On 15 April 2020 UK Government announced that the on-line portal for employers to submit claims under the Coronavirus Job Retention Scheme (the "JR Scheme") will go live on 20 April 2020.
At the same time further revised and updated guidance was issued on the application of the JR Scheme and a Treasury Direction was issued under the powers granted to the UK Treasury under sections 71 and 76 of the UK Coronavirus Act 2020 in respect of the administration of the JR Scheme by HMRC (the UK tax authority).
Extension of time period for JR Scheme to 30 June 2020
On 17 April the UK Government announced that the JR Scheme will be extended for a further month and will now operate until 30 June. The period may be further extended if necessary.
Change to cut-off date for inclusion in JR Scheme
The JR Scheme may now be utilized by employers for employees hired on or before 19 March 2020. Previously, the JR Scheme could only be utilized for individuals on the employer’s payroll on or before 28 February. The change is welcome, as it now allows employers to furlough employees who were hired before 20 March 2020, when the UK Government announced the introduction of the JR Scheme.
However, for such employees to be covered they must have been on the employer’s Pay As You Earn (PAYE) payroll on or before 19 March 2020 and their employer must have made an RTI (real time information) system notification about a payment to the employee to HMRC on or before 19 March. Many employees are paid monthly in the UK and payroll is often run with the relevant RTI submission made towards the end of the relevant month i.e. after 19 March. There may therefore still be hard cases where a recently hired employee cannot be included in the JR Scheme because they were not included in an RTI submission before 19 March 2020.
Furloughed Employees may not work for their employer or any related (group) employer while on furlough
The prohibition on working for the employer while on furlough under the JR Scheme was set out in the initial announcement. The latest guidance makes it clear that this extends to barring work for related entities. Employees with a separate unrelated employment may carry on working for that employer if furloughed from another unrelated employment.
Agreement to go on furlough and not to work
As previously noted, employees must agree to go on furlough. However the Treasury Direction, but not the guidance, states that an employee is only a furloughed employee for the purposes of the JR Scheme if they have ‘been instructed by the employer to cease all work in relation to their employment [but] only if the employer and employee have agreed in writing (which may be in electronic form such as an email) that the employee will cease all work in relation to their employment’. If an employer’s initial furlough communication to employees does not contain this express agreement it seems that it is possible to get retrospective agreement from employees without this breaching the terms of the JR Scheme. Employers should therefore consider their communications and, if required, contact employees to obtain consent in the applicable terms, i.e. agreement not to work for the relevant furlough period.
Where an employee has not replied or consented, or the employer has acted on the basis that there is deemed consent if an employee does not reply to a furlough communication, it would appear that this means the employee cannot be included by the employer in the JR Scheme and steps should be taken to obtain consent in the required terms as soon as practicable.
Relevant Pay and Salary Sacrifice
Where an employer operates a salary sacrifice scheme HMRC confirms that the salary to be used to calculate salary for the 80% limit is the actual salary being received (post -sacrifice) and employees must continue to receive their related benefits provided under the salary sacrifice in operation. However, HMRC have also confirmed that the COVID-19 pandemic may be treated as a ‘life event’ such that changes may be made to that employees’ salary sacrifice arrangements if their employment contract is updated accordingly.
Transferring Employees and PAYE Payroll Consolidation
Where employees transfer under the UK Transfer of Undertakings (Protection of Employment) Regulations, or a PAYE payroll succession occurs e.g. because a group moves from having several PAYE payroll registrations to one PAYE payroll registered with HMRC, the successor employer will be able to furlough or continue furloughing relevant employees and claim under the JR Scheme.
Fixed Term Employees
Employers may renew or extend the term of engagement of a fixed term employee and keep them on furlough without this breaking the terms of the JR Scheme.
Employees on unpaid leave
Employees on unpaid leave before 28 February which leave continued after that date cannot be included in the JR Scheme while that leave continues. The guidance confirms that if the employee returns from such leave during the period the JR Scheme will run, i.e. between 1 March and 30 June 2020 they may be placed on such leave and covered from the date they were due to return to work.
Company Directors (Officers)
Executives who are Directors may, while on furlough, carry out such duties as would ‘reasonably be judged necessary’ to fulfil statutory obligations they have as directors for the purposes of UK legislation, without this being constituting prohibited work for furlough purposes. They must not however, ‘do work of a kind they would carry out in normal circumstances to generate commercial revenue or provide services to or on behalf of their company.’
Which employers may apply under the JR Scheme?
Employers may make a JR Scheme application if they:
- operated a PAYE scheme on or before 19 March 2020;
- were enrolled for PAYE online and submitted payroll information via HMRC’s RTI system on or before 19 March 2020; and
- have a UK bank account.
Employers will be required to calculate their own claim. However, HMRC have the right to retrospectively audit claims.
The terms of the JR Scheme, the associated Treasury Direction and HMRC guidance remain subject to review and updating as the COVID-19 situation develops.
Previous updates on the JR Scheme can also be found here.
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