CJRS - Guidance Updated on 12 JunePublished on: 15 June 2020
The government updated its guidance on its “furlough scheme”, the Coronavirus Job Retention Scheme (CJRS), on 12 June to reflect changes announced by the Chancellor in recent weeks.
As always, the devil is in the detail and, as has been a feature of the scheme since the outset, some aspects have not been explained as clearly as they might have been or otherwise leave some room for doubt. Further, an important change to the Treasury Direction (which sets out the formal rules which govern how HMRC is to operate the scheme) relating to employees with variable pay who have been on statutory parental leave or sick leave has not been reflected in the updated guidance.
Restrictions on the application of the scheme
The guidance states that only employees who have been (past tense) subject to a successful claim under the scheme prior to 1 July can be furloughed under the scheme from 1 July onwards – unless, subject to certain conditions, they returned, or return, from statutory maternity, paternity, adoption, shared parental or parental bereavement leave (which the guidance refers to as “statutory parental leave”) after 10 June (see further below).
However, employers will have until 31 July to make any claims for employees who were furloughed for at least 3 consecutive weeks at any time between 1 March and 30 June – so the guidance should more accurately state that only employees who have been or are to be subject to a successful claim under the scheme in respect of the period prior to 1 July can be subject to the scheme from 1 July onwards.
In any event, it is clear that in order to be subject to the scheme going forward, the last day an employee could have started furlough for the first time (including with their previous employer, in the context of a TUPE transfer that took place after 10 June) was 10 June, unless they return from statutory parental leave after that date.
An employee who returns from statutory parental leave after 10 June can be furloughed as long as the employee was on the employer’s PAYE payroll on or before 19 March (i.e. an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before that date) and the employer has claimed (or is to claim) for at least one other employee who has been furloughed for at least 3 consecutive weeks between 1 March and 30 June.
The guidance adds the following qualification:-
If your employee agrees to be put on furlough and end their maternity leave early, they will need to give you at least 8 weeks’ notice and they will not be eligible for furlough pay until the end of the 8 weeks.
However, under the law relating to maternity leave, an employee can only be required to provide 8 weeks’ notice of her early return if the employer complied with its obligation to notify her of the date that her full 52 weeks’ maternity leave was to end within 28 days of (i) the employee notifying it of her chosen start date for her maternity leave or, if applicable (ii) the automatic triggering of maternity leave by pregnancy-related absence in the 4 weeks before the expected week of childbirth or by premature birth.
Further, even where it is open to an employer to insist that an employee provides not less than 8 weeks’ notice to return early from maternity leave, the employer may waive that requirement completely or agree to a shorter notice period.
Logically, therefore, it should be open to an employer to agree to an employee returning early from maternity leave and be furloughed without the 8 week delay (as long as maternity leave is no shorter than the legal minimum of 4 weeks in the case of factory and workshop settings and otherwise 2 weeks). However, as things stand, in the event of an audit, any employer who does agree to such an arrangement would seem to be at risk of being required to repay any grant received under the scheme relating to the first 8 weeks after the employee’s return date, and perhaps also facing penalties.
No reference is made regarding minimum notice to commence furlough in the context of an early return from shared parental leave or adoption leave. An employer can insist on being provided with up to 8 weeks’ notice to end such a period of leave early but, like any requirement for an employee to provide notice of an early return from maternity leave, this can be waived.
The number of employees who can be claimed for in any claim period starting from 1 July can’t exceed the maximum number of employees who were claimed for in respect of any claim period ending by 30 June – ignoring any employees who returned from statutory parental leave after 10 June and subject also to TUPE related considerations, where relevant.
From 1 July, there will no longer be a requirement that a period of furlough must last for at least 3 consecutive weeks – a period of lay-off (i.e. no work) or short-time working (see below) of as little as a single day can be claimed for.
To emphasise, however, where a previously furloughed employee starts a new furlough period by 30 June which continues beyond that date, this furlough period must still be for a minimum of 3 consecutive weeks. The guidance provides an example of a previously furloughed employee who starts a new furlough period on 22 June, and makes the point that this would have to continue for at least 3 consecutive weeks, ending on or after 12 July.
Note also that after 1 July, employers can’t make claims that cross calendar months, so for any period of furlough that straddles June and July the employer will need to make separate claims (i) for the period up to 30 June (to be made no later than 31 July) and (ii) for the period after 30 June (to be made not before 1 July).
For claim periods up to 30 June, there was, and is, a prohibition on an employee doing any work for their employer other than training (subject to limited exceptions in the case of directors and pension scheme trustees).
However, for claim periods starting after 1 July, employees can work less than their “usual hours” and employers can claim a grant under the scheme for such of their “usual hours” that aren’t worked. There are two different calculations that are to be used to work out an employee’s usual hours, depending on whether they work fixed or variable hours. For the guidance in this regard click here.
The guidance refers to employers being able to “bring furloughed employees back to work for any amount of time and any shift pattern”, which on its face might suggest that “flexible furlough”, as it is termed, applies only to employees who have been completely laid off at the time short-time working arrangements are implemented. However, it is apparent that this is not to be taken literally. As long as an employee was furloughed for at least 3 consecutive weeks at any time between 1 March and 30 June, flexible furlough arrangements can be applied to them at any time after 30 June – even if they have returned to working their normal hours for a period of time.
Putting employees on flexible furlough
The guidance states:
If you flexibly furlough employees, you’ll need to agree this with the employee (or reach collective agreement with a trade union) and keep a new written agreement that confirms the new furlough arrangement. You’ll need to:
- make sure that the agreement is consistent with employment, equality and discrimination laws
- keep a written record of the agreement for five years
- keep records of how many hours your employees work and the number of hours they are furloughed (i.e. not working).
The first port of call should be to consider the contract of employment. Some contracts contain lay-off and short-time working provisions, which allow the employer to lay the employee off without pay, or to reduce their hours and reduce their pay proportionately. Just as these clauses allow employers to readily furlough employees completely on no more than 80% of their pay (subject to the applicable cap), they will allow employers to dictate part-time furlough arrangements and to pay employees no more than the amount recoverable under the scheme for such hours that are not worked.
For employers without the benefit of such contractual provisions, if they are not going to pay affected employees in full regardless of any reduction in working hours, to act lawfully, they will need to do one, or a combination, of two things: obtain the binding consent of employees, or impose the arrangement after applying appropriate procedures. What will constitute “appropriate procedures” will be a matter for legal advice according to the particular circumstances.
Where consent alone is to be relied upon (i.e. if contractual changes are not to be imposed on any dissenters), collective consultation will not be a consideration.
However, if that is not the case and 20 or more employees are to be affected at one establishment within a 90-day period, this will require a collective consultation process – and there will be a moratorium on effecting the required contractual changes of 45 days from the commencement of that consultation if 100 or more employees are affected, or 30 days if fewer than 100 are affected. (Employers who are also contemplating redundancy dismissals should bear in mind that any employees they propose to dismiss may be part of the head-count for collective consultation thresholds, depending on the circumstances.)
Adding in time to plan and execute the process and then give contractual notice of changes, plus considerations about by when affected employees are expected to return to work full time or else be made redundant, means that in many cases an approach which involves collective consultation won’t be practicable. How to address such considerations, to include possible commercial solutions, is a matter for legal advice according to the particular circumstances.
A claim period is the period for which a grant is claimed under the scheme. The position regarding claim periods is not without its complexities.
There is no maximum length for claim periods that end on or before 30 June - but any periods starting before 1 July must end on or before 30 June and be claimed for by 31 July. This is the case even where an employee furloughed in June continues to be furloughed full time in July. Separate claims will need to be submitted to cover the days in June and the days in July, even if employees are furloughed continuously.
Claim periods starting on or after 1 July must start and end within the same calendar month and must last at least 7 days, unless they include either the first or last day of the calendar month and the employer has already claimed for the period ending immediately before it.
Only one claim can be made for any period: claims can’t overlap. Therefore employers must include all of their furloughed / flexibly furloughed employees in one claim even if they pay them at different times. Where employees have been furloughed / flexibly furloughed continuously (or both), the claim periods must follow on from each other with no gaps in between the dates.
When claiming for employees who are flexibly furloughed, employers should not claim until they are sure of the exact number of hours they will have worked during the claim period. If they claim in advance and an employee works for more hours than were reported, the excess grant will be repayable to HMRC. Overclaimed amounts can be reported in the next claim and the employer should keep a record of this adjustment for six years. The guidance states that HMRC are working on a process that will allow employers who do not intend to make further claims to report and repay overclaimed amounts.
If the employer makes an error that has resulted in an underclaimed amount, it should contact HMRC to amend its claim.
The full section of the guidance relating to claim periods is here.
The updated guidance reflects the following:
From 1 August, employers will have to pay employer's national insurance contributions (NICs) and pension contributions on furlough pay. Currently, the government meets the employer’s NICs and the equivalent of the minimum employer’s auto-enrolment pension contributions.
From 1 September, the government will only reimburse 70% of salary (up to a maximum of £2,190). Employers will be required to top-up to 80% (or more, depending on what the arrangement is with respective employees).
From 1 October, the government will only reimburse 60% of salary (up to a maximum of £1,875), and employers will continue having to top up to 80% (or more).
The furlough scheme will close on 31 October.
Update to Treasury Direction awaited
We still await an update to the Treasury Direction which sets out the formal rules which govern how HMRC is to operate the scheme to reflect the above, but it is, of course, reasonable for employers to act in accordance with the published guidance.
Calculating furlough pay for returners from statutory family leave or sick leave
An important oversight is that the updated guidance doesn’t reflect a key change relating to the reference salary for those taking furlough after a period of statutory parental leave or sick leave.
The guidance still states that for such of those employees who have variable pay, their reference salary is to be the higher of the average pay received in the last tax year or the corresponding month in 2019. However, under the latest Treasury Direction, the reference salary is to be calculated as if the employee had been on paid annual leave receiving normal pay required under the Working Time Regulations during those periods – which is obviously more favourable to the employees.
It is the Treasury Direction that HMRC must apply, so this omission does not affect the true legal position – but, of course, it is the guidance that most employers will look to when applying the scheme and so this omission may result in underpayments, and potentially also disputes with employees who are aware of their entitlements under the Treasury Direction.
For a published summary of the changes to the scheme that take effect on 1 July, click here. This doesn’t deal with all aspects of the changes, but it does set out a handy table illustrating the changes in the government’s level of contributions to payments made under the scheme over the coming months. The full updated primary guidance (with further links to more detailed guidance on making claims under the scheme) is here.