Coronavirus Job Retention Scheme (CJRS): summary of the latest changes (and what is still puzzling us)
- Even if you have tried really hard to keep up to date with the recent changes to the Coronavirus Job Retention Scheme (CJRS), you will be forgiven if you feel a bit confused. We can assure you that you are not the only one.
- So much has happened over the last week that it is hard to keep up. To assist, this note summarises the main changes that have taken place between 9 April and 1 May 2020 and is up to date as of the time of writing (6 May 2020). It is by no means an exhaustive note. Our aim is simply to highlight the main things you should be aware of. We also expect that we will see some more changes later this week as the government announces what will happen to the CJRs after 30 June 2020. We will produce another note in due course outlining those changes.
- To recap, we are now on version 9 of the Government Guidance for Employers (Guidance) - it was last updated on 1 May 2020. Alongside that guidance, sits the Treasury Direction (TD), which was issued on 15 April 2020. The TD is the nearest thing that we have to put the CJRS on a legal footing (even though it isn’t legislation). We have also seen the production of several new documents, such as a Step-by-Step-Guide to making a claim via the Government Portal, a document full of worked examples and a calculator. There is, of course, also the Government Guidance for Employees- we are now on version 8: it was last updated on 1 May 2020. What hasn’t changed, however, are the existing legal rights that underpin all employment laws- they still remain intact.
- You would think that with all of these extra guides, the earlier questions that we had (“the known unknowns”) have now all been answered and dealt with. Some have, but many haven’t; and there are some new ones now as well. In some ways, each iteration of the Guidance, and each new document that is released, brings with it fresh confusion (and, on occasion panic!) This was probably inevitable, given the speed of introduction of the CJRS. The result, however, is that businesses will be interpreting the guidance in different ways and relying on different iterations of it, depending on when they made the decision to furlough. The best advice is to keep a paper trail and, if you can, keep copies of the guidance you are relying on, in case you ever have to explain your thinking to HMRC at a later stage as part of an audit process.
- What has been a pleasant surprise, though, is the relative smooth operation of the portal process. With the report that 70% of companies have furloughed staff (see the Guardian article from 21 April 2020), HMRC have said that 800,000 firms have submitted claims successfully, resulting in 6.3 million employees recorded as being on furlough and £8 billion worth of grants being claimed (as of midnight on 3 May 2020). That really is impressive but the Chancellor has said that the government cannot maintain this level of support and so we expect to see either a reduction in the amount that can be claimed (e.g. a reduction to cover 50% of capped wages, or a reduction in the cap) or restricting it to only certain sectors (e.g. hospitality, who will need to remain closed for some while yet).
- So, let’s look at the most recent changes….
- On 15 April 2020, the Treasury issued ‘The Coronavirus Act 2020 Functions of HM Revenue & Customs (Coronavirus Job Retention Scheme) Direction’ (TD), which is addressed to HMRC and lays out some of the detail of the CJRS.
- The key points to note in relation to the TD are:
a) How paragraphs 6.1 (relating to the definition of a furloughed employee) and 6.3 (relating to employees eligible for/ in receipt of SSP) of the TD interact with each other and the apparent contradiction between the TD and the 20 April 2020 Government Guidance for Employers (Guidance) in respect of furloughing employees who are entitled to SSP.
- The TD appears to state that those employees who are eligible for/ in receipt of SSP at the “time of the instruction” by the employer to cease all work, under paragraph 6.1(a), cannot begin their furlough until their entitlement to SSP has ended. This means that employers would not be able to claim for those employees currently on SSP under the CJRS until their SSP entitlement has come to an end.
- As mentioned below, the Guidance appears to do the opposite of what the TD suggests. The Guidance gives employers some scope to decide whether to furlough employees who may currently be on sick leave and in receipt of SSP for business reasons. NB: Employers should bear in mind that any contractual entitlement to occupational sick pay could be reset by a period of furlough.
- The Guidance does makes clear, however, that employers cannot claim under the CJRS and the SSP rebate scheme for the same period in time in respect of the same employee. They can only claim under one or the other at any one time.
b) Paragraph 6.7 of the TD appears to require a written agreement between the employer and employee with the employee confirming in writing that they will, “cease all work in relation to their employment” during the furlough period. This differs from the Guidance which states that employers are only required to notify employees of furlough and states, specifically, that employees are not required to respond in writing to an employer in relation to the agreement to furlough. This is a fundamental difference between the two documents and is discussed further below. The concern is, primarily, that if employers do not have the written consent required by the TD they may be ineligible for a grant or, if they have received a grant, they may need to pay it back (following an HMRC audit).
c) There is also some commentary which suggests that paragraph 7.12 of the TD creates some ambiguity around whether an employer is able to defer payment of the employees’ furlough pay until they receive the grant money under the CJRS in order to pay this on to the employee. We consider this to be unlikely when reading the TD as a whole; however, HMRC may provide further clarification on this point.
Some of these points are also discussed further along in this note (below).
- The government guidance has also been updated a few times between 9 and 1 May 2020.
- The changes identified below are still in existence in the 1 May 2020 version of the guidance. In this note, we have focussed on the guidance for employers.
Furloughing employees on a visa
- The Guidance confirms that employees on all categories of visa can be furloughed as the grants made under the CJRS are not classed as ‘access to public funds’ which employees on visas would usually not have access to.
Employees who are self-isolating or on sick leave before furlough
- The Guidance confirms the position that the CJRS is not intended to be a solution for short term absence from work due to sickness, as the minimum furlough period is 3 weeks. Employees who are on sick leave or self-isolating due to coronavirus would be able to receive SSP (subject to the other conditions being fulfilled) as furlough is not intended to address this.
- The Guidance goes on to state that short term illness or self-isolation should not be a deciding factor in determining whether to furlough an employee and that employers are able to furlough employees who are currently off sick for business reasons. Where employers decide to furlough these employees, the employee should be classed as furloughed instead of being ‘off sick’ and should no longer receive SSP once furloughed.
- As mentioned above, this contradicts paragraph 6.3 of the TD which states than an employee eligible for/ in receipt of SSP cannot be furloughed until their SSP entitlement has come to an end. We hope that we will receive further clarification on this point so we have a clearer picture of what the exact position is here (but that clarification may not be forthcoming).
- We do note, however, that Unite has written a “Letter Before Action” to Rishi Sunak, seeking urgent clarification of the discrepancies between the TD and the Guidance. The first discrepancy they have identified is the fact, as stated above, that the Guidance suggests that entitlement to SSP does not preclude an employee from being furloughed but the TD suggests that you cannot be furloughed if you remain entitled to SSP. Second, they have sought clarification on a point that relates to pay. The TD suggests that where an employee is entitled to SSP (whether it is claimed or not), the amount that the employer can recover from the CJRS in relation to that employee is reduced by the amount of SSP (i.e. by £95.85 per week). There is no suggestion of that in the Guidance.
- The Guidance also provides that employers can also decide to furlough those employees who are off from work due to long term sick leave and those who are being shielded (but see below).
- As mentioned above in the TD section, an employer cannot claim in respect of the same employee under the CJRS and the SSP rebate scheme for the same period of time. Once an employee has been furloughed, an employer can only claim their wages under the CJRS. If an employee who has not been furloughed becomes ill, needs to self-isolate or be shielded, then employers may be able to claim an SSP rebate (max. 2 weeks of SSP per employee).
Employees who become sick during furlough
- As furloughed employees continue to retain and accrue their usual employment rights (including their right to receive SSP), if they become ill while furloughed they must be paid SSP as a minimum. However it is the employer’s decision whether to move the employee onto SSP or keep them furloughed and continue to pay them at the furloughed rate of pay.
- If they are moved to SSP, the employer cannot continue to claim in respect of them under the CJRS. If they fall sick within the minimum 3-week furlough period, however, does that mean that the employer needs to pay back the part of the grant that relates to the period before they fell ill? It is not clear.
- Employers must pay SSP to employees directly but, as mentioned above, they may be able to qualify for a rebate under the Coronavirus SSP Rebate Scheme whereby they can be reimbursed for up to 2 weeks of SSP per employee (for more information, see here: Claiming back SSP).
Shielding employees (and those living with shielding people)
- Previously, the government guidance stated that employers can claim for furloughed employees who are shielding (or needs to stay at home with someone that is shielding) in accordance with public health guidance “if they cannot work from home and would otherwise have to be made redundant”.
- It is, however, worth reviewing the categories of employees who fall under the ‘shielding’ category (in the link above) as it is narrower than you might think and only includes extremely vulnerable persons with certain health conditions (and does not include for example, pregnant employees or over 70s without any health conditions).
- Now, the updated Guidance simply states that where employees are unable to work because they are shielding in line with public health guidance (or need to stay at home with someone who is shielding), they are able to be furloughed. The requirement that they cannot work from home and would otherwise have been made redundant has been removed. It would, therefore, seem much easier now to furlough shielding employees.
- However, what has complicated things is that the Government made the Statutory Sick Pay (General) (Coronavirus Amendment) (No. 3) Regulations 2020, which provide that a person is deemed to be incapable of work if they are unable to work because they fall within the extremely vulnerable category and have been advised to shield. The Regulations came into force on 16 April 2020 and it does not appear they have retrospective effect (unlike some of the other changes to SSP).
- How this fits in with paragraph 6.3 of the TD is unclear and, on one reading, would indicate that those who are shielding cannot be furloughed until they have exhausted their entitlement to SSP, which cuts right across the Guidance (and surely cannot be the intention?). However, the explanatory memorandum to the new SSP Regulations states that access to SSP is a “safety net for [such] individuals, in cases where their employer chooses not to furlough them under the CJRS and does not have any other suitable policies in place (e.g. the ability to work from home, or the provision of special leave”) and so it would seem that the intention is that they can be furloughed even if they are eligible for SSP. Clarity would, however, be helpful.
- Another point that many have not appreciated concerns those employees who are living with someone who is shielding. For them, it is not simply a case that they should be automatically furloughed. If you click on this link (which is referred to in the section of the Guidance about shielding), it explains that if they are living with someone who is shielding then they do not need to shield themselves too, if they can still do their job in accordance with social distancing rules (which, primarily, will mean that they can stay 2m apart from colleagues and customers, have the appropriate PPE and other safeguards). Therefore, employers do not need to automatically furlough them providing the social distancing rules can be complied with - and there is still work for them to do.
Contractors with public sector engagements within the scope of IR35 off-payroll working rules
- Most public sector bodies will follow the Crown Commercial Services guidance but there will be a minority of organisations who are not primarily funded by the government and where their staff cannot be redeployed to assist with the response to coronavirus. Such organisations may be able to claim under the CJRS.
- Where contractors are deemed to be employees in accordance with IR35 off-payroll working rules, it may be possible to claim in respect of them under the scheme.
- The following would apply where a public sector organisation wishes to furlough a contractor:
- The public sector organisation would need to confirm that the contractor is being furloughed with the contractor’s Personal Service Company (PSC) and the fee-payer (which is usually the agency which pays the PSC).
- A formal agreement should be made between the parties that the contractor will not undertake any work for the public sector organisation while they are furloughed.
- The fee-payer applies under the CJRS for a furlough payment of 80% of the monthly contract value (capped at £2,500), together with employer NICs on this amount.
- The fee-payer then pays the grant in respect of the contractor’s wage to the PSC and reports the payment via PAYE using the contractor’s details and makes the usual tax and NIC payments in respect of contracts within the scope of IR35 rules.
- The PSC must then report the amount that is paid to the contractor as deemed employment income via PAYE.
- As long as the contractor continues to receive payments from a public sector organisation (whether under the CJRS or otherwise), this income should be excluded when calculating any reference pay for the purposes of the CJRS where the contractor, by being an employee or director of their own company, seeks to furlough themselves.
Payroll cut-off date change for CJRS
- Previously, government guidance stated that employers would be able to claim under the scheme in respect of those employees who were on the employer’s PAYE payroll on or before 28 February 2020.
- This date has now changed to 19 March 2020 which means that employers can only claim under the CJRS in respect of those employees who were on their PAYE payroll, and who were notified to HMRC on an RTI submission, on or before this date. Whilst this might appear to open it up to many more people, it may not do so in practice given the requirement that the RTI needs to have been submitted by 19 March 2020.
- For new employees starting in March, and who are paid monthly, the RTI may not have been submitted until much nearer to payday which is often at the end of the month. It may also mean that employees who started in late February and who have already been furloughed but were not paid for the first time until the end of March fall foul of this requirement. Hopefully, though, any new March starters who are paid weekly will be in scope.
Employees who were made redundant or stopped working after 28 February 2020
- Those employees who were made redundant or stopped working for an employer on or after 28 February 2020 can be re-employed and furloughed so that the employer can claim for their wages under the CJRS.
- This applies as long as the employees in question were on the employer’s payroll on 28 February 2020 and had been notified to HMRC on an RTI submission on or before this date.
- For employees made redundant / who stopped working for you after 19 March 2020, see below under 'CJRS updates as of 23 April 2020’.
Employees with multiple employers
- If any employee has had multiple employers over the past year but has only been working for one of them at any one time, they can be furloughed by their current employer and their previous employer should not re-employ them.
Employees on unpaid leave
- Employees who went on unpaid leave after 28 February 2020 can be furloughed instead and be paid at least 80% of their usual wages (capped at £2,500 a month) under the scheme.
- If employees started their unpaid leave on or before 28 February 2020, they cannot be furloughed until the date on which it is agreed their unpaid leave would come to an end.
Calculating salaries for full or part time employees
- Under the CJRS, employers are able to claim for 80% of an employee’s salary as in their last pay period prior to 19 March 2020.
- However, if an employer has calculated their claim based on the employee’s salary as at 28 February 2020, in line with previously published guidance, employers can choose to use this calculation instead for their first claim where there is a difference in the employee’s salary had they calculated it using their salary amount as in their last pay period prior to 19 March 2020.
Employee transfers under TUPE and on a change in ownership - change in cut-off date
- The government guidance previously stated that new employers are able to claim under the scheme in respect of employees of a previous business which was transferred after 28 February 2020 where TUPE or PAYE business succession rules apply. That date then changed to 19 March 2020 so that new employers could only claim in respect of those employees who transferred after 19 March 2020 instead, providing that they were still employed by the old employer on 19 March.
- However, as explained in the section “Changes of 30 April 2020” below, that has now changed back to 28 February 2020. At least the government is prepared to react to feedback and accept its mistakes!
- It should be noted that the TD appears to only apply to transfers of an undertaking (or part of an undertaking) and not service provision changes, although the guidance appears to encompass any transfer under TUPE.
Payroll consolidation - change in cut-off date
- Previous versions of the guidance stated that employees in group companies that are transferred from multiple PAYE schemes to a new consolidated PAYE scheme after 28 February 2020 would be able to be furloughed under that new scheme.
- Taking into account the new payroll cut-off date of 19 March 2020 for claims under the CJRS, this has changed so that where all employees have been transferred from the old PAYE schemes to a new consolidated PAYE scheme after 19 March 2020, they are eligible to be furloughed under the new scheme.
- However, as explained in the section “Changes of 30 April 2020” below, that has also now changed back to 28 February 2020.
Inputting information for CJRS claims
- How employers input information to submit their claim using the CJRS portal (see link below) depends on the number of employees they will be submitting information in respect of.
- If there are less than 100 furloughed employees, the employer will have to input the relevant information for each employee directly into the system.
- If an employer has furloughed more than 100 employees, the employer will be able to upload a file / spreadsheet onto the system. File types that will be accepted by the system include .xls, .xlsx, .csv and .ods files.
- In each case, the following information will be required in respect of each furloughed employee:
- NI number
- Claim period
- Claim amount
- Payroll/employee number (optional)
Retaining records relating to CJRS claims
- Employers are recommended to retain all records of CJRS claims they submit as well as details of calculations they have used. HMRC will not be able to provide this information if requested by employees so employers are encouraged to keep accurate records themselves.
- As well as employers keeping a record of the communication in which it was confirmed to the employee(s) that they are being furloughed for 5 years (already in the guidance), keeping a copy of the information used for the actual claims can help avoid issues later down the line as HMRC has said it will be able to investigate claims retrospectively to avoid fraud and dishonesty.
- It is also worth employers saving a copy of the guidance in force at the time of making their calculations. As the guidance has been updated so much already, it would be good to ensure you retain a copy of the guidance you have relied on at any given time as evidence.
Extension of the scheme
- The CJRS has been extended to the end of June 2020. The scheme was originally due to end on 31 May 2020 but has now been extended for a further month. We wait to hear whether the CJRS will be extended again, in full or in part.
HMRC to check claims made under CJRS
- The Guidance states that HMRC will be checking claims made under the scheme and warns that payments can be withheld or ordered to be repaid in full to HMRC if claims are found to be fraudulent or based on dishonest or inaccurate information provided by employers.
- There is also an online portal which employees and members of the public can use to report cases of suspected fraud under the CJRS.
Clarification on wages that can be claimed for employees who were made redundant/ stopped working for employers after 28 February 2020
- As the Guidance states, employers can claim for wages of employees who were made redundant or stopped working for an employer after 28 February 2020 and who were then re-employed and furloughed.
- The Guidance clarifies that employers can claim for their wages from the date on which they were furloughed. However, it is clear that it is still the employer’s choice whether to take them back at all.
Employees on fixed term contracts (FTCs)
- The changes to the guidance made on 17 April 2020 in respect of employees on FTCs were amended further on 23 April 2020 - see ‘CJRS updates as of 23 April 2020’ below.
Agreeing to furlough employees
- Previous guidance already stated that employers must confirm an employee’s furloughed status to them in writing i.e. they must be “notified” in writing that they are furloughed.
- The updated Guidance states if the above is done in accordance with employment law, that consent will be deemed valid for the purposes of the CJRS and although there needs to be a written record, the employee is not required to provide a written response to the employer.
- As mentioned above, there is some conflict here with the TD, which states, at paragraph 7, that the employee must provide their written consent in writing that they will cease all work for the employer during the furlough period.
- We are yet to see whether the TD and/ or the Guidance will be updated to confirm the position as to whether an agreement in writing, consisting of a response from the employee, is required for furlough.
- In the absence of any clear authority, there has been a lot of commentary on this point and it appears that in one response to a query relating to this issue, HMRC has taken the position that employers will be expected to consult and comply with the government issued Guidance rather than the TD (which is directed at HMRC and its functions in relation to the CJRS, rather than employers).
- If correct, this should mean, as per the wording in the Guidance, employers should seek to agree to furlough with their employees and once this has been agreed, the employer should notify the employee confirming the agreement to furlough. There should be no need for the employee to respond to confirm in writing that they will not undertake any work for the employer while furloughed, as the TD suggests.
- It is hoped, therefore, that pragmatism will prevail and that the position in the Guidance in this instance would take precedence here so that written notification of the decision to furlough would be sufficient, without the employee needing to respond in writing. However, if you have already sought written agreement to furlough from employees, or are in the process of doing so, there is no harm in having erred on the side of caution while we wait for this issue to be formally addressed. If you haven’t done this (or have tried but have not received all written confirmations back), equally, there is nothing to stop you applying for a grant under the CJRS but you should keep a record that you are doing so in reliance on the Guidance in place at the time you furloughed those employees.
- Another area of conflict between the TD and the guidance is about backdating claims. The Guidance allows employers to backdate claims to 1 March 2020 but the TD does not because it refers to an agreement that the employee “will” cease work. Again, if employers want to backdate claims then they should keep a written note that they have done so in reliance on the version of the guidance in place at the time of claim.
Emphasis on retaining records
- The updated Guidance continues to emphasise the need for employers to retain records of:
- all calculations in respect of claims submitted under the CJRS;
- amounts claimed for each furloughed employee;
- the period for which each employee is being furloughed; and
- a claim being made under the CJRS.
Guidance for employers: Calculating your Claim
- As mentioned in the Introduction section above, some useful guidance, including worked examples, has been published to assist employers in calculating how much of their employees’ wages they can claim under the scheme as well as working out the amount of employer NICs and pension contributions that can be claimed for.
- Parts of the previously published guidance have also been moved into this separate guidance which can be found here: Calculating your Claim
- It also includes details of what constitutes ‘wages’ for the purpose of the scheme and also provides information relating to holiday and pay as well as other forms of leave. Some key points/ changes to the guidance are listed below.
- Employers should take into account the following regular payments which they are obliged to make to their employees when calculating 80% of their wages for the purposes of the CJRS:
- regular wages the employer pays to employees
- non-discretionary overtime
- non-discretionary fees
- non-discretionary commission payments
- piece rate payments
- The following should not be taken into account when calculating the amount of wages which can be claimed under the scheme:
- payments made at the discretion of the employer which the employer was not under any contractual obligation to pay, including tips, discretionary bonuses and discretionary commission payments
- non-cash payments
- non-monetary benefits such as benefits in kind (e.g. company car) and salary sacrifice schemes (e.g. pension contributions) which reduce the amount of an employee’s taxable pay.
- All of the grant which the employer receives in respect of the employee’s furlough pay must be paid to the employees as money and none of it should be used to pay for other benefits or salary sacrifice schemes.
- If the employer does provide furloughed employees with benefits (including by way of salary sacrifice schemes), these should be paid to the employee on top of the wages paid under the scheme.
Holiday and pay
- For the first time, there is reference to annual leave and holiday pay. The Calculating your Claim guidance confirms that employees still continue to accrue holiday while on furlough and that they can take holiday while they are furloughed.
- It is possible for employers and their employees to agree to vary holiday entitlement as part of their furlough arrangements but most workers have a minimum statutory entitlement to 5.6 paid weeks of holiday each year so any variation to an employee’s holiday entitlement should not cause it to be less than this amount.
- The Working Time Regulations (WTR) state that employees should be paid at their normal rate of pay in respect of any holiday taken. If an employee’s rate of pay varies, their rate of pay should be calculated based on an average of the pay the employee has received in the previous 52 weeks (as per the recent change to this reference period introduced on 6 April 2020 - it was previously only the past 12 weeks).
- Furloughed employees should, therefore, still be paid their normal holiday pay if they take holiday while on furlough and employers will be required to pay any additional amounts above what they receive as part of the grant under the CJRS. This means that they should top up furlough pay to 100% of pay for any holidays taken.
- Where there is a business need, employers are able to restrict when employees take holiday and this would be applicable during both the furlough and recovery period.
- Where employees usually work on bank holidays, they can agree with their employer for this to be included in their furlough pay. If employees usually have bank holidays off, then the employer will need to top up the employee’s holiday pay or give them 1 day’s holiday in lieu to be taken later.
- The Calculating your Claim guidance states that this policy on holiday and pay will be kept under review due to the current uncertain and ever-changing situation so we will look out for any updates in relation to this. It may be, therefore, that there is a change to this position such that, for example, taking holiday breaks the period of furlough, such that the safest thing to do may be to have at least 3 weeks of furlough before and after any holiday period to ensure that the only risk would be in losing the furlough pay for the holiday period (which the employer would be obliged to pay anyway).
- Points to note: Before the government guidance was updated on 17 April 2020 to include the above, the provisions relating to holiday in the ACAS guidance on coronavirus were updated on 8 April. The ACAS guidance reflects a similar position to that under the government’s Calculating your Claim guidance (as outlined above), in that furloughed employees are able to take holiday and should receive their usual full pay in respect of any days taken as holiday while on furlough. You can view the updated guidance here: ACAS guidance
- The ACAS guidance suggests that employers and employees alike should be flexible on the subject of holiday during the pandemic, to ensure dialogue between both parties about taking or cancelling holiday during this time and any concerns employees might have in relation to holiday, as well as considering everyone’s wellbeing (both mental and physical) during this difficult period.
- ACAS highlights that in some circumstances, an employer might require an employee to still take holiday, particularly where they have pre-booked holiday but as a result of the current situation, it has had to be cancelled. However, the guidance suggests that it would be best practice to seek the employee’s agreement to this before doing so.
- At present, both the ACAS and the Calculating your Claim guidance is silent as to whether an employer can require an employee to take holiday on specified dates by giving notice (which the employer can do under the WTR). We are hopeful that further clarification will be provided on this although, at present, there has been nothing which amends the employer’s rights under the WTR in this respect and maybe guidance isn’t the place to change law.
Employees returning from family related statutory leave
- Family related statutory leave includes maternity leave, paternity leave, shared parental leave, adoption leave, parental bereavement leave and unpaid parental leave.
- Claims for full or part-time employees who are being furloughed on their return from family related statutory leave should be calculated using their salary (before tax) and not the pay they received while they were on family related statutory leave. The same will also apply where an employee is returning from unpaid family related statutory leave.
- Claims for those on variable pay, returning from statutory leave should be calculated using either the:
- same month’s earning from the previous year
- average monthly earnings for the 2019 to 2020 tax year
Employees returning to work after being on sick pay
- Claims for full or part-time employees who are being furloughed on their return from sick leave should be calculated using their salary (before tax) and not the pay they received while they were off sick.
- Claims for those on variable pay, returning from statutory leave should be calculated using either the:
- same month’s earning from the previous year
- average monthly earnings for the 2019 to 2020 tax year
Unpaid sabbatical or unpaid leave
- When calculating the wages you can claim for under the CJRS for employees who have been on unpaid sabbatical or unpaid leave, the Guidance states you should use the amount they would have received if they were on ‘paid leave’ instead. The reference here to ‘paid leave’ is odd and presumably means using the normal rate of pay when the employee was at work.
- Note, however, that according to the TD, the provision to exclude any period of unpaid leave when calculating the 80% wage payment only appears to apply to ‘fixed rate’ employees. There doesn’t seem to be a similar requirement to ignore any unpaid leave which fell within the last 12 months, for the purposes of working out the 80% of average earnings for employees whose pay varies. So the calculation here for variable pay employees is unclear.
CJRS - Guidance for Employees
- There is also some guidance on the CJRS published for employees. It has taken relevant parts of the main guidance (which is now located in several different places, as per the links provided) and put them together to help employees determine whether they may be eligible to be furloughed under the CJRS and how much their employer may be able to claim in order to pay them while they are on furlough.
- It also contains the useful provisions in relation to things such as holiday and pay and what can / can’t happen while employees are on furlough.
- The guidance for employees is located here: Employee Guidance
CJRS portal - now live
- The HMRC portal which employers should use to submit their claims under the CJRS is now live. A link to the portal as well as information on what you need to claim, how to claim and what happens once you have put through your claim can be found on the following link: Claim for Wages (Portal link)
- Employers should use their Government Gateway ID and passwords to access the portal and submit their claims.
- The portal operates by way of employers inputting relevant information in response to a series of questions relating to the furloughed employees and their pay.
- Employers who authorise agents to act for them for PAYE purposes on a ‘file only’ basis are advised that those agents will not be able to submit claims under the CJRS on their behalf and can only assist employers in collating the relevant information required to submit a claim under the CJRS. Employers who use ‘file only’ agents will need to submit their claims under the scheme themselves.
- As mentioned above, employers who have furloughed more than 100 employees can upload a spreadsheet containing all of the pertinent information required for each employee in order for their claim to be processed.
Details of what employers need in order to make a claim under the CJRS
- As mentioned above, information on what information employers need in order to claim, how to make a claim and what happens once a claim has been submitted can be found at: Claim for Wages (Portal link)
CJRS calculator tool
- A CJRS calculator has also been released which employers can use to work out the amounts they will need when completing their online claim form under the scheme. Although the above link does itself contain a link to the calculator, it can also be accessed by clicking on this link: Calculator
- It should be noted that currently, the calculator is aimed at employers with a small number of employees and it will not work in respect of those employees who:
- receive any top up on their pay in the claim period
- have returned from statutory leave in the last 3 months
- receive director’s payments and have been transferred under TUPE
- have been employed at separate times over the course of the year
- receive employer pension contributions beyond an auto-enrolment pension scheme.
- At the moment, if employers cannot use the calculator because of the circumstances listed above, they are encouraged to use the written guidance and seek professional assistance. HMRC will look to develop the calculator further to cover more of these scenarios in due course.
Which employees you can claim for under the CJRS
- The guidance now clarifies further which employees you can claim for under the scheme:
Was the employee employed with you as of this date?
Date when RTI submission notifying payment was made to HMRC
Eligible for CJRS?
28 February 2020
On or before 28 February 2020
28 February 2020
On or before 19 March 2020
28 February 2020
On or after 20 March 2020
19 March 2020
On or before 19 March 2020
19 March 2020
On or after 20 March 2020
On or after 20 March 2020
On or after 20 March 2020
- The requirement to have submitted an RTI submission to HMRC by no later than 19 March 2020 has raised concern for a number of employers who usually would not submit this until on or around payday at the end of the month. As such, they feel caught out by the updated guidance in that they may not be able to claim in respect of their employees and any new starters who commenced employment after 19 March 2020. The government does not yet appear to have formally addressed these concerns.
Agreeing to furlough and collective agreements
- The guidance has clarified that a collective agreement which has been made between an employer and a trade union is acceptable as a form of agreement / consent to furlough.
Employees who were made redundant or stopped working after 19 March 2020
- Those employees who were made redundant or stopped working for an employer on or after 19 March 2020 can be re-employed and furloughed so that the employer can claim for their wages under the CJRS.
- This applies as long as those employees were on the employer’s payroll on 19 March 2020 and had been notified to HMRC on an RTI submission on or before this date.
Employees on fixed term contracts (FTCs)
- The guidance now states that employees on FTCs can be re-employed and furloughed if:
- where the FTC expired after 28 February 2020, an RTI submission was made in respect of the employee on or before this date; or
- where the FTC expired after 19 March 2020, an RTI submission was made in respect of the employee on or before this date.
- If the employee’s FTC has not yet expired, it can be renewed or extended and as long as the employee was included in an RTI submission to HMRC on or before 19 March 2020, they will be eligible under the CJRS.
- The guidance also highlights the point that employees will not be eligible under the CJRS if they began and ended the same contract between 28 February - 19 March 2020.
Employee transfers under TUPE and on a change in ownership - change in cut-off date
- The guidance now states that a new employer is eligible to claim under the CJRS in respect of employees of a previous business transferred after 28 February 2020 (not 19 March 2020 as the previous guidance said) if either the TUPE or PAYE business succession rules apply to the change in ownership.
Payroll consolidation - change in cut-off date
- The guidance now states that where a group of companies have multiple PAYE schemes and there is a transfer of all employees from the schemes into a new consolidated PAYE scheme after 28 February 2020 (not 19 March 2020 as the previous guidance said), the new scheme will be eligible to furlough those employees and claim the grants available under the CJRS.
Furloughed employees working as union or non-union representatives
- A much-needed new section was inserted on 30 April 2020 to say that whilst on furlough, employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers.
- However, in doing this, they must not “provide services to” or “generate revenue for”, or on behalf of, their organisation or any linked or associated organisation
Employees on maternity leave, adoption leave, paternity leave, shared parental leave or parental bereavement leave
- Following the introduction of some new Regulations on 24 April 2020 (in force from 25 Aril 2020), a new section was included in the Guidance to clarify that workers who have been furloughed and are about to go on family leave within the next 8 weeks are not disadvantaged in terms of their statutory pay.
- To explain why this is helpful, provisions within family-related pay legislation depend upon the calculation of a person’s Normal Weekly Earnings during an 8-week “assessment period” (AP). If an employee is furloughed during the AP (and, therefore, potentially only paid 80% of their usual pay for that period), this might reduce the calculation of their Normal Weekly Earnings and then:
- The employee’s Normal Weekly Earnings for the AP could fall below the Lower Earnings Limit 93120 per week for 2020/21), meaning that they may become ineligible for statutory pay altogether; or
- The employee’s Normal Weekly Earnings for the AP may be lower than they would have been had the employee not been furloughed, which would reduce the earnings-related rate for the first 6 weeks of statutory pay.
- The amendments ensure that statutory pay is the same as it would have been had they not been furloughed. This ensures that they are not it twice; first, by the lower pay they get by being on family leave and, second, by the impact of their lower furlough pay.
- This new section also adds in parental bereavement leave/ pay as another kind of family leave/pay.
Company directors with annual pay periods on maternity leave, adoption leave, paternity leave, shared parental leave or parental bereavement leave
- A new section was added to deal with company directors that are paid annually. It states that those paid annually are eligible to claim as long as they meet the relevant conditions. This includes: being notified to HMRC on an RTI submission on or before 19 March 2020, which relates to a payment of earnings in the 19/20 tax year. The requirement for there to be payment of earnings in the 19/20 tax year applies for any employee being claimed for under the CJRS, irrespective of how frequently they are paid (e.g. weekly, fortnightly, or monthly). This will be relevant for those on annual pay periods if the last payment notified to RTI was before 5 April 2019 and no further payments were notified until after 19 March 2020.
- An employer can also make their claim in anticipation of an imminent payroll run, at the point they run their payroll or after they have run their payroll.
Extending furlough periods
- A really important new section was added to clarify that provided an employee has undertaken a minimum 3-week period of furlough, each period of furlough can be extended by any amount of time whilst the employee is on furlough. This means that the furlough period does not have to be extended in 3-week blocks. As soon as someone returns to work, however, their furlough period has ended and so if they were to be furloughed again, it would need to be for a minimum of 3-weeks.
- It also clarifies that the CJRS end date is the last day you can claim for through this scheme. As such, an employee can remain on furlough for longer, after the CJRS has ended, but the employer cannot receive any grant towards those furlough payments- and would need to, therefore, fund it entirely themselves. Of course, employees would need to agree to remain on “furlough” past the end of the CJRS period and so do seek further advice if you are thinking of doing that.
- The 30 April 2020 guidance confirms that CJRS grants are not classed as state aid.
- Just 24 hours later, the guidance was updated again and a new section was included to deal with those employees in receipt of Maternity Allowance whilst they are on maternity leave. For those employees, they should not get furlough pay at the same time. If they have agreed furlough, they should contact the JobCentre Plus to stop their Maternity Allowance payments.
- Also, the new guidance clarifies that if they agree to be put on furlough and end their maternity leave early, they will need to give their employer at least 8 weeks’ notice and they will not be eligible for furlough pay until the end of the 8 weeks. We are not sure why this was added so late in the day at a time when there was only 8 weeks and 4 days of the CJRS left (unless that is an indication that the CJRS will be extended?)
Support and Help
- On 1 May 2020, a Treasury Direction for the SEISS was also published. This is the equivalent of the TD for the CJRS and is the closest we will get to any legal footing for the SEISS.
- This clarifies that the amount of the SEISS is the lower of £7,500 and 80% of 3 months’ earnings (typically averaged over the last 3 years- but there is a complicated calculation). Interestingly, it does not relate to actual loss of earnings of the individual and so they could lose, say, £500 of trading profits and still receive up to £7,500 a month.
- Also, it clarifies that not every self-employed person can make a claim under the SEISS. A claim may only be made in relation to a “trade”, the business of which as been “adversely affected” by coronavirus or coronavirus disease.
- To claim, a self-employed person needs to have completed a tax return on or before 23 April 2020 but only in one of the three “relevant years” (2016/17; 2017/18; and 2018/19) but they need to have traded in 2018/19, 2019/20 and intend to trade in 2020/21.
- Finally, they need to have had profit before tax of under £50,000. There is talk that, under the new plans, this may decrease to under £30,000 but only time will tell.
- On 4 May, the SEISS guidance was also updated to include a link to an online tool to so self-employed can find out if they are eligible to claim and the “How to Claim” section was updated. It also confirmed that if they are eligible to claim then payment will be received within 6 days.
- Agreement to furlough: As discussed above, the clear conflict between the requirements for the agreement of furlough between employers and employees given in the Guidance and the wording of paragraph 6.7 of the TD still needs to be resolved formally.
It is being widely suggested that the primary source for employers to consult in respect of the CJRS will be the Guidance. This approach would cut out the need for employers to chase written responses from furloughed employees/ those being furloughed confirming that they will not undertake any work for their employer (or any linked or associated organisations) while on furlough. We await to see whether the TD will be amended to better reflect what is stated in the Guidance or whether this will be left as is, purely as a TD directed to HMRC.
Of course, obtaining the written agreement of employees to cease all work for the purposes of claiming a grant under the CJRS is a separate issue from obtaining an agreement to vary pay. It is doubtful that an agreement to cease all work implies an agreement not to receive full pay and so normal legal principles on varying terms and conditions of employment still apply.
Either way, employers should exercise diligence by ensuring they keep an accurate paper trail consisting of communications with their employees concerning the notification/ agreement to furlough, information submitted as part of an employer’s claim under the CJRS, details of calculations the employer has undertaken as well as a copy of the guidance the employer has relied on (as at the time of doing their calculation and making their claim).
- Pregnant employees? The Guidance does not pick out pregnant employees as ones that can be specifically furloughed (like it has with those shielding or with caring responsibilities). So, many employers are asking how they should manage their pregnant employees. Maybe they can do their work from home, which is fine. If, however, their work cannot be done from home because they work in, for example, manufacturing, retail or hospitality, what is the advice then?
The government classed pregnant employees as vulnerable at the start of the crisis (just like it did with the over 70s and those with underlying health issues) but there is a line of argument that that does not qualify them for SSP if they are sent home as they are neither ill nor needing to self-isolate. Some employers have, therefore, chosen to furlough them ahead of others in a sort of hierarchy of furloughing. Others have, however, chosen to suspend them on full pay in light of health and safety legislation if, having undertaken a risk assessment, they cannot remove the risk of them (or their unborn baby) catching coronavirus. According to Michael Ford QC and Karen Monaghan QC, this latter approach is the correct one.
- Disciplinary and grievance hearings: Many have wondered how you deal with these during lockdown. ACAS have produced a helpful guide but do still seek advice because our view is that it is slightly cautious advice in places.
Though the CJRS has now been extended until the end of June 2020, as we move through more weeks of furlough, some employers will now be thinking about what lies ahead for their business. The Calculating your Claim guidance document deals with this and says, “When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy)”. So, taking each of these outcomes in turn:
In some cases, businesses may have no other option but to consider making redundancies due to a prolonged downturn in work for employees and a continued need to save costs.
In that situation, we have some questions:
- Can an employer commence collective consultation on the proposed redundancies while employees are on furlough leave? If so, can employers use the grant received under the CJRS towards the time an employer might spend in undertaking a consultation exercise (whether collective or individual), any time spent in a notice period or towards any PILONs?
On the face of it, using the CJRS grant money towards such things could be said to defeat the purpose of the scheme (which is to retain employees and to be able to continue to pay them a certain amount while they are not working as a result of the pandemic). So, would commencing collective consultation and using the grant towards pay for that period and any subsequent notice periods be an abuse of the CJRS? You would hope not as the Guidance does mention that employees may be made redundant either during or at the end of furlough and so that would assume any consultation can take place whilst they were on furlough, surely?
- It is inevitable that some employees will need to be made redundant at the end of the furlough period but where is the line drawn- if employers know at the time that they place employees on furlough that they will be made redundant at the end of the furlough period, should this mean that they cannot claim a grant/ they must repay it in respect of those subsequently dismissed?
- Another point to consider in relation to this is that as the employee is in receipt of reduced pay while on furlough, consideration will need to be given on what pay should be used for notice/ redundancy payments. As regards notice pay, legislation states that in some cases the employee’s full pay should be paid to them, so even if it the grant could be used towards this, the employer may need to top up the payment amount. Daniel Barnett has written a useful paper on this topic.
- The Guidance also clearly states that the CJRS grants cannot be used to substitute “redundancy payments” (which, we assume, means just a statutory redundancy payment) but there is no further detail on this issue. However, the Guidance does go on to state that HMRC will continue to monitor businesses after the CJRS has come to an end, so this is another area on which further guidance is expected and needed (and hopefully provided soon).
“Unfurloughing" people and returning to work
- Maybe, just maybe, things will turn a corner and you can think about bringing people back to work after the end of their furlough periods. Alternatively, your business may be venturing out into pastures new, either on an interim or a permanent basis, (for example, Brewdog recently moved into hand sanitiser production) and you need people on the ground. Either way, how do you select fairly who returns to work?
- Furlough is, after all, a new concept and so there are no hard and fast rules here. What seems certain, however, is that any criteria employers use must be fair, objective (or as objective as possible) and non-discriminatory.
- Some commentators have suggested that you can bring back, first, those that have already completed 3 weeks on furlough and leave those who are get to complete the minimum 3-week period on furlough. However, that may not bring back those that you want. So, what other selection criteria you can use?
- One option may be a “First In First to Unfurlough (FIFU)” approach, so an opposite to the well-known “Last in First Out (LIFO)” approach sometimes used in redundancy processes. This would mean that those with the longest service could be the first to be “unfurloughed” and return to work. This would help as those who know the company the best are on hand to get things going again.
- Otherwise, employers can devise a selection criteria, just like for redundancy scenarios. Those with the highest scores get to return first. So long as there is no discrimination at play, this should work although it will take longer to work through.
- Above all, it won’t be easy because everyone will have their own personal preference. Some will, for example, want to stay off work a little longer (to, maybe, care for sick family members and/or look after children until the schools go back). Whereas, others will be desperate for some sort of return to normality. As ever with employee relations, good and open communications with staff will be key.
- As mentioned above, employers must also be mindful of avoiding any kind of discrimination and the European and Human Rights Commission have produced a helpful paper on this.
- On 5 May 2020, Cloisters Chambers released an extremely thorough and user friendly toolkit to help businesses plan for a return to It is definitely worth a read. Some of the topics covered are:
- How to deal with health and safety on returning to work including whistleblowing and refusing to work in workplaces?
- How to deal with the financial consequences of the pandemic such as redundancy, reducing pay and or hours?
- How to approach the duties on consultation from redundancy to health and safety including ICE and TICE?
- How work and new procedures may affect discrimination or workers who may need to care for their children?
- What is the workplace position of the extremely vulnerable, the vulnerable or the pregnant?
- What are the data protection implications?
- How might Directors’ duties be affected?
- What is the impact of remote Tribunal litigation over the next few months?
- The TUC, however, feels that the government needs to make changes now to ensure a safe transition from lockdown, looking at how to safely return to work outside the home, the enforcement measures needed to protect workers and how best to protect workers’ livelihoods. You can read about it here.
- CIPD has also produced a helpful guide summarising the key points to bear in mind when planning a return to the workplace.
Whilst there are still areas of uncertainty, we hope that this note is helpful. Do contact the Knights Employment Team if we can assist with any specific queries. We have created a special Coronavirus Hub which contains guidance on others areas as well as Employment. Do take a look.
The law is constantly changing and the position set out in this note may not be current. You should not rely on this note as a comprehensive statement of the law. Please contact us if you require specific legal advice on your situation.
© Knights plc 6 May 2020