct of the parties); however, we recommend that clients seek to obtain their employees’ express agreement to be furloughed to mitigate the risk of future disagreements and disputes.
The amended direction states that an employer should retain the agreement or confirmation to furlough until at least 30 June 2025 (paragraph 6.7 (c)).
Study and training during furlough
The amended direction sets out the kinds of study and training that an employee can do while on furlough without breaching the requirement that a furloughed employee does not work for the employer (paragraph 6.8).
Pension scheme trustees
The amended direction now expressly allows pension scheme trustees to continue to do work for the sole purpose of fulfilling their duties (paragraphs 6.10 – 6.12).
Statutory Sick Pay (SSP) during furlough
Where SSP is in payment or due to be paid, furlough cannot begin until immediately after the end of the ‘period of incapacity for work’ for which the SSP is being paid or due to be paid (paragraph 6.3). The amended direction goes on to suggest that the timing of the end of the period of incapacity should be determined by agreement between the employer and employee.
Definition of ‘regular pay’
The updated guidance seeks to clarify the definition of regular pay. Generally speaking, regular pay will mean an employee’s basic pay except where basic pay is enhanced by additional remuneration that is non-discretionary and that the employee is entitled to by way of a legally binding agreement (i.e. a contract of employment). For instance, if an employee has a contractual entitled to overtime, their paid overtime should be factored into the calculation of their regular pay. However, if an employee has an entitlement to participate in a bonus scheme at the sole discretion of the employer, any bonus paid should not be factored into the calculation of regular pay because the employee was only contractually entitled to participate in the scheme, not received the bonus.
Should you require any assistance with your employment arrangements during this difficult period, do not hesitate to contact the co-head partners of our employment department. Ewan Keen can be reached at 020 3206 2724 or Tamara Ludlow at 020 3206 2739.