HMRC has updated its guidance several times now for employers in relation to furloughing employees under the Coronavirus Job Retention Scheme and the Treasury have now issued their instructions to HMRC in the form of a Direction that provides further clarification. The latest changes are below:
WHAT HAS CHANGED AND WHAT HAS BEEN CLARIFIED?
The important features are:
- The date that employees must have been on the employer’s payroll has changed from to This will take account of employees who fell outside the scheme as they had recently changed jobs.
However, what this means for employers is not quite as straightforward as it would first appear. Paragraph 3.2 of the Direction states that “the employer must have a pay as you earn (PAYE) scheme registered on HMRC’s real time information system for PAYE on 19 March 2020” which means that only employees who whose information was notified to HMRC as part of a real time information (RTI) submission on or before 19th March 2020 can be furloughed.
Making the submission of RTI prior to 19th March a condition of being able to furlough an employee could however have an unintended consequence that is at odds with the guidance previously issued to employers. For example, an employee who started employment at the end of February and was on their employer’s payroll but had not yet been paid, would now appear not to qualify for furlough as no RTI had been submitted by 19th March, assuming RTI was provided as it is for many businesses at the end of the month when the March payroll was run.
Whether this was the intention and how HMRC will deal with any claims for employees who fall into this category and had relied on previous guidance remains to be seen.
- Confirmation that employers can switch between sick pay and furlough (and vice versa).
- Employers can furlough ‘shielding’ employees rather than paying sick pay.
- Employers can furlough employees with all categories of visa and this will not be considered a breach of their visa conditions.
- In addition to being prevented from working for their employer while on furlough, employees cannot work for organisations that are linked to the employer.
WHAT STILL ISN’T CLEAR?
Unfortunately, many questions still remain outstanding in relation to the scheme, including:
- the position regarding employees taking holiday whilst on furlough and/or
- what happens to an employee’s continuity of service if they are re-hired by their former employer and immediately placed on furlough. This is particularly important for those employers considering re-hiring employees who have previously been made redundant and have already received their redundancy payment (whether statutory or contractual) and their notice pay.
HOW CAN CLAIMS BE MADE?
We are still waiting for precise details about the HMRC portal that businesses will be required to use to access the grant, but the Chancellor has now confirmed that the portal should be live from Monday 20th April 2020 and that following submission of the relevant information and appropriate checks being made to prevent fraud, employers should receive the payment within a few days.
This will be welcome news for employers concerned about the April payroll that is fast approaching, particularly if businesses have not yet been able to take advantage of some of the other measures that have been put in place by the government to offer financial support.
However, the Treasury Direction to HMRC on making payments under the scheme includes the following information:
- the scheme is not limited to those employees who would otherwise have been made redundant. It will apply to any employee who is furloughed “by reason of circumstances as a result of coronavirus or coronavirus disease”.
- to claim furlough, the employer and employee must have agreed in writing that the employee will cease all work. This is extremely important as previously the guidance only required notification from an employer that an employee should not perform any work and may mean that employees who have already been furloughed may not fall within the requirements of the scheme. However, it would seem to be possible for agreement to be provided and recorded retrospectively and therefore employers should ensure that they action this as soon as possible for any furloughed employees where agreement has not already been expressly provided.
- Any performance related payments (bonuses), discretionary payments or non-financial benefits should be disregarded for the purposes of calculating an employees’ salary whilst furloughed.
- An employer cannot claim for any salary which is “conditional on any matter” which unfortunately leads to more unanswered questions about what constitutes regular salary for the purposes of claiming for furloughed employees.
What is not yet clear is whether an employer can claim the furlough payment in April without having first made the salary payment for April. However, once the portal goes live on 20th April, hopefully this question will be answered.
It remains to be seen whether the guidance will now be updated again to reflect the Direction from the Treasury but it is now more important that an employer records an employee’s agreement to vary their contract of employment and be furloughed, along with the terms whilst on furlough. The agreement should make it clear when the period of furlough leave starts, what pay the employee will receive, that they have agreed not to perform any work for their employer and when and how furlough leave will come to an end.
If you have any questions about how to furlough your employees and what this means for salary payments, please contact Julie Edmonds, Head of Employment, by email firstname.lastname@example.org; telephone (0207 644 7286) or contact her on LinkedIn.