Coronavirus job retention scheme: HM Treasury publishes legal framework

Soon after publishing the fourth version of its guidance on the coronavirus job retention scheme, HM Treasury published a Direction setting out the legal framework which HMRC will need to work to in operating the scheme. This contains some additional information not in the guidance.  

It confirms that:

• In order to be eligible, the employer must have instructed the employee to cease all work for them and it must have given the instruction “by reason of circumstances arising as a result of coronavirus or coronavirus disease”
• In addition, the employer and employee must have agreed in writing the employee will cease all work in relation to their employment. This may be in electronic form, such as by email. This suggests that notification of furlough but no written agreement recording it may be insufficient.  Employers are unlikely to be able to rely on deemed consent in cases where employees have not confirmed their agreement. Employers who do not have a written agreement will want to make sure they get one now
• The statutory duties a company director can carry out while furloughed without falling foul of the "no work" rule are more limited than the guidance suggests. These are limited to work undertaken “to fulfil a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the director’s company”. By contrast, the guidance says they can do what is reasonably necessary to fulfil “the statutory obligations they owe to their company”
• Where an employee is on Statutory Sick Pay (SSP) when they are furloughed, furlough does not start until the period for payment of SSP for that absence has ended. This differs from the guidance which suggests an employee on sick leave can be furloughed and get furlough pay instead of SSP straightaway
• The Direction also sets out in more detail the criteria for working out whether a payment forms part of an employee’s "regular wages" and is therefore something the employer can include in their claim

Where there are inconsistencies between the guidance and the Treasury Direction, the Direction is likely to take precedence. While the Direction clarifies a number of issues, employers will be concerned by what appears to be some new requirements and by the inconsistencies which can only lead to further confusion.