Yesterday the Government updated guidance on the Coronavirus Job Retention Scheme (CJRS). The guidance has now been split into a number of separate web pages and the text moved between or within pages, but the only substantive changes are:
- The guidance now reflects this week’s announcement confirming the extension of the CJRS in its current form until the end of July. “From August, employers currently using the scheme will have more flexibility to bring their furloughed employees back to work part time whilst still receiving support from the scheme. This will run for three months from August through to the end of October. Employers will be asked to pay a percentage towards the salaries of their furloughed staff. The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month. More specific details and information around its implementation will be made available by the end of May.”
- There is a new clear prohibition on an employer furloughing an employee and then asking them to “volunteer” for the employer in the same or a different role.
- With regard to the meaning of “non-discretionary payments” which should be included when calculating the 80% pay (which can be claimed by the employer under the CJRS, subject to the £2,500 per month cap), the guidance now provides that this only includes payments which an employer has a contractual obligation to pay and to which the employee had an enforceable right. It notes that “when variable payments are specified in a contract and those payments are always made, then those payments may become non-discretionary“. Payments for overtime worked are non-discretionary for the purposes of the CJRS when the employer is “contractually obliged to pay the employee at a set and defined rate for the overtime that they have worked“. The focus is therefore on whether the employer is obliged to pay specifically for overtime hours worked, rather than on whether the overtime itself is compulsory and/or guaranteed. This is a helpful (if somewhat belated) clarification of HMRC’s interpretation of the CJRS conditions. Employers who have not included these amounts in wages paid and/or claims submitted under the CJRS may need to review the terms of their furlough agreements with employees and/or contact HMRC to determine whether any claim can be amended (and the additional sums claimed paid to the employees if not already done so). Currently the guidance states that “You must claim for all employees in each period at one time – you cannot make changes to your claim. It is not possible to amend a claim once it is submitted. HMRC are looking to develop a process to allow for amendments to be made.”
- The guidance now includes a link to new page setting out the Government’s view on the interplay between statutory holiday entitlement and furlough – see more below.
- The guidance now lists the employer’s bank account billing address as required information when making a claim, suggests that employers who do not have an employee’s NI number can make a verification request as an alternative to contacting HMRC, and states that records must be kept for 6 years.
Previous iterations of the guidance confirmed HMRC’s view that both statutory and contractual annual leave entitlement continues to accrue during furlough (subject to any agreement to vary the contract to remove contractual enhancement during furlough). HMRC has also made clear that employees taking holiday (including bank holidays) during furlough will not break furlough nor invalidate a claim under the CJRS, and set out its view that the Working Time Regulations require holiday pay to be paid at the normal rate of pay (ie, pre-furlough pay) or, where pay varies, the rate calculated by averaging over the previous 52 working weeks. However, it was not clear whether the HMRC considered furlough would be broken (or it would be unlawful) if employers required furloughed employees to take holiday during furlough (subject to giving the required notice), either where the holiday was pre-arranged or designated after furlough had started.
The new separate (and non-legally binding) guidance published on 13 May confirms the Government’s view that holiday can be taken without disrupting furlough and that the employer can continue to claim the 80% grant to cover most of the cost of holiday pay. It envisages that employers can require furloughed individuals to take holiday subject to the usual notice requirements and suggests that employers should engage with their workforce and explain reasons for wanting them to take leave before requiring them to do so. However, it also goes on to comment that “the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday“. Of course the same would apply in respect of requiring employees who are not furloughed to take holiday during lockdown. Later on the guidance notes that ‘in most cases’ furloughed employees will be able to take holiday during the furlough period (see below).
This may indicate the Government’s view that designating holiday during lockdown will generally be effective except perhaps for vulnerable individuals who are following the stronger social distancing guidance, extremely vulnerable individuals who are ‘shielding’, or individuals who are self-isolating due to their or their household having symptoms; given that ‘social distancing’ is likely to be the ‘new normal’ for some time, it would perhaps be surprising if the social-distancing restrictions on society as a whole were to be treated as sufficient to prevent ‘enjoyment’ of holiday. However, there is clearly scope for argument, at least until we reach the later stages of the Government’s roadmap out of lockdown. Claims are perhaps more likely where an employer seeks to require furloughed employees to use up their entire year’s entitlement while on furlough. In practice, employees may accept that a requirement to take a pro rata amount reflecting the expired portion of the leave year is not an unreasonable request.
The guidance also discusses the new right for workers to be able to carry forward some or all of the 4 weeks’ statutory holiday entitlement into the following two leave years where it has not been “reasonably practicable” for the worker to take it due to the effects of coronavirus. It suggests that factors relevant to what is “reasonably practicable” include:
- whether the business has faced a significant increase in demand due to coronavirus that would reasonably require the worker to continue to be at work and cannot be met through alternative practical measures
- the extent to which the business’ workforce is disrupted by the coronavirus and the practical options available to the business to provide temporary cover of essential activities
- the health of the worker and how soon they need to take a period of rest and relaxation
- the length of time remaining in the worker’s leave year, to enable the worker to take holiday at a later date within the leave year
- the extent to which the worker taking leave would impact on wider society’s response to, and recovery from, the coronavirus situation
- the ability of the remainder of the available workforce to provide cover for the worker going on leave.
It is suggested that workers who are on furlough are “unlikely to need to carry forward statutory annual leave, as they will be able to take it during the furlough period (in most cases at least)”. One exception may be where, due to the impact of coronavirus on operations, the employer is financially unable to top up the 80% covered by the CJRS to full holiday pay (as required by the Working Time Regulations), in which case the worker would be able to carry over their annual leave.
Links to the current guidance:
- Check if you can claim for your employees’ wages through the Coronavirus Job Retention Scheme
- Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme
- Work out 80% of your employees’ wages to claim through the Coronavirus Job Retention Scheme
- Examples of how to work out 80% of your employees’ wages, National Insurance contributions and pension contributions
- Claim for wages through the Coronavirus Job Retention Scheme
- Reporting employees’ wages to HMRC when you’ve claimed through the Coronavirus Job Retention Scheme
- Holiday entitlement and pay during coronavirus (COVID-19)
- Check if your employer can use the Coronavirus Job Retention Scheme