Updated Furlough & Coronavirus Job Retention Scheme Guidance from HMRC

In another string of updates surrounding the Government response to the current COVID-19 crisis, new guidance on the process of furlough and the Coronavirus Job Retention Scheme (CJRS) has been issued.

In our previous post “Coronavirus Job Retention Scheme – What we know so far” we introduced the furlough process and other features of the scheme, and more recently in our blog “Covid-19 Advice for Employers’ – New guidance released” we detailed further updates including the length of furlough period, Benefits in Kind, Salary Sacrifice Arrangements, guidance for apprentices and information on furlough agreements for furloughed employees.

Here is our run down of the most recent updates to the scheme and furlough.

New Furlough Qualifying Date

Firstly, the Government announced that the date from which an employee had to be on the employer’s payroll to qualify for furlough has now changed from the 28th of February 2020 to the 19th of March 2020.

This is a significant change and will no doubt provide much needed support to many more employers and their employees, in particular people who had previously not qualified due to the fact that they had recently changed their employment. This also affects employer claims and the salary reference date as detailed below.

Employer Claims

For an employer to claim under the CJRS it has been announced that they have to have a pay as you earn scheme (PAYE) registered through HMRC’s real time PAYE information system as at the 19th March 2020.

Salary Reference Date

As a result of the new furlough qualifying date the salary reference date for calculating claims will be the latest salary period ending on or before the 19th March 2020.

Calculating Furlough Regarding Statutory Leave

Further clarification has been issued with regard to calculating furlough payments for employees who are just returning from statutory leave; such as maternity, paternity or adoption. Pay should be calculated by referencing their salary before tax rather than the statutory payments they received whilst on their statutory leave.

However, if that employee is on variable pay it should be calculated using either the earnings from the same month of the year previous or an average of monthly earnings from the previous tax year.

CRJS Reach Extends

Unlike it previously seemed, the reach of the CJRS has extended to become much broader and apply to more employees than those who were at risk of redundancy. This scheme now covers “furloughed employees arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease” which has a much more open interpretation, although claims will not be considered if they are deemed to be abusive of the purpose of the scheme.

Extensions to Sick Leave & SSP Guidance

Up until now employees who were on sick leave were unable to be furloughed, but this has now changed. Employees who become sick whilst on furlough leave are able to remain on furlough.

It cannot be used for short term sick leave absences outside of the above scenario. Employers will be responsible for choosing whether their employees fall under the above scenario and are put on sick leave or furlough, and if these employees remain on sick leave the employer will not be able to recover the Statutory Sick Pay (SSP). The revised SSP rules only allow a maximum of 14 days SSP to be recovered by the employer.amount through the Coronavirus Job Retention Scheme (CJRS).

Furlough Agreement

As we explained in our previous post it was announced that a signed furlough agreement must be in place for furlough to take place and for the employer to claim the 80% assistance.

Written confirmation must be obtained, which can be electronically via email considering the given circumstances, that the employee agrees to cease work and understands the process of furlough and agrees to being furloughed.

Shielding Employees

In other news, it has been confirmed that employees who are shielding are able to be furloughed rather than put on SSP irrespective of whether they would have been made redundant or not.

Furlough Salary

When undertaking furlough payment calculations it has been instructed that anything outside of their regular salary or wages, such as performance and discretionary bonuses or tips for workers in the hospitality industry, must not be included. This covers all conditional payments.

Conditional Payments Cannot be claimed

As such it is no surprise that conditional payments of any kind are not covered by CJRS and employers will not be able to claim for them. However, this could also mean that if an employer has stated that the furlough payments to the employee are conditional upon successfully claiming them through CJRS that these payments could actually be excluded in terms of redemption.

This should be considered carefully when having furlough discussions with your employees.

Working on Furlough

Although the Government had already issued guidance that stated that work could not be carried out on furlough, this guidance has been extended to include work carried out for an organisation that is linked to the employer. This means that furloughed employees must not carry out any work in relation to services for their employer or organisations linked to their employer whilst on furlough leave.

Holiday Pay Update

Gov.uk have finally provided guidance on holiday pay for furloughed employees, this was announced late on Friday 17 April 2020.

The guidance now confirms that it is possible for employees to take annual leave while they are on furlough, without the annual leave breaking the furlough agreement. The employer is required, for annual leave purposes, to top up to 100% of normal pay, but can still claim the 80% grant from HMRC, subject to the normal furlough rules.

The Coronavirus pandemic continues to be one of the biggest challenges faced by many businesses and their employee’s not only in the UK but across the World, it is expected as such that as the situation continues to evolve the Government will issue further guidance – particularly when it is time to talk about an exit strategy for lockdown.

Here at Dataplan our dedicated team of professionals, including our Head of Legislation and Compliance (a previous Inspector of Taxes for HMRC) are working hard to keep abreast of these updates and fast changing legislation. To keep up to date with the latest COVID-19 advice for employers please subscribe to our email newsletter.