Coronavirus job retention scheme: revised legal framework for claims submitted after 22 May

HM Treasury has amended the legal framework which HMRC needs to work to in operating the coronavirus job retention scheme. This new framework will apply for all claims submitted after 22 May 2020.  Claims submitted on or before that date will have to comply with either the original rules published on 15 April or the new rules.  

Placing employees on furlough

Furloughed employees must have been instructed to cease all work in relation to their employment.  The previous rules said that the employer and employee must have agreed in writing that the employee will cease all work.  The new rules say that there must be an agreement between the employer and employee (which can be made by means of a collective agreement between the employer and a trade union) which:

• Specify the main terms and conditions upon which the employee will cease all work in relation to their employment
• Is incorporated (expressly or impliedly) in the employee’s contract 
• Is made in writing or confirmed in writing by the employer (which can be done electronically, such as by email) 

The employer must retain the agreement (including a collective agreement) or confirmation until at least 30 June 2025. 

“No work” rule

The new rules say that:

• Directors will not fall foul of the “no work” rule by making a claim under the job retention scheme in respect of an employee of the director’s company or by making a payment of salary or wages to such an employee.  As previously, 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” does not count as work.
• Work undertaken by an employee for the sole purpose of fulfilling their duties as a trustee or manager of an occupational pension scheme does not count as work (unless the employer’s business is the provision of occupational pension scheme independent trustee services)
• Furloughed employees can study or do training if its purpose is to improve an employee’s effectiveness in the employer’s business or the performance of the employer’s business, provided:
  • it does not directly provide a service to the employer or the employer's business activities 
  • it does not contribute to the business activities of the employer or anything generating income or profit for the employer
  • it does directly contribute to any significant degree to the production or supply of goods or services for sale

Regular salary/wages

The grant only covers regular salary/wages.  The new rules seek to clarify when variable payments can be included and say that:

• Variable payments for overtime, fees, commissions, timing of shifts or additional duties or similar can be included in the amount claimed as regular salary/wages provided a legally enforceable agreement, understanding, scheme, transaction or series of transactions prescribes the method of calculation (whether or not that method involves the exercise of discretion by the employer or a person connected with the employer)
• Anything provided in lieu of cash payments (including salary sacrifice arrangements) does not count as regular salary/wages and so will not be covered by the scheme.    

Statutory sick pay 

Where an employee is receiving or due to receive Statutory Sick Pay (SSP) when instructed to cease work, the furlough period does not begin until immediately after the end of the period of incapacity for work for which they were receiving/due to receive SSP.  However, it appears that it is possible for the employer and employee to agree that the period of incapacity for work will come to an end so that the furlough period can start. This is presumably intended to enable employers to agree to furlough individuals in the extremely vulnerable category who have been advised to shield. 

Unpaid leave 

Where someone is on unpaid sabbatical or other unpaid leave between 1 March and 30 June, it not possible to claim for them under the scheme and a period of furlough cannot begin in that period.   
Where someone was already on unpaid leave on 1 March, furlough cannot start until after the time when it was originally agreed unpaid leave would end.  

Future changes 

The new legal framework extends the scheme until 30 June. It does not cover the changes to the job retention scheme announced earlier this month which are due to take effect from 1 August.   

Both the original and revised frameworks can be viewed here