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The Telegraph Article

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"Employers may be forced to return cash to taxpayer as Sunak redefines furlough"

So ran the clickbait headline in The Telegraph on Saturday 4 July. Is there any truth to it?

Almost certainly not. The article derives from a new paragraph in the third and most recent Treasury Direction dated 25 June 2020, which is the semi-legislative framework provided by the Treasury to HMRC, telling HMRC how to operate the Furlough Scheme.

The new paragraph states:-

“2.2 Integral to the purpose of the CJRS [Coronavirus Job Retention Scheme] is that the amounts paid to an employer pursuant to a CJRS claim are used by the employer to continue the employment of employees in respect of whom the CJRS claim is made whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission.”

An immediate reaction is that the government is proposing to limit furlough claims to employees whose employment the employer intends to continue, not to those whom the employer intends to make redundant. So, follows the argument, furlough pay will not be available to (and, under paragraph 2.4(b), can be reclaimed from) the employer, if the employer is planning to make the employee redundant at the end of furlough.

That reading is superficial and alarmist. It would be a U-turn on previous government policy statements that furlough pay can be used during notice periods. Rather, all this paragraph is saying is that money claimed under the furlough scheme must be used to continue to pay employees. During a notice period, the employees are continuing to be employed (as opposed to being dismissed without notice). Nothing in the fact they are under notice means that their employment is not continuing during their notice period. So an employer can pay notice using monies reclaimed under the CJRS.

A consequence of paragraph 2.2 is that it is now clear beyond dispute that claims cannot be made under the furlough scheme to pay in lieu of notice, or to pay statutory redundancy payments. But that was pretty clear anyway, and anybody who thought differently was somewhat optimistic, if not misguided.

Note that leading employment law firm Lewis Silkin have posted on Twitter that they were told by HMRC’s telephone helpline that paragraph 2.2 is not intended to prevent employers claiming furlough pay for employees working their notice.  And the brilliant Paman Singh has managed to get informal written confirmation of the same from a contact at BEIS.

Neither of these are legally binding on BEIS, but it does corroborate my clear view on this.

If you want a comprehensive, step-by-step guide to making redundancies, please have a look at my course Getting Redundancy Right. I am also running two webinars on making redundancies this week, and there are a few places left.