HR Brief: The Coronavirus Job Retention Scheme: what do we now know?

In our blog posted on 27^th March, we gave an overview on what the government’s Coronavirus Job Retention Scheme (“the scheme”) meant in practice. The government’s initial guidance on the scheme was welcome but contained a number of gaps which created issues for employers in being clear on what they could and could not do within the parameters of the scheme and for workers in knowing what their rights are.

There has been a recognition by the government of the grey areas in the initial version of the scheme rules. Indeed, since that initial guidance was published there has now been 5 iterations of the scheme, the most recent only being announced late on the afternoon of Friday 17^th April.

The updated guidance can be found here.

Additionally, there is now also a Treasury Direction which sets out further rules that ought to be complied with. Again, this further guidance is welcome of itself. Indeed, the Treasury Direction becomes the primary source of the rules regulating the scheme, given it was made under Ss.71 and 76 of the Coronavirus Act 2020 and so establishes the legal basis for the scheme. Somewhat unhelpfully, there are some tensions between the Treasury Direction and the guidance. Where this arises, it will be the Treasury Direction which rules. The Treasury Direction can be found here.

Finally, ACAS has also issued some guidance on the scheme which can be found here.

Below we focus on the main issues which the updated guidance has sought to clarify. This should be read in conjunction with/as an update on our initial blog of 27^th March.

What legal effect does the scheme have?

It has now been made abundantly clear by the government that the scheme sits on top of (rather than replaces or overrules) general employment law principles. As such, it is dangerous to read the scheme on its own terms without bearing in mind employers can only amend a workers terms and conditions in accordance with the applicable contract and/ or in accordance with the normal statutory rules.

One of the biggest difficulties with the scheme is it has not been introduced in the manner legislation usually is. It is given effect solely on the basis of the Treasury Direction and government guidance: it is not regulated by an act of parliament or statutory instrument. A scheme of this nature would normally take at least 12 months to move through the legislative process before becoming law. It is to the government’s credit that it has been able to implement the scheme so quickly, but it does raise the question as to how certain the scheme rules are.

In this regard there are two issues to consider:

• HMRC will have ultimate say on whether claims made under the scheme are valid. The Treasury Direction makes clear HMRC has the power to reject any claim where it feels it has not been validly made. This gives HMRC a failsafe to avoid claims which have been made disingenuously.
• If a worker asserts that in taking the decision to place an employee on furlough, the employer has breached their employment law rights, then this may become the focus of a subsequent claim to an Employment Tribunal.

As such, there are two ways in which an employer’s decision may come under scrutiny.

What are the main changes that have been introduced?

• The government has announced the scheme will now be in place until 30^th June 2020. This extends the scheme for a further one month period. There may be further extensions dependent on how long lockdown measures remain in force.

• The HMRC portal is now live (as from 20^th April 2020) and employers can submit claims for relevant workers from this date. Claims can be made 14 days in advance of any relevant pay period for employees who claims are being made for.

• The scheme could initially be used in respect of workers who were paid via PAYE on 28^th February 2020. Now, any worker who was registered with HMRC via an employer’s PAYE payroll scheme (through submission of an RT1 form) by 19^th March 2020 will be eligible for the scheme (albeit on day 1 of the HMRC portal being live there were reports of it rejecting claims for workers registered after 16^th March).

• It is for HMRC to determine what evidence an employer initially requires and must retain in terms of record keeping. The only clear guidance issued to date states that the employer must be able to produce a written record of the fact the worker has been notified they are being placed on furlough (see below) which must be retained for 5 years.

• Importantly, the Treasury Direction does place some more certain parameters on when an employer can make a claim under the scheme for an affected worker. A claim can be made:

• Where the worker has been instructed by the employer to cease work;
• That instruction will have affect for at least 21 calendar days; and
• The instruction has been given because of circumstances relating to the coronavirus or by reason of coronavirus disease.

This third criteria is wide but does mean that there are some limits to those workers claims can be made for.

• The worker must be given written notice of the fact they are being placed on furlough. It is uncertain whether an employer does requires a written acceptance from the worker (but the worker must agree without the employer having a lay off clause/ the employer running the risk of claims being raised). As above, the written confirmation should be retained for 5 years.

The Treasury Direction appears to have altered the position on what documentation is required. The initial guidance suggested all that was needed was a written instruction form the employer, with no express consent form workers agreeing to be furloughed being required. However, the Treasury Guidance states that it must be “agreed in writing” that the employee and worker have agreed that the worker will cease work. This would suggest that the worker must have also expressly given consent to cease work in writing. If this is indeed what the Treasury Guidance requires, the absence of the worker’s consent in writing to being furloughed under the scheme could invalidate any claims made by employers. Employers would be well advised to ensure they have written consent from workers and if this is not presently held, should be chased up as quickly as possible so as to ensure any otherwise valid claim is not rejected or payment of the grant is delayed.

• Placing workers on furlough will amount to a variation of their terms and conditions of employment in most occasions (except where the contract of employment includes a right to lay off the worker). As such, as the scheme is subject to normal employment law rules, employers must ensure they follow due process in trying to introduce this change. The most obvious way to do this is to get worker’s individual agreement to the change.

Where such agreement is not obtained, then workers may have the right to bring claims of unlawful deduction of wage, breach of contract and (for employees) unfair constructive dismissal if the change in terms and conditions is impose unilaterally. If the employer wishes to place an employee on furlough under the scheme to avoid redundancies, this may act as incentive to employees to agree to the change. Where a worker is placed on furlough in circumstances where the employer is topping up pay to 100%, the risk of these claims is likely to be reduced to nil.

• The original scheme allowed an employer to re-engage a worker whose employment had ended after 28^th February where the reason for employment terminating was redundancy. The scheme now allows for an employer to re-engage any worker whose employment ended on or after 28^th February and place them on furlough under the scheme no matter the reason for termination of employment. The only limitation on this appears to arise from the Treasury Direction which states that the reason for any claim must be because of circumstances relating to the coronavirus or by reason of coronavirus disease. As such if employment was not terminated for such a reason, it would be an abuse of the scheme to re-engage an employee and make an application to HMRC under the scheme.

As the scheme is subject to general employment law, there are some other points to bear in mind if consideration is being given to re-engaging an employee and placing them on furlough under the scheme (where it can be evidenced that employment had previously ended for a coronavirus related reasons):

• their continuity of employment will be re-instated, potentially meaning they accrue over two years’ service (leading to unfair dismissal and redundancy rights) or giving them an additional year for statutory redundancy pay purposes, basic award or notice pay rights

• their effective date of termination will change to 30 June 2020 or such other date as the scheme lasts until (unless employment is terminated earlier by the employer), meaning that they then have until 29 September 2020 to contact Acas to initiate Early Conciliation for most types of claims

• the employer might face an unfair selection for redundancy claim, where one did not previously exist, if it makes an employee redundant a second time when financial circumstances have changed or when the consultation requirements might differ

• the employer might find it is subsequently contemplating making 20+ people redundant within a period of 90 days, leading to collective consultation obligations.

If an employer agrees to re-engage an employee to provide them with the benefits of the scheme, it is sensible to have that employee sign a “Furlough Agreement” which would regulate what will happen when the scheme ends.

• The scheme can be used to furlough company directors and members of an LLP, so long as they satisfy the basic criteria.

Where a company director is furloughed, they 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. This is very narrow.

• Workers have no automatic right to be furloughed. It is entirely a matter for the employer’s discretion as to whether they choose to furlough a worker. A failure to do so cannot give any right of claim of itself to workers who are not furloughed.

As there is no right to be furloughed, when deciding if and who to place on furlough an employer is not required to carry out a competitive selection process akin to that which would be carried out in deciding who should be selected for redundancy.

This being said, and again bearing in mind that the scheme is subject to the usual underlying principles of employment law, employers must avoid using any discriminatory factors in deciding who to place on furlough under the scheme.

• Employers are entitled to switch workers between periods of furlough and having them to return to work. However, it is important to remember that for a period of furlough to qualify under the scheme, it must last for a minimum period for 3 weeks during which no work at all should be carried out for the employer.

• Workers are entitled to take annual leave during periods of furlough without bringing that furlough period to an end. This has been confirmed in the HMRC guidance for employees regarding the scheme (although not the employers’ for some reason) and can be found here.

Where a worker wishes to take leave they must receive 100% of their normal pay for periods of holiday taken. This means the employer is required to top up the payment made under the scheme where they are not doing so already.

Again, the right to take annual leave will be subject to normal employment law rules, so the employer retains a right to veto any leave request and the employer can also dictate that a worker takes periods of leave during the furlough period, in accordance with the general right laid down in the Working Time Regulations.

• It has finally (and sensibly) been confirmed that where employees have been subject to a relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 on or after the 19^th March 2020, their new employer (the transferee) can make a claim under the scheme for any employees either already on furlough or employees the transferee wishes to place on furlough. The original guidance was unclear on this point given the requirement for workers to be on the employer’s payroll by a specified date (i.e. 28^th February; now 19^th March). Even if the employer (transferee) is only able to put a transferring employee on their PAYE system after 19^th March, a claim can still be made where this is pursuant to a relevant transfer.

• Workers placed on furlough are entitled to carry out paid work for another employer during the period of furlough and still benefit from the scheme. The only restriction on this is that the worker cannot do work for any 2nd employer connected to their primary employer or is found to be indirectly working for their primary employer.

• Contrary to the initial version of the guidance, public sector organisations and those organisations who employ workers who are funded via public funds may place employees on furlough where they are not providing essential services and where the work which those employees are normally required to do is affected by the pandemic.

• In terms of the amount that can be claimed, the short position is that only payments which are guaranteed under the contract of employment (or other agreement) can be taken account of. The amount of salary for the worker must disregard anything which is not "regular salary or wages". That includes excluding any performance related bonus or discretionary payments, any conditional payments and any non-financial benefits. The employer cannot claim for any salary which is "conditional on any matter". The employer can claim for earnings which it "reasonably expects to be paid" to the employee.

Finally, some further helpful guidance has been issued to assist employers with the technical requirements of submitting claims and how to calculate how to assess how much can be claimed:

• Step-by-step guide
• Guide to working out 80% of wages

The scheme will inevitably lead to a number of further queries by both employers and workers and, unfortunately, disputes would also seem certain at some stage in the future.

The above is intended as general guidance only, but if you require assistance on any particular aspect of the scheme please contact This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it. who will be happy to assist.