Employment and pensions

New Treasury Direction published on furlough scheme

Published on 30th Jun 2020

Employers will need to act on the Coronavirus Job Retention Scheme's latest direction that clarifies its purpose and sets new limitations on claims.


The government has issued a further Treasury Direction setting out the legal basis for the continued operation of the Coronavirus Job Retention Scheme (CJRS), as modified, to provide flexible furloughing (from July) and employer contributions (from August) up to 31 October 2020.

Now is an optimum time for employers to consider what support they have received from the CJRS, what continued support they require, and what steps they need to take to manage workforce costs. While this latest direction reflects the latest government guidance, it does raise a number of specific considerations for employers, particularly in relation to the recent consultation on the proposed "clawback" scheme – the outcome of which is still awaited.

CJRS' purpose

The wording on the purpose of the CJRS has been extended.

The direction restates that the CJRS is intended to provide for payments to employers "in respect of costs of employment in respect of employees… arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease". However, the direction adds: "Integral to the purpose of the CJRS is that the amount paid to an employer pursuant to a CJRS claim are used by the employer to continue the employment of employees in respect of whom the CJRS claim is made whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission".

The prime minister and the chancellor have both alluded to redundancies as an inevitable consequence of the Covid-19 emergency and, with the CJRS extended numerous times to avoid a "cliff edge" situation, many of those "at risk" may be furloughed. The updated guidance and the direction fail to address head-on whether or not CJRS funds can be used during redundancy consultation or to pay an employee's notice period; employers should take legal advice before using the scheme's funds in tandem with these processes, particularly in light of the clawback provisions.

Employee agreement

The wording of the updated guidance had raised questions over whether an employer must obtain an employee's written agreement to being furloughed from 1 July 2020. The direction makes clear that an employee's agreement must be obtained but it only needs to be confirmed in writing. However, it would be sensible to obtain written agreement, wherever possible, or an employee's written confirmation, for example, by email. Employers should note that the agreement must have been made before the beginning of the claim period, although an agreement can subsequently be varied.

Eligible employees include those who have previously been furloughed for at least three consecutive weeks beginning on or before 10 June 2020 or who are returning from statutory family leave, reservists returning from a period of active duty, and those who have TUPE-transferred to a new employer after 10 June. Employers should carefully check the guidance setting out the conditions in each of these cases.

New limitations

There are new limitations on making claims under the CJRS. The direction confirms that employers must make any claim for a grant for a furloughed period up to 30 June 2020 by 31 July 2020; a separate claim must be made for any furloughed period from 1 July 2020. This is required even where an employee may be completing a three-week minimum period of furlough under the existing CJRS rules that crosses into July 2020.

From 1 July employers will also need to factor in the new limitations on making claims:

  • each claim must generally cover at least seven days (although exceptions are made for claim periods falling near the start or end of a month but subject to specific conditions);
  • each claim must include all furloughed employees for whom a grant is being sought in respect of that period;
  • the maximum number of furloughed employees who can be claimed for cannot exceed the "high watermark number" – that is the maximum number of employees who have been claimed for in any one claim made prior to 1 July (although it is possible to add on eligible employees who have not previously been furloughed such as those returning from statutory maternity leave or who have transferred over under TUPE); and
  • each claim must not cross calendar months, due to the tapering provisions under which employers must start to contribute.

Next steps

Employers wishing to continue to use the CJRS should ensure that they follow the updated government guidance: it contains detailed formulae (which must be applied unless an employee is furloughed for an entire claim period) to calculate what funds can be claimed under the scheme from 1 July 2020. Employers will need to work closely with payroll to ensure that the right claims are made at the right time.

Employers must also retain appropriate evidence of the rationale for and circumstances in which they are continuing to claim CJRS funds. When subsequent claims are made, employers should check that the rationale still applies. Likewise, now would be a sensible time to review funds already obtained and ensure that appropriate evidence is in place. The guidance also provides for specific record-keeping requirements. Where employers are concerned that, in fact, they may not have needed the CJRS funds or have incorrectly made any claims, advice should be sought; at the same time as issuing the new Treasury Direction, the government has published guidance on how to pay back some or all of a grant where an employer considers it has been overpaid.


* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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