As many businesses will be aware, on 25 June 2020, the Chancellor of the UK Government published an updated Treasury Direction (the Direction) in relation to the Coronavirus Job Retention Scheme (JRS). It will be recalled that the Direction – literally, the instructions from the Treasury to HMRC on how to operate the JRS – sets out the legal framework for the JRS. The revised Direction is intended to facilitate the new heavily-publicised flexible furlough arrangements. The revised Direction is a very dense document but essentially reflects the terms set out in the most recent guidance provided by the UK Government on the JRS (the Guidance). In some places, there is arguably some inconsistency between what the two documents say, but it seems now to be established that employers will be able to rely on the Guidance (see for example the comments below in relation to redundancy).
Businesses will by now be familiar with the principal terms of the flexible furlough arrangement. In summary, in the period between 1 July and 31 October 2020, employers will be permitted to claim under the scheme for employees who work part-time and spend the remainder of their working time on furlough. Employees will be entitled to their usual pay for any time spent at work, and may agree to any pattern of flexible furlough / part-time work with their employer until the scheme ends on 31 October. Alternatively, employers may retain their employees on full furlough arrangements for all or any part of the remaining life of the JRS. Any claims in respect of periods prior to 30 June (i.e. under the arrangements in place prior to the introduction of the flexible furlough) must be made by 31 July 2020.
Only employees who have been previously furloughed for at least 3 consecutive weeks between 1 March and 30 June 2020 are eligible to participate in the scheme. Employers should reach agreement with their employees (whether individually or as part of a collective agreement with a trade union) as to their new flexible arrangement before it begins. This should be confirmed in writing, including by email, and such records should be retained until 30 June 2025. The agreement should set out the details of the new working arrangement, including when the employee shall be required to work and when they will be on furlough. The cost for business of participating in the JRS will also start to increase (see here for details).
One concern that arose in some quarters following the publication of the revised Direction was whether employers would be able to claim under the flexible furlough scheme in respect of employees under notice of redundancy. It seemed to be the case under the Guidance that employers can still make use of the JRS in respect of employees under notice of redundancy. However the wording in the revised Direction makes specific reference to claims being used ‘to continue the employment of employees’, which raised concerns that where an employee was under notice or about to be put under notice the JRS might not be available. We do not consider that the language in the Direction was intended to have this effect, and therefore we believe it remains possible for employers to continue to claim under the JRS in respect of employees who are under notice of termination (although it is clear that payments in lieu of notice are not covered).
It is worth noting that private correspondence from BEIS was recently published on LinkedIn and this seemed to confirm that where furloughed employees are made redundant their redundancy terms should not be any less favourable because they are furloughed. This seems to confirm, for example, that an employee’s notice pay may need to be paid in full even if an employee had previously been receiving only 80% of their wages.
In further developments, the Chancellor announced last Wednesday (8 July) that employers will receive a bonus of £1,000 for each furloughed employee that they bring back to work. The payment of this bonus is subject to various conditions, including that the employee must earn above the lower earnings limit (£520 per month) on average over the three-month window between the end of the JRS and the end of January 2021, and must still be employed at that date. Further details are yet to be announced. Clearly the arrangement is intended to encourage employers to keep as many staff as possible in employment after the JRS comes to an end. Whether it has any material effect remains to be seen, as the amount payable is likely to be viewed by many employers as relatively immaterial in comparison to the costs of retaining employees over the minimum earning threshold.
Employers should also be aware that, whilst the rules of the Direction are undeniably complex, HMRC is monitoring claims closely and has begun to instigate enforcement proceedings against those suspected of using the JRS fraudulently. In the first arrest made in connection with the JRS, a businessman is being investigated for JRS fraud thought to be worth approximately £495,000 as well as further tax fraud and money laundering offences. Eight others have also been arrested in connection with the investigation. This should serve as a reminder to businesses that HMRC will not hesitate to act on suspected misuse of the JRS, and that any issues relating to the use of the scheme should be brought to the attention of HMRC as soon as possible.
For further information, please see our previous update on the flexible furlough scheme.