Coronavirus Job Retention Scheme (CJRS) – latest developments
In our last update, we reported on HMRC’s 4 April 2020 update to the furlough guidance. The guidance has been updated numerous times since (on 9, 15, 17, 20 and 23 April) and a Treasury Direction has been issued too. On 17 April 2020, HMRC also published a step-by-step guide for employers claiming through the CJRS, which explains the process for making a claim and includes detailed instructions on how to calculate the amount that may be claimed.
As most employers have now gotten to grips with the scheme and made at least one claim through it, instead of discussing these updates in any detail, we share some of the FAQs we’re being asked about.
The 17 April HMRC update provided some clarity regarding holidays, and confirmed that:
- Holiday entitlement continues to accrue whilst an employee is on furlough leave.
- Employees can request to take holiday whilst on furlough.
Holidays taken during furlough should be paid at an employee’s normal rate of pay (as calculated in the relevant legislation). That means topping up to 100% for those employers furloughing staff on 80% of their normal salary.
- An employee’s request can be refused by an employer (if for example an employer cannot afford the 20% top up).
It was unclear if employers could compel furloughed employees to take annual leave and if they did, what implications that could have for reimbursement through the CJRS.
An update on 13 May 2020 available here has clarified that employers can compel employees to take annual leave during furlough (subject to the requisite notice being given), and can claim for these payments through the CJRS.
However, the guidance cautions that employers should consider restrictions the employee is under, “such as the need to socially distance or self-isolate, [which] would prevent the worker from resting, relaxing and enjoying leisure time”. This suggests that employers may face challenge if requiring employees to take a significant portion of their entitlement during lockdown, particularly the current ‘unrelaxed’ lockdown.
In terms of the carry over provisions (reported in our last update here) the guidance helpfully notes that employees on furlough are unlikely to need to carry forward statutory annual leave, as they will, in most cases, be able to take it during the furlough period. This is however unlikely to be the case for those employers who cannot afford the ‘top up’.
Whilst the guidance isn’t definitive and also wouldn’t be binding in a Tribunal, it does provide long-awaited comfort that annual leave does not break furlough leave. This should help protect against employees returning to work from furlough leave with several months of accrued holiday entitlement.
The Treasury Direction states that an employee is furloughed if they “have been instructed and agreed in writing to cease all work in relation to their employment”. The guidance doesn’t go that far, and simply provides “employers must confirm in writing to their employee confirming that they have been furloughed… There needs to be a written record, but the employee does not have to provide a written response”. There’s a clear discrepancy between the two. The cautious approach is to seek express agreement in writing from the employee prior to furlough starting, which failing after the furlough leave has started.
Training is permitted under both the guidance and the Treasury Direction. In terms of the former, training can take place provided that it is not used by the employer to generate revenue or for the provision of services, and is expressly encouraged. The latter is significantly more limited, and permits training activities “directly relevant” to the employee’s employment only. The cautious approach is to avoid training in new skills or areas lest that prejudice reimbursement under the CJRS for time spent training.
Charities are not prevented from accessing the CJRS. However, the HMRC Employer Guidance states that: Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.
This is because the Government and HMRC have made clear that no organisation should profit from the various schemes available – in other words, continuing to receive public funding for salaries plus obtaining a rebate through the CJRS could be said to be double recovery. That being so, in our view charity employers who receive a 100% wage contribution from public funds ought not be furloughing staff and claiming through the CJSR.