The Treasury has issued a Direction to HMRC under the Coronavirus Act 2020, containing authority and instructions for making payments under the Coronavirus Job Retention Scheme. Amendments are still possible however, it is likely to be the definitive guidance on how the Job Retention Scheme works.
Key changes and clarifications include:
- Employees who were employed before 19 March 2020 (previously 28 February 2020) are eligible for furlough, provided the employer had submitted real time information payroll data by that date. Employers can therefore contact any employees who were refused furlough leave on the basis that they were not on payroll as of 28 February and now offer to furlough them.
- The Scheme is not limited to those employees who would otherwise be made redundant. It is applies to any who are furloughed “by reason of circumstances as a result of coronavirus or coronavirus disease”.
- To claim furlough, the employer and employee must have agreed in writing that the employee will cease all work. The initial guidance only required notification. The Direction from the Treasury requires written agreement. If you have not received written confirmation from the employees who have been furloughed, they may not fall within the meaning of the Scheme. You should therefore contact those employees and ask them to confirm either by signing a copy of the letter confirming their furlough leave or if they are unable to do so ask them confirm by sending an email (from their personal email address as they should not be accessing their work email address.
- A director who is furloughed can only undertake work to fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of company’s accounts or provision of other information relating to the administration of the director’s company.
- The amount of salary for the employee must disregard anything which is not “regular salary or wages”. That includes disregarding any performance related bonus or discretionary payments (including tips), any conditional payments (eg where a threshhold must be met) and any non-financial benefits.
- Employers cannot claim for any salary which is “conditional on any matter”. This may exclude any salary payments which the parties have agreed are conditional on the Job Retention Scheme paying out.
- Employers can claim for earnings which it “reasonably expects to be paid” to the employee – this appears to include deferred earnings, deferred until the Scheme pays out (provided they are not conditional on the Scheme paying out).
- The Direction is currently silent on annual leave.