An unexpected number of amendments have been made to both the employer and employee guidance and additional guidance has been published. The new guidance provides a step by step guide for employers and a number of worked examples, helping to simplify how to make a claim.
Essential resources for employers to make a claim:
- Government CJRS guidance for employers
- Government CJRS guidance for employees
- The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Coronavirus Job Retention Scheme) Direction
- Work out 80% of your employees' wages to claim through the Coronavirus Job Retention Scheme
- Government step by step guide on CJRS for employers
- Claim for wages through the Coronavirus Job Retention Scheme - access to Gateway
The most important clarifications to note from the latest guidance are as follows:
Dishonest, inaccurate or fraudulent claims – In the opening paragraphs of the guidance employers are given a stark warning that payments may be withheld or need to be repaid if the claim is found to be dishonest, inaccurate or fraudulent. HMRC has put in place an online portal for employees and the public to report suspected fraud.
Fixed term contracts – Clarification has been given that fixed term contracts can be renewed or extended "before their natural conclusion" during the furlough period without breaking the terms of the CJRS. The key to eligibility is that the fixed term must not have ended.
Agreeing to furlough employees – The employer guidance attempts to clarify how employers should go about agreeing to furlough their employees. The guidance states "To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS". The guidance goes on to say "There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years". Read alone this creates a clear direction, unfortunately however the guidance appears to conflict with the Treasury Direction (please see our Legal Update for further information on the Treasury Direction).
The Treasury Direction has a requirement that in order for an employee to be instructed to cease work (and in effect be furloughed) the "employer and employee [must] have agreed in writing (which may be in an electronic form such as an email)". While the position is uncertain and as the Treasury Direction is legal in nature, we would advise employers to seek written confirmation from employees. Although it would seem illogical for an employers' claim to be excluded from the CJRS having followed the guidance to the letter, the safest approach is to seek written confirmation.
Records – The guidance advises employers to "retain all records and calculations in respect of your claims, including records of the amount claimed for each furloughed employee and the period for which each employee is furloughed and a claim made under the scheme".
Annual leave – The much anticipated question of annual leave has been addressed in both the employee guidance and in the employer guidance on calculating 80% of wages. The guidance on annual leave provides essential clarity for employers, enabling periods of furlough leave to be managed in a much simpler way. The employee guidance confirms:
• Holiday continues to accrue during furlough;
• Holiday entitlement can be agreed to be varied during furlough leave as part of the furlough agreement, providing the entitlement does not go below the statutory minimum;
• Employees can take holiday during furlough leave;
• Holiday should be paid at the normal rate of pay, or where pay varies, calculated on the basis of the average pay received in the previous 52 weeks;
• Employers will be obliged to pay the additional amounts over the CJRS grant;
• Employers can restrict when leave can be taken if there is a business need – during both the furlough period and the recovery period; and
• If the employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up pay to 100% of usual pay, or give a day of holiday in lieu.
Rather ominously the section on annual leave concludes with "During this unprecedented time, we are keeping the policy on holiday pay during furlough under review", and there may therefore be further changes
Although elements of the latest guidance provide welcomed clarity, there is still tension between the Treasury Direction and the guidance in places. As the Treasury Direction provides the legal framework we would suggest that this take precedence but should be read (where possible) in light of the guidance. We will keep you updated.
If you would like any further information with regard to the issues raised in this update please contact your usual DWF contact or another member of the Employment Team.
Acas Coronavirus (COVID-19): advice for employers and employees
Pensions Regulator Guidance
DWF Legal Update on the CJRS guidance on 26 March 2020
DWF Legal Update on the CJRS updated guidance on 4 April 2020
DWF Legal Update on the CJRS updated guidance on 9 April 2020
DWF Legal Update on the CJRS updated guidance on 15 April 2020
DWF Legal Update on Treasury Direction