In anticipation of the changes to the Coronavirus Job Retention Scheme (the Scheme), which are due to take effect from 1 July, the Government has today (26 June) published a further amended Treasury Direction, setting out the technical details of the Scheme and how it will change. Here, we summarise some key aspects of the new Treasury Direction that will impact on employers’ use of the Scheme.
The further amended Treasury Direction is divided into two parts, with the first concerning the Scheme in its original form, which runs until 30 June, and the second concerning the amended version of the Scheme (the Revised Scheme), applicable from 1 July until its closure on 31 October.
Purpose of the Scheme
As before, the Treasury Direction states that the Scheme is intended to provide for payments to employers “in respect of costs of employment in respect of employees who are within the scope of CJRS arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease”. However, this latest version adds that “Integral to the purpose of CJRS 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.”
This provision, which applies both to the original Scheme and to the Revised Scheme, raises questions about the extent to which employers can use the Scheme to cover the costs of pay for employees who are being made redundant. The name of the Scheme refers to “job retention”, but the current Government guidance does not include any express reference to the Scheme being intended to avoid redundancies and makes clear that employees can be made redundant while on furlough. It is unclear whether, or how, this new wording in the Treasury Direction will affect employers’ ability to claim under the Scheme in a redundancy situation.
We are seeking further clarification on this issue from the Government. In the meantime, we would suggest that employers that are currently consulting on possible redundancies while they have employees on furlough continue to use the Scheme, but watch out for further developments. We will keep members updated on this issue.
Closure of original Scheme
The first part of the Treasury Direction makes clear that claims under the original Scheme cannot relate to periods after 30 June. This is the case even if an employee commenced a three week period of furlough under the original Scheme which only ends after 30 June. In such a case, the employer would need to claim under the original Scheme for the period up to and including 30 June and under the Revised Scheme for the period thereafter. All claims under the original Scheme must be submitted by 31 July at the latest.
Operation of Revised Scheme
The second part of the Treasury Direction sets out the eligibility criteria for employees to be furloughed under the Revised Scheme. As indicated in the Government guidance published on 12 June, employers can only claim for employees who have previously been furloughed for at least three consecutive weeks beginning on or before 10 June, but there are exceptions for employees who are returning from statutory family leave, who TUPE transferred to a new employer after 10 June, or who are armed forces reservists returning from a period of active duty.
The Treasury Direction makes clear that furlough under the Revised Scheme, whether full furlough or part-time furlough, must be agreed, and sets out the requirements of such an agreement. This can be by agreement between the employer and employee, or by collective agreement between the employer and a trade union. The agreement:
- must specify the main terms and conditions on which the employee will either do no work, or will not work the full amount of their usual hours;
- be made before the beginning of the period of furlough to which a claim relates, although it can be subsequently varied to reflect any variation agreed between the parties during that period;
- be made or confirmed in writing by the employer (this can be in electronic form such as an email); and
- be retained by the employer until at least 30 June 2025.
There are detailed formulae for calculating employees’ usual hours and for determining how much an employer can claim for under a part-time furlough arrangement. As flagged in the Government guidance published on 12 June, the applicable formulae for calculating usual hours differ depending on whether the employee has fixed or variable hours and whether their pay varies based on the number of hours they work. Given the complexity of these formulae, employers will need to enlist the help of their payroll provider to ensure that their claims are calculated correctly.
The Treasury Direction also formalises the gradual tapering of financial support under the Revised Scheme.
How we can help
We are in the process of updating our FAQs on Furlough under the Revised Coronavirus Job Retention Scheme to take account of the further amended Treasury Direction.
We have prepared a template letter for employers to use when seeking employees’ agreement to go onto flexible furlough under the Revised Scheme. You can download this letter for free here.
While the Revised Scheme offers welcome flexibility if you are seeking to bring furloughed employees back to work on a part-time basis, not all your previously furloughed employees will be able, or willing, to return. How to handle reluctant returners and new types of absence, such as self-isolation, shielding and quarantine may become a challenge. Click here to book on our webinar, ‘Reluctant Returners and absence management in the context of Covid-19’, in which we look at the 'new' types of absence you might see arising in your organisation as a result of Covid-19 and explore whether your current absence management policies and procedures are fit for purpose.
If, despite the Revised Scheme, you are considering the prospect of redundancies, you may find our webinar, Redundancies in the context of Covid-19, helpful. Click here for more information and to book.
Our Coronavirus 'furlough letters and resources' pack, put together by our HR advisers and lawyers, Health and Safety consultants and Business Growth specialists, includes helpful template furlough letters, as well as checklists and webinar materials on getting your business running again and is a very valuable resource. Make UK members can access this pack via the Coronavirus Support tab in the HR & Legal Resources section of our website.
During the Covid-19 crisis, we are offering non-members access to the Coronavirus ‘back to business’ pack for a one-off fee and access to our HR and Employment Law Helpline on a monthly subscription basis. To access the furlough letters and resources pack, or sign up for a one month subscription, call us on 0808 168 5874.