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Coronavirus Job Retention Scheme
Coronavirus Job Retention Scheme
On 15th April the Treasury issued a directive to HMRC regarding the Coronavirus Job Retention Scheme (CJRS), which provides some interesting updates to the previous Government guidance.
The Treasury’s directive can be accessed here
The Government’s general guidance can be accessed here
Of note:
1. The directive confirms that employees on PAYE as at 19th March are covered.
It says;
“3.2 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 (“a qualifying PAYE scheme”).”
If viewed on its own, this could be interpreted to mean you just need to have a registered scheme. However, further clarity can be found in the Government’s general guidance, which says;
“Employees you can claim for
You can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020. Employees that were employed as of 28 February 2020 and on payroll (i.e. notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for the employer after that and prior to 19 March 2020, can also qualify for the scheme if the employer re-employs them and puts them on furlough.”
Which would imply the individual employee must be noted and informed to HMRC; where payrolls usually run at the end of the month, this may be of limited benefit.
There remains pressure from some quarters for the Government to allow people who had accepted a new job that was due to start after 28th February 2020 to be accepted under the scheme where many have seen their start dates delayed, job offers withdrawn or, if they had started, being put on unpaid leave.
2. Directors can undertake duties.
Under the general guidance, it states that:
“Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.”
Some clarification has been given in the Treasury’s directive, which says;
“Work undertaken by a director of a company to fulfil a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the director’s company must be disregarded for the purposes of paragraph 6.1(a).”
This would seem to greatly limit the activity that can be undertaken by a furloughed director and is far more restrictive than first thought.
3. Written agreement is needed.
The general guidance states;
“Employers should discuss with their staff and make any changes to the employment contract by agreement…
To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. A record of this communication must be kept for five years.”
The general guidance very much created the impression that employers could impose furlough leave, and agreement was only needed where this would result in changes to the employment contract.
Not providing work is the acceptable part and seen as being within the gift of the employer, so not providing work would not be a change to the contract meaning no agreement is needed.
The issue with furlough leave is the reduction in pay, which many see as being a change to employment terms and not something the employer can do without agreement. For those employers with a ‘lay off’ clause in their contracts it was generally accepted that they had the right to temporarily cease pay (in addition to work), so could impose furlough leave. For those without a ‘lay off’ clause they could impose it on those with less than two years service and/or seek the employee’s agreement.
The Treasury’s directive undermines what was the general view. Firstly, it says;
“6.1 An employee is a furloughed employee if-
the employee has been instructed by the employer to cease all work in relation to their employment…”
On its own that looks to be consistent with the general guidance, but it goes on to clarify this by saying;
“6.7 An employee has been instructed by the employer to cease all work in relation to their employment only if the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment.”
So, it would seem you need your employee’s written agreement and if you have not obtained that, you may not qualify for the furlough scheme. If so, written agreement should be sought as quickly as possible. We believe that this agreement is capable of being backdated, but comes with the risk the Government expressly rules out that option.
In terms of demonstrating acceptance, we already have case-law on the CJRS that has relevance here. This comes from the High Court in the Carluccio’s (in administration) case where the administrators sought clarification of the impact of the CJRS. The administrators had written to all staff members seeking to vary their contracts so they could be furloughed. Importantly, the administrators required the staff to provide a positive reply.
The judges looked at ways in which staff could be deemed to have given their agreement where some employees accepted the contract variation, others rejected it, and some did not reply. The position for those who accepted/rejected was clear as to whether their terms were changed and whether they could or could not be furloughed.
It was those who did not reply who became a focus of the case. Their acceptance could not be inferred where the administrators had required a reply.
According to the judgment, it seems acceptance may be capable of being shown from silence provided the letter is appropriately worded and clear as to the fact that a failure to reply will be taken as acceptance. There are other considerations, such as, the time given to the employee to reply, and whether you can demonstrate the communication has been delivered.
As such, while its best to seek express consent, you should consider building in confirmation that a failure to reply will be treated as acceptance. Where an employee then suffers a reduction in pay owing to furlough leave, that too will help show it was agreed should they take no action to dispute the pay reduction.
4. Other points to note.
There remain a few other areas to consider.
Holiday pay
This isn’t dealt with by the general guidance or Treasury directive, but guidance for employees does record that staff can be on holiday while on furlough leave.
I refer to Emily Kidd’s recent article that can be accessed here
and our view here has not changed, although it remains subject to any further clarification from the Government. In a nutshell, we believe furloughed staff can be on holiday provided they are paid 100% of their wages for the holiday period.
Notice
There remains nothing in the guidance or directive that says you can or cannot give notice of dismissal to employees. Our view is that dismissals can still occur at this time.
The follow-up question is then what do you do about furlough leave. It seems to us that, in the absence of this being ruled out, you can furlough staff for their notice period.
We would suggest you keep notice to the minimum, rather than extending it to end of the scheme and for the notice period you pay 100% of pay. You can seek to recover 80% (up to £2,500 per month) so it may see a reduced cost to your business. After all, if clarification is given that staff on furlough leave do not qualify, you’ve not really lost anything. NB: where notice periods are no more than a week longer than the statutory amount of notice, it has to be paid in full, regardless.
If staff have the right to claim unfair dismissal, proper and fair processes should be followed when giving notice.
Collective requirements
There is a sentence in the general guidance that many may overlook, but nonetheless appears. This is;
“Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.”
Collective consultation usually applies if more than 20 employees are to be made redundant. However, under the collective consultation rules, the definition of “redundancy” is wider than that which applies to ordinary unfair dismissal claims. Accordingly, you need to be aware that if staff do not agree to furlough and you are forced to dismiss and offer new employment or if they resign as a result of changes to their terms, and the number of staff affected are sufficient, you may be required to formally consult. The formal consultation must last for either 30 or 45 days (depending on the numbers involved) and it also requires the election of employee representatives if none exist already.
If this applies, it may significantly impact your ability to claim under the CJRS if staff refuse and you need to engage in consultation before the change(s) can take effect. If you have more than 20 people affected, you should do as the guidance suggests and seek legal advice.
Portal
We understand the on-line portal is now live and the government is aiming to pay within six working days.
If any of the issues discussed above are a concern to you, or if you would like specific advice, please contact the writer, Matthew Kilgannon, via mk@kilgannonlaw.co.uk
or on 01483 388 901.
20th April 2020. © Kilgannon & Partners LLP
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