The UK government issued a Direction to HMRC on 15 April and published updated guidance on the Coronavirus Job Retention Scheme on 17 April. Most notable was the amended date that employees must have been on their employer’s payroll to qualify for the scheme, which has been brought forward from 28 February 2020 to 19 March 2020, allowing a larger number of employees to benefit. The Chancellor has also extended the scheme until the end of June 2020 (previously due to terminate on 31 May).
This LawFlash supplements our detailed prior analysis of the scheme: Furlough Developments: Updated Guidance on UK Coronavirus Job Retention Scheme and COVID-19 Developments for UK Employers: Coronavirus Job Retention Scheme, Annual Leave Carryover.
On 15 April 2020, the UK Chancellor made a Treasury Direction to Her Majesty’s Revenue and Customs (HMRC), under Sections 71 and 76 of the Coronavirus Act 2020, which constitutes the legal framework underpinning the Coronavirus Job Retention Scheme. It contains authority and instructions for making payments under the scheme and signals that the guidance is in near-final form. It is notable that the Treasury Direction fails to advise on the issue of annual leave, despite continuing uncertainty on this issue.
On 17 April, the UK Chancellor extended the scheme until the end of June to reflect continuing social distancing measures. Employers will now be able to claim under the scheme for an additional month, continuing to protect jobs for this extended period. The new end date is not set in stone and the government will continue to review the scheme in line with wider measures to reduce the spread of coronavirus.
The process for placing employees on furlough leave remains substantively similar to that previously articulated by the government, with the following noteworthy amendments:
The government has also produced a step-by-step guide for employers that sets out the practical process for making claims under the scheme. Worked examples are also provided to assist employers with furlough payment calculations. The guide confirms that the scheme is due to open for claims on 20 April; employers should receive payment within six working days after making an application.
As expected, employers can claim in respect of all qualifying employees, regardless of whether they would otherwise have been made redundant. The Treasury Direction specifies simply that an employee is a furloughed employee provided “the instruction is given by reason of circumstances as a result of coronavirus or coronavirus disease”.
Additional guidance is provided for the following types of employees:
The Treasury Direction includes welcomed detail and definitions to assist employers with furlough payment calculations, which may prove complicated when dealing with a large and varied workforce. The furlough payment must be calculated with reference to an employee’s regular salary or wages, which is helpfully defined as unconditional wages that arise from the employment contract. Employers must therefore disregard performance related bonuses or discretionary payments (including tips), conditional payments and benefits of any other kind.The wages cannot be conditional on any matterand consequently excludes payments which the parties have agreed are conditional on the scheme paying out.
The Treasury Direction adds that employers can claim for the gross amount of earnings paid orwhich it "reasonably expects to be paid" to the employee.This may include earnings which are deferred until the scheme pays out (provided they are not conditional on the scheme paying out).
We recommend that employers claiming under the scheme review the Treasury Direction in detail.
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