On 15 April 2020 the Chancellor Rishi Sunak made a Treasury Direction which purports to set out the legal framework for the furlough scheme.
On the whole, as you would hope, this reflects the guidance that had previously been provided by HMRC however there were some significant changes made;
- The date by which the furloughed employee must be registered on the payroll changed from 28 February to 19 March 2020. However, there is a sting in the tail as the employee must be registered on HMRC’s real time information system for PAYE as at 19 March 2020. So the employer must have made at least one RTI submission with that furloughed employee on it, before 19 March 2020. As such individuals who joined an employer in late February but were not paid until the March payroll, if that March payroll was after 19 March, would not qualify. This could therefore exclude a number of people who we previously thought could be part of this scheme.
- There is no exclusion of public sector or publicly funded employers. As the Treasury Direction purports to be the legal basis for the scheme and the HMRC guidance is simply guidance, it appears that public sector and publicly funded employers are just as eligible to apply for the scheme as any other.
- A furloughed employee is confirmed as anyone who is sent home from work “by reason of circumstances arising as a result of coronavirus or coronavirus disease.” This confirms the gradual shift we have seen in the HMRC guidance from this being a substitute for redundancy and only being available to those who would otherwise be made redundant. The definition is now though so broad that it would also include an employee who refuses to attend work due to fears over their health and safety. The employer could then choose to furlough them with wages recoverable under the scheme.
- For an employee to be validly furloughed there must be an agreement in writing. This varies significantly from the previous guidance which, although requiring agreement, only required the notification from the employer to be in writing. Non-objection is irrelevant, there must be a written confirmation, albeit that can be a very brief ‘I agree’ by email. The Direction does not however require prior written agreement and as such employers should be seeking this from their employees retrospectively if they do not have it already.
- The Direction confirms that an employees reference salary is limited to their regular wages as per the last RTI submission prior to 19 March 2020. Unfortunately the Direction implies that regular overtime is excluded from this notwithstanding that previous HMRC guidance confirmed that it would be included.
- The Direction remains entirely silent on annual leave and whether an employee can take/be compelled to take, annual leave whilst on furlough leave.
As this Direction aims to be the legal basis upon which the scheme is based it is unlikely that there will be an further changes although it remains a possibility. Notwithstanding it’s imperfections this appears to be the scheme at least for the next few days as the web portal is launched.
If you have any queries relating to this scheme please contact Gary Smith on 01279 712576 or via email gsmith@nockolds.co.uk