The Treasury has issued a Direction to HMRC under powers conferred by the Coronavirus Act 2020, containing authority and instructions for making payments under the Coronavirus Job Retention Scheme. Although amendments are possible, it is likely to be the definitive guidance on how the Job Retention Scheme works.
This email only addresses the major changes and clarifications that are set out in the Direction. There are nuances and subtleties that fall outside the scope of this email, but I'm going to run some free webinars on them this afternoon and tomorrow - click below to register.
- employees who were employed on 19 March 2020 (previously 28 February 2020) are eligible for furlough, provided the employer had submitted real time information payroll data by that date (paras 3.2 and 5(a))
- the Scheme is not limited to those employees who would otherwise be made redundant. It is applies to any who are furloughed "by reason of circumstances as a result of coronavirus or coronavirus disease" (para 6.1(c)).
- a director who is furloughed can only undertake work to fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of company's accounts or provision of other information relating to the administration of the director's company (para 6.6). This is a very narrow interpretation of directors' duties.
- to claim furlough, the employer and employee must have agreed in writing that the employee will cease all work (para 6.7). This is significant; the guidance only required notification. The Direction from the Treasury requires written agreement. This may mean that many employees who have already been furloughed may not fall within the meaning of the Scheme.
- the amount of salary for the employee must disregard anything which is not "regular salary or wages". That includes disregarding any performance related bonus or discretionary payments (including tips), any conditional payments (eg where a threshhold must be met) and any non-financial benefits (paras 7.3 - 7.5).
- the employer cannot claim for any salary which is "conditional on any matter" (para 7.4(b)). This may exclude any salary payments which the parties have agreed are conditional on the Job Retention Scheme paying out.
- the employer can claim for earnings which it "reasonably expects to be paid" to the employee (para 8.1(a)) - that seems to include deferred earnings, deferred until the Scheme pays out (provided they are not conditional on the Scheme paying out).
- the Direction is completely silent on annual leave.
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