The Coronavirus Job Retention Scheme (the “Scheme”) has been developing over the last few weeks, with many clarifications and revisions to the language of the Scheme.
The Government issued revised guidance on the Scheme for employers (the “Guidance”), and the Treasury issued a direction to HMRC in respect of payments under the Scheme (the “Direction”).
This new Guidance and Direction may impact your previous approach/communications and your applications under the Scheme.
We set out links to the full Guidance and Direction below.
The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Coronavirus Job Retention Scheme) Direction - to receive a copy of this document please email us
Gov.uk - Claim for your employees' wages through the Coronavirus Job Retention Scheme
Although the Guidance and Direction may still be revised or updated, there are some changes which are important and we would, therefore, recommend that you review this additional information in full.
To assist, we set out below a summary of key changes to the Scheme, on the basis of the Guidance and Direction.
Employees you can claim for
Furloughed employees on your PAYE payroll on or before 19 March 2020 (provided they were notified to HMRC on an RTI submission on or before that date).
If you made employees redundant or they stopped working for you after 28 February based on COVID 19 reasons
You can re-employ employees who were made redundant or those who stopped working for you after 28 February 2020, put them on furlough and claim for their wages through the Scheme (up to the specified limits), even if you do not re-employ them until after 19 March 2020, provided that the employee was on your payroll as at 28 February 2020 (provided they were notified to HMRC on an RTI submission on or before 28 February 2020).
The Guidance confirms that to be eligible for the grant under the Scheme, employers must confirm in writing to their employee that they have been furloughed (with a record of this communication being kept for five years). The Direction goes further, confirming that an employee will be considered ‘furloughed’ if:
- the employee has been instructed by the employer to cease all work in relation to their employment;
- the period for which the employee has ceased (or will have ceased) all work for the employer is 21 calendar days or more; and
- the instruction is given by reason of circumstances arising as a result of Coronavirus or Coronavirus disease.
There are numerous additional conditions relating to particular circumstances of such employees. One such condition is that an employee will only be considered to have been instructed to cease all work (and therefore, have been furloughed) if the employer and employee have agreed that the employee will cease all work in relation to their employment in writing.
It is confirmed that this agreement could be in electronic form such as an email.
We would recommend that you review your previous communications with your employees to ensure that they comply with these updated requirements.
The Direction provides significantly more detail regarding how to determine whether employees should be treated as ‘salaried’ or having variable pay, and how that pay should be calculated.
The Guidance and Direction both confirm that furloughed staff must receive no less than 80% of their reference pay (up to the monthly cap of £2500).
It is important that reference pay is calculated correctly to ensure that any claim under the Scheme is not jeopardised. Your communications with employees should also agree the correct amount of pay during furlough.
In summary, the Direction provides that for those who are ‘salaried’ their reference salary for the purposes of the Scheme is the amount payable to the employee in the latest salary period ending on or before 19 March 2020.
For those whose pay aries, their reference salary for the purposes of the Scheme is the greater of:
- the average monthly (or daily or other appropriate pro-rata) amount paid to the employee for the period comprising the tax year 2019-2020 (or, if less, the period of employment) before the period of furlough began; and
- the actual amount paid to the employee in the corresponding calendar period in the previous year.
In calculating the employee’s reference salary for the purposes of either the ‘salaried’ or variable pay category, no account is to be taken of anything which is not ‘regular’ salary or wages.
‘Regular’ salary or wages is stated to include the amount which is not conditional on any matter, is not a benefit of any other kind, and arises from a legally enforceable agreement, understanding, scheme or transaction(s).
‘Regular’ is also interpreted to mean that any amount of salary and wages which varies due to the performance of the business or the employee or discretion, are excluded (save where that variation arises due to the legally enforceable agreement, understanding, scheme or transaction(s)).
If you have any questions regarding these changes to the Job Retention Scheme please contact a member of our employment team or call us on 0113 246 0622.
Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.