Following increasing pressure, the government announced (17 April 2020) that the Coronavirus Job Retention Scheme – part of 'a collective national effort to protect people's jobs' – is now extended to 30 June 2020. On the same date, HMRC updated its existing employer and employee guidance on the Scheme and published two further guidance publications for employers:
- 'Work out 80% of your employees' wages to claim through the Coronavirus Job Retention Scheme'; and
- a 'step by step guide' for claiming employees' wages under the Scheme.
The HMRC portal for making claims under the Scheme is now live (20 April 2020).
Written record of furlough required, but no need for the employee to provide a written response
The current Treasury Direction states that an employer and employee must agree furlough 'in writing'. Following concerns about an employer's ability to claim under the Scheme where a furloughed employee had not responded to their employer individually in writing, revisions have been made to the guidance stating: 'To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming [under the Scheme]. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years' (our emphasis).
This is good news for employers who may not necessarily have received written consent from each employee individually, but are already grappling with protecting their business whilst managing large numbers of workers (and in some cases through representative bodies). The expectation is that the Direction will now be revised or a new direction issued clarifying this.
Employers who may need to make use of the extension of the Scheme to the end of June should carefully check the terms on which employees have been furloughed or seek express agreement to any extension. In any event, it will be important to communicate with furloughed employees on the anticipated duration of their furlough; an employer still has the same duties towards a furloughed employee as any other employee, including the implied obligation of trust and confidence which underpins the employment relationship.
More detail on calculating entitlement under the Scheme
HMRC has now published further guidance for employers on how to calculate 80% of wages, employer NICs and pension contributions for claims under the Scheme, together with a step-by-step guide for claiming under the Scheme (for more detail, see this insight). This further guidance clarifies a number of important points on what should be included in any calculation; as well as setting out a number of worked examples which employers should consider before claiming under the Scheme. Helpfully, HMRC:
- tells employers to check what you can include as wages first and to choose the calculation that best fits the way the employee is paid. For example, if the employee is paid a regular salary, employers should use the calculation for fixed pay amounts;
- will not decline or seek repayment of any grant based solely on the particular choice of pay calculation as long as a reasonable choice of approach is made. This emphasises the need for good record-keeping.
Employers should ensure that they obtain the required information and work with payroll providers and/or use a new HMRC online calculator before making a claim (there are specific cases where the calculator cannot be used). For more detail on how to calculate the correct amount and how to make a claim, see this insight.
Holiday accrues as per the employment contract; holiday taken must be paid at the usual pay rate
Guidance now expressly states that during furlough, an employee will continue to accrue leave as per the employment contract. Employers may, however, vary any existing entitlement to contractual holiday exceeding the statutory entitlement of 5.6 weeks' leave as part of any furlough agreement.
Employers looking to adhere to minimum three week furlough periods and managing potentially significant accrued holiday rights down the line will be pleased that the government has confirmed that its position is that an employee can be on holiday while on furlough. However, the employee must be paid at their 'normal rate of pay or where [their] rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks'. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations. Employers will be obliged to pay the additional amounts over the grant, but will have the flexibility to restrict when leave can be taken if there is a business need.
With the long Easter weekend just gone and two May bank holidays on the horizon, the guidance provides that where employees usually work bank holidays, an employer can agree that this is included in the grant payment. However, for an employee who would usually take the bank holiday as leave, an employer must top up an employee's pay to their usual holiday pay or provide a day in lieu.
'It is up to employers' whether furlough sick, self-isolating or shielding employees
The guidance still states that it is up to employers to decide whether to furlough employees who are sick, self-isolating or shielding. Where an employer decides to do so, it 'can claim back from the Coronavirus Job Retention Scheme and the [Statutory Sick Pay (SSP)] rebate scheme for the same employee but not for the same period' (our emphasis). For employees who would still otherwise be able to carry on their work, guidance expressly states that the Scheme 'is not intended for short-term absences from work due to sickness, and there is a 3 week minimum furlough period'.
This still seems to contradict the strict wording of the Direction on this point, which requires that no SSP is payable or is liable to be payable at the time the employee is instructed to cease work - but given no further amendments have been made to the guidance it is hoped that the Direction will now be revisited and clarified. This approach is also reflected in the explanatory notes to the latest statutory amendment on SSP – this now brings shielding employees within the SSP regime and indicates that the statutory amendment to SSP is 'intended as a safety net for individuals, in cases where their employer chooses not to furlough them under the [Scheme] and does not have other suitable policies in place e.g. the ability to work from home or the provision of special leave'.
There is no change in the guidance on the latest position where an employee becomes sick during furlough; 'it is up to employers to decide whether to move these employees onto Statutory Sick Pay or to keep them on furlough, at their furloughed rate'. Where an employer keeps the sick furloughed employee on the furloughed rate, 'they remain eligible to claim for these costs through the furloughed scheme'.
Retain all records and calculations
Guidance confirms that employers 'should retain all records and calculations in respect of your claims, including records of the amount claimed for each furloughed employee and the period for which each employee is furloughed and a claim made under the Scheme'. When making their claim, employers must ensure that information provided in the application is entered carefully and is accurate. All records and calculations should be kept – in particular, the confirmation screen/claim reference number, as HMRC will not provide email confirmation. Whilst it does not need to be formally submitted as part of the claim to HMRC, guidance makes clear that a record of the employer's written communication to the employee on furlough must be kept for five years.
As always, employers should also remain mindful of HMRC's concerns for potential abuse and its powers to audit claims made under the Scheme. Employers are reminded that 'payments may be withheld or need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information' and employees are expressly told 'You can play a vital role by reporting fraudulent claims to HMRC. If you're concerned that your employer is abusing the scheme you should report them. This could include your employer claiming on your behalf and not paying you what you're entitled to, being asked to work whilst on furlough, or making a backdated claim that includes times when you were working'. However, helpfully the reference to ACAS for employees wanting to reporting suspected fraud has been removed. The concern was that this may have caused unwelcome confusion with ACAS's early conciliation powers.
As employers start to make their claims, it is essential that entitlement under the Scheme is calculated in accordance with the new guidance specifically on this aspect and a claim is made following HMRC's step by step guide. Although not set out in the guidance, we would suggest that wherever possible screenshots or printouts be taken at each key stage of the online process, so that employers have a record of what has been submitted. It is essential that you print the confirmation screen or note down the claim reference number provided, as HMRC has confirmed that you will not receive an email confirmation (read more here).
With increasing talk of how and when as a country we now transition out of lock-down, employers will also need to ensure that they are considering what actions they will need to be taking to prepare for a resumption (albeit perhaps limited) in activity, including potentially taking staff off furlough. Whilst the extension to the Scheme is welcomed, employers must use this time to understand what shape their business will be in come 30 June and what steps they may need to be instigating now where a potential reduction in workforce is contemplated. Employers may also want to consider rotating staff on furlough to ensure any one set of employees are not out of the business too long, (although remembering that any furlough must be for a minimum of three weeks).
We anticipate a further Treasury Direction will be issued confirming the Scheme extension and clarifying the points in the revised and new guidance. It is hoped that we will not now see any significant shift in the government's guidance on the Scheme. However, employers should note the slightly ominous warning that 'during this unprecedented time, we are keeping the policy on holiday pay during furlough under review'.