In depth

Update 11: the legal implications of the Job Retention Scheme

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On 4 April 2020 the Government issued further guidance in relation to the Coronavirus Job Retention Scheme (“CJRS”).   We have set out briefly below the key points covered in the updated guidance: 

  1. Apprentices
    Apprentices can be furloughed and can continue to train during any period of furlough. However, the employer must pay the full relevant minimum wage (either apprenticeship minimum wage, national minimum wage or national living wage as appropriate) for their apprentices for any time spent training which is likely to involve topping up the amount that the Government will contribute.

    The Apprenticeship Levy remains payable by the employer during any period of furlough so this will be a cost borne by the employer direct and not recoverable from the Government.
  2. Multiple Periods of furlough
    As expected, it has been confirmed that, provided agreement is reached and the 3-week minimum period of furlough is adhered to, employees can be swapped on and off furlough by the employer.  Each period of furlough must last at least 3 weeks.
  3. Working elsewhere whilst on furlough
    It has now been confirmed that, provided their contract of employment does not preclude it, employees can work elsewhere whilst on furlough.
  4. Confirmation of what the grant covers
    The Guidance confirms that the grant under the CJRS will cover 80% of normal wages costs (up to £2,500), employers national insurance contributions and the minimum automatic enrolment employer pension contributions on that wage. 

    The previous guidance suggested that fees and commission would not be included in the calculation of the grant. However, the new guidance now states that employers can claim all regular payments you are obliged to pay your employees (up to the cap of £2,500 per month). This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonuses (including tips) and discretionary commission payments and non-cash payments should be excluded. 
  5. Salary sacrifice
    Benefits provided through salary sacrifice should not be included in the calculation of the grant that can be claimed through the CJRS. This would mean that an employee whose pension contributions are made via salary sacrifice would only be entitled to a grant based on 80% of their salary after sacrifice. The employer would still need to make the sacrifice payment in full which could be a heavy burden which employers will want to seek to negotiate with relevant employees on.  Such negotiation could be difficult as it is normally difficult to change salary sacrifice arrangements unless there is a ‘life event’. However, HMRC have confirmed that the current crisis can be designated as a ‘life event’ allowing employees to terminate any sacrifice arrangement and have their furloughed grant based on 80% of full salary rather than salary after sacrifice.  
  6. Employees that can be claimed for:
    The new guidance gives a comprehensive list of the types of employees that can be claimed for under the CJRS, but does suggest this will only be if there would otherwise be no work available for them to do (albeit this is still not clear):

    - Employees who are shielding in line with public health advice;
    - Employees who had been made redundant or had, for any other reason, stopped working for the employer after 28 - February 2020 can be re-hired and then placed on furlough;
    - Employees placed on unpaid leave after 28 February 2020 can be furloughed;
    - Employees unable to work owing to caring responsibilities related to Coronavirus (including looking after children) can be furloughed; and
    - Employees on fixed-term contracts can be furloughed.
  7. Other eligible persons:
    The Government’s aim is for the CJRS to operate as flexibly and widely as possible. Other eligible persons include:

    - Statutory directors. The guidance confirms that they can be furloughed and, importantly, are still able to carry-out any statutory duties of their office as long as they do no more than is reasonably necessary to discharge those duties.Directors of Personal Service - Companies that are also employees of those companies can be furloughed and, as with statutory directors, are able to perform any statutory duties reasonably necessary in their role as office holder during any period of furlough.
    - Salaried members of LLPs can be furloughed.
    - Any agency workers who are paid through PAYE are eligible to be furloughed, even those working under umbrella companies.
    - Limb (b) workers (dependent contractors) are eligible to be furloughed where they are paid through PAYE.
  8. Training
    Furloughed employees are entitled to undertake training but must be paid at least national minimum wage (or any other relevant minimum wage) for such periods. This may involve the employer topping up the grant for low paid employees.


Your questions on furlough answered

Read more here

What about annual leave?

The updated guidance, like the previous guidance, is silent on annual leave and furlough.

However, ACAS guidance published on 2 April says: “If an employee is 'furloughed' (temporarily sent home because there’s no work), they can still request and take their holiday in the usual way. This includes taking bank holidays”.

Bearing in mind ACAS is a non-departmental public body of the Department for Business, Energy and Industrial Strategy (BEIS), mostly funded by BEIS, it is a reasonable assumption that this guidance reflects the Government’s intentions regarding holidays and furlough.

There is still some uncertainty on how holiday pay should be calculated during furlough.  With effect from 6 April 2020 the new 52-week reference period for calculating holiday pay comes into force so that may well apply for employees with no normal hours when calculating their pay for the statutory 5.6 weeks.

In respect of at least 4 weeks leave there is a legal requirement that the pay reflects ‘normal pay’. That has been established as including all regular additional payments that the employee would have expected to receive had they been in work. This calculation would appear more generous than that which will apply to the Government’s 80% contribution to furlough pay calculations.  

In respect of holidays over and above 5.6 weeks the employer can agree whatever payment it wishes.  

What about TUPE and furlough?

This remains unclear. 

The new guidance does not deal with TUPE explicitly, but it does repeat that an employee needs to have been on the employer’s PAYE payroll on or before 28 February 2020. This would appear to preclude an employer from furloughing any employees who TUPE’d into their employment after 28 February 2020.

It seems to be in line with the principle that TUPE operates to transfer all 'rights, duties, powers and liabilities' under the employment contract but it does not transfer tax rights or liabilities owed to HMRC. 

However, we have also seen one QC tweeting that the Treasury has indicated to an MP that the CJRS will be available in a TUPE scenario.

There is also the practical difficulty that if the scheme does extend to those who had TUPE’d across the new employer would be faced with the task of calculating what to claim from HMRC, without access to the employee’s payroll data for any part of the relevant period.  

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