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Coronavirus Job Retention Scheme Further Treasury Direction issued

26 May 2020
The Chancellor has made a further Treasury Direction providing clarity on the legal framework to the Coronavirus Job Retention Scheme ("CJRS") and addressing some of the inconsistencies with HMRC's guidance.

The Chancellor has made a further Treasury Direction providing clarity on the legal framework to the Coronavirus Job Retention Scheme ("CJRS") and addressing some of the inconsistencies with HMRC's guidance. The initial Treasury Direction of 15 April has been modified by this latest iteration dated 20 May 2020 but issued on 22 May 2020. 

The Direction deals with the extension of the CJRS to 30 June 2020 but does not address the extension to October 2020 as announced by the Chancellor. The Chancellor's announcement reported that there will be no changes to the CJRS until the end of July; however between August and October employees on furlough can return part-time, with employers paying a percentage of their salaries. The Direction provides no further details on the mechanics of the CJRS from August 2020. An update is expected by the end of May 2020.

The most important clarifications to note from the Direction are as follows:

Agreement in writing – There was much confusion between the previous Direction and HMRC's guidance as to whether the employee had to agree to being furloughed in writing. The new Direction provides welcomed clarity and removes the explicit requirement that the employee must agree in writing.  The Direction requires the agreement (including a collective agreement) to:

  • specify the main terms and conditions upon which the employee will cease all work in relation to their employment;
  • be incorporated (expressly or impliedly) in the employee’s contract, and 
  • be made in writing or confirmed in writing by the employer (such agreement or confirmation may be in an electronic form such as an email).

The Direction requires employers to retain the agreement until at least 30 June 2025. This gives some indication as to how long HMRC envisage scrutinising claims under the CJRS.  

Sick pay – The sick pay provisions have been significantly amended from the previous Direction. The Direction states that where Statutory Sick Pay ("SSP") is "in payment or due to be paid" in respect of an employee the period of furlough does not begin until immediately after the end of the period of incapacity for work for which the SSP is in payment or due to be paid. The Direction goes on to say that the timing of the end of the period of incapacity should be determined by an agreement between the employer and employee. Although the position is not entirely clear, this would appear to give the employer and employee greater flexibility over ending SSP and placing an employee on furlough and claiming under the CJRS, even if the employee is still eligible for SSP.  

Training – The Direction gives more detail on the extent of training that an employee can undertake without breaching the rules of the CJRS. Training can be undertaken if its purpose is to improve the employee's effectiveness in the employer's business or the performance of the employer's business. However, there are caveats, including the requirement that the training does not directly provide a service to the employer, contribute to business activities, generate income or profit or significantly contribute to the production of goods the employer intends to supply or the supply of services for a consideration by the employer. 

Work whilst on furlough – The Direction provides clarity that a furloughed company director can make a claim under the CJRS in respect of their employees and make payments of salary or wages, without breaking the rules of the CJRS. The Direction allows occupational pension scheme trustees or managers to continue with their duties under the scheme, providing the employer's business is not the provision of services as a trustee or manager of the occupational pension scheme requiring the employee to undertake duties as an independent trustee. 

Overtime, fees, commission or piece rates – The Direction provides some clarity over what can be included in the CJRS calculation, although the position is still far from clear. According to the Direction anything which is not regular salary or wages should not be included and discretionary variations in pay cannot be taken into account. This means: 

  • pay which varies according to the performance of the business should not be included within the calculation under the CJRS; but
  • payments such as overtime, fees, commission or piece rates made in recognition of the employee undertaking additional or exceptional responsibilities, or undertaking duties in excess of their contractual hours should be included within the calculation under the CJRS. 

The Direction goes on to state that such payments are only covered by the CJRS if "a legally enforceable agreement, understanding, scheme, transaction or series of transactions prescribe the method of calculating the amount of wages or salary payable in respect of the payment (whether or not that method involves the exercise of discretion by the employer or a person connected with the employer)". This means that there must be an agreement between the employer and the employee as to what the employee will be paid for such payments, i.e. agreed rates of overtime etc. rather than just a goodwill payment by the employer. 

TUPE – The TUPE provisions in the Direction are updated to refer to 28 February not 19 March as the relevant date by which an employee must have transferred under TUPE in order to be eligible for furlough. This amendment is in line with the latest HMRC guidance. The Direction also makes allowances for a furlough claim which does not last the minimum period of 21 days solely because of the TUPE transfer. 


The government has reported that 8 million jobs have been furloughed, totalling £11.1 billion worth of furlough grant claims by employers. As the popularity of the CJRS continues, we can expect further clarifications. 

It is unsurprising that we have seen a second version of the Treasury Direction considering the many discrepancies between the first and HMRC's guidance. We can expect to see further versions detailing the extension of the CJRS to October 2020 and setting out the legal framework for furlough from August 2020. 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

Key Resources
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 - 20 May 2020
The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Coronavirus Job Retention Scheme) Direction - 15 April 2020 
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 
Acas Coronavirus (COVID-19): advice for employers and employees
Pensions Regulator Guidance 

Further Reading

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