The Chancellor has produced a third iteration of the Treasury Direction in relation to the Coronavirus Job Retention Scheme (CJRS) and this was published on Friday 26 June 2020. The new Direction sets out the rules that will apply under the amended CJRS from 1 July 2020, which allows for ‘flexible furlough’ arrangements, until 31 October 2020, when the scheme ends.
Third Treasury Direction on the UK Coronavirus Job Retention Scheme
The updated Treasury Direction which legally underpins the Coronavirus Job Retention Scheme (CJRS) and which can be read here, sets out the rules that will apply under the amended CJRS from 1 July 2020. The new rules allow for ‘flexible furlough’ arrangements, until 31 October 2020, when the scheme ends. In summary the Treasury Direction largely reflects the recent Guidance and clarifies a number of points:
From 1 July to 31 October, employers are permitted to use the CJRS flexibly. This means the scheme enables part-work/part-furlough. Employers can claim under the scheme for time furloughed and will have to pay employees normally for time spent working.
The new Direction confirms that the cut-off date for making claims under the original CJRS, as set out in the previous Directions and in force until 30 June, is 31 July.
It also confirms that a business will only be able to participate in the amended CJRS that applies from 1 July if it has made a claim under the original scheme by 31 July in respect of an employee who has been furloughed for a minimum of three weeks beginning on or before 10 June.
From 1 July, the scheme is changing from month to month. Although more than one claim can be made in a month, a claim must start and end within the same calendar month and must relate to seven or more consecutive days. An exception to the seven-day claim period is made for “orphan periods” at the beginning or end of a month.
Maximum number of employees you can claim for
The number of employees who can be claimed for post 1 July cannot exceed the maximum number in any one claim made for furlough periods prior to 1 July – the new Direction refers to this as the “high-watermark number”.
Exceptions to 10 June cut-off and “high – watermark number”
The new Direction confirms the exception to the 10 June cut-off and the “high-watermark number” for family leave returners and armed forces reservists. There is a similar exception where a TUPE transfer takes place after 10 June 2020, in relation to transferring employees who were furloughed by the transferor under the original CJRS (but who cannot satisfy the 10 June cut-off as regards the transferee). The Direction confirms that the number of these previously-furloughed, transferring employees is added to the transferee’s cap in the same way as “returning employees”.
Financial support for employers
The financial support for employers will not change until 1 August 2020. From 1 August, the government will pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough and employers will pay ER NICs and pension contributions for the hours the employee is on furlough.
From 1 September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
From 1 October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
Requirement to reach an agreement on flexible furlough
In our previous bulletin, analysing the recent Guidance on flexible furlough, we referred to the fact that the Guidance is not clear whether the agreement to flexible furlough needs to be full written agreement with employees as opposed to written confirmation / letter as has been applicable for full furlough.
The new Direction confirms the requirement to reach agreement on flexible furlough arrangements but says that the agreement only needs to be confirmed in writing by employers (which may be in electronic form such as an email). Therefore, any flexible furlough arrangements require communication and letters/ emails to employees to evidence agreement. A record of the agreement must be retained by the employer until at least 30 June 2025. As with full furlough, the agreement for flexible furlough can be by means of a collective agreement.
Employers should note that there is a new requirement that the agreement must have been made before the beginning of the period to which the CJRS claim relates – and must not be made retrospectively. However, the Direction confirms that an agreement can subsequently be varied.
The Direction provides various examples of how to calculate employee wages based on usual hours and hours worked, to determine how much can be claimed under the CJRS.
The requirements are not straightforward and will have to be worked through carefully especially if the claim period does not align with a calendar month. To align with a calendar month, a furlough period may have to start mid-week. In all other cases (for example, if a furlough period started on Monday 6 July), the complex flexible furlough calculations will have to be undertaken. The government has worked through some examples and has updated its calculator on the gov.uk website to assist with hours calculations to claim the CJRS grant.
If you are considering bringing back your workforce part-time, we recommend you start planning and discussing with employees as soon as possible. Bear in mind that some employees will have childcare issues and others may be shielding or live with someone who is shielding. The government expects employers to be understanding and flexible with employees in these situations.
Purpose of CJRS / redundancy
One point on which urgent clarification is being sought is that the new Direction now says that the purpose of the CJRS is to “continue the employment of employees” which begs the question can it be used to pay notice pay or any costs associated with termination of employment? This new wording appears to contradict the Employee Guidance on the CJRS which still states, “your employer can still make you redundant while you are on furlough”. HMRC have apparently referred this question to a specialist team.
This is clearly of significance to some employers who are presently exiting people or are planning to and we will of course keep it under review.
Support for Employers
The COVID-19 pandemic and associated furlough scheme continues to present numerous and complex challenges for Employers.
If you are an Employer and require advice and support on extending full furlough, introducing flexible furlough, or are contemplating a restructure/reorganisation and/or redundancies as a result of the ongoing COVID 19 restrictions, call us now on 0800 612 4772 or Contact us via our website and we will set out clear options for you to help ensure you comply with your legal obligations.