Job Retention Scheme: further guidance issued for suppliers of temps

Written on 6 Apr 2020

HMRC issued further guidance on the Job Retention Scheme (JRS) on Saturday 4 April 2020. Some but not all areas of uncertainty have been addressed.

Here are eight aspects of the guidance that will be important to staffing agencies:

  1. Apprenticeship Levy – employers still need to pay the levy in respect of furloughed workers. This is a massive issue especially for any lower margin business such as staffing companies: they are expected to fund the levy from their own pockets while workers are on furlough. This will sadly put some off using the JRS.
  2. Alternative employment – a furloughed worker can get alternative employment with another employer while on furlough if this is permitted in their contract – this is important for agencies that in practice often have no idea what other work agency workers do. It would be prudent to ensure that any new employment permitted enables a worker to return to their existing “job” on short notice to meet business demands.
  3. “On payroll?” – only those workers who were on payroll on or before 28 February 2020 can be furloughed. What does “on payroll” mean? For example, what does it mean for temps who were not actually working on 28 but who were on an agency’s payroll waiting to be paid? There are various intricacies here and the position is still not 100% clear but we think the sensible approach would be to treat any temp who worked in the pay reference period immediately before the 28 and who was/would have been paid for that work as being “on payroll”.
  4. Pay calculation – can include contractual but not discretionary bonus and commission. This is good news for staffing and recruitment companies that pay in-house people a substantial proportion by commission. Although not expressly referred to in the guidance, it seems that expenses are excluded from pay.
  5. Employed umbrella workers – are covered, although that may little avail them practically since for technical reasons they are often mainly paid by discretionary bonus. Expenses also seem to be excluded.
  6. Agency’s decision to furlough – it will be their decision but the guidance says the agency would be advised to discuss the need to furlough with any end clients involved. This simply seems to place a moral/PR obligation on the agency to double check the end user does not need the worker before putting the worker on furlough.
  7. Calculation of amounts to be claimed – “employers” will be responsible for calculating the amounts they are claiming. This will, in some cases, require a recalculation of amounts actually paid via payroll in order to adjust for discretionary pay elements.
  8. HMRC reserves right to adjust your claim – the guidance makes it clear that “HMRC retain the right to retrospectively adjust all aspects of the claim.” Staffing agencies therefore need to think carefully about the amounts they are claiming and that they can justify those amounts at a later date if necessary. Keeping contemporaneous records of decision making regarding furloughing workers and claiming grant will be important.

Clarity needed

There is still no clear guidance on the following:

  • Whether as a matter of Company law there will be a wholesale permission to pay dividends notwithstanding use of the JRS which is intended for companies which cannot otherwise pay their workers.
  • Whether the right to holiday accrues while on furlough, including for zero hours workers. A lot may depend on how your contracts are structured. This latest guidance says nothing about holiday pay accrual.
  • Whether (or to what extent) workers will be able to continue receiving a furlough payment (from the new “employer”). The updated guidance suggests that this will be allowed but we believe that there will be understandable concerns around this, especially if some workers benefit from a furlough payment (based on a full time pay) plus a full time pay from an alternative “employment”. The guidance seems to assume that workers who worked for more than one “employer” as at 28 February will be able to continue to work for another “employer” provided they don’t work for the “employer” that has furloughed them. We think that this is quite different to moving from one full time “employment” to another.

Please click here for a broader summary of the updated guidance.

If you would like us to assist further on any of these points please let us know – we are supporting many businesses on these issues at the moment.