Coronavirus Job Retention Scheme – Treasury Direction and further updated HMRC guidance issued: A summary of the key changes


On 15 April, The Treasury issued a Direction to apply to HMRC (see here) under the Coronavirus Act 2020 setting out the legal framework for the Coronavirus Job Retention Scheme (“CJRS”). On both 9 and 15 April, HMRC also issued further amended versions of its Employer Guidance (see the latest version here). Unhelpfully, there are important discrepancies between the Employer Guidance and the Direction.

On 17 April, the Employee Guidance (see here) was updated to deal with holiday. A short time after the revised Employee Guidance was published, new Guidance headed “Work out 80% of your employees’ wages to claim through the Coronavirus Job Retention Scheme” was then published which also deals with holiday and how to calculate the grant under the CJRS (“Claims Guidance” – see here). In addition, the Government published a new ‘step by step guide’ for employers (see here). This is particularly important as the online portal to make CJRS claims has gone live today (20 April). Whilst an online calculator has been published to assist businesses making claims through the portal (see here), it is quite basic and can currently only deal with claims in respect of individuals that are paid the same amount in each weekly or monthly pay period. Businesses must work through the Claims Guidance in order to make accurate self-assessed claims in more complex scenarios.

Subsequent to the Direction and revised Employer Guidance, on 17 April the Chancellor announced the extension of the CJRS to the end of June 2020.

On 27 March 2020 and 7 April 2020 we published FAQs on previous iterations of the Guidance which can be found here and here. We set out below the key additional points for employers to consider in light of the Direction and the changes to the Employer Guidance as at 15 April, the Employee Guidance as at 17 April 2020 and the publication of the Claims Guidance. A more detailed briefing on the new Claims Guidance can be found here.

Eligibility cut-off date change
  • This has now been extended to encompass employees (including domestic workers, such as nannies, employed by individuals) who were added to a company’s payroll on or before 19 March 2020 (it was previously 28 February 2020) providing employers have sent an RTI submission for the relevant employee to HMRC on or before 19 March 2020. This proviso means that many new starters will still be excluded from CJRS purely as a result of their employer’s payroll practices.
  • The Employer and Employee Guidance advises that employees who were on an employer’s payroll as at 28 February 2020 (and were notified to HMRC on an RTI submission on or before that date) but were made redundant or stopped working for the employer prior to 19 March 2020 can also qualify for the scheme if they are re-employed. This is the case even if these employees were not re-employed until after 19 March 2020.
CJRS not limited to those who would otherwise be made redundant
  • The Direction confirms that an employee can be furloughed “by reason of circumstances arising as a result of coronavirus or coronavirus disease”, which is a broad definition of eligible employees, but clearly open to different interpretations.
The need for a written agreement
  • The Direction requires a written agreement between employer and employee (email is sufficient) that the employee will “cease all work in relation to their employment”. By contrast, the Employer Guidance only requires a written confirmation from the employer to the employee that the employee has been furloughed.
  • The Direction is legally binding on HMRC and it is therefore prudent to put in place a written agreement.
  • The Direction requires that agreement should be made prior to the employee being placed on furlough. However, this is unlikely to have occurred for many employees whose employers have sought to furlough them. Furthermore, in the Claims Guidance it states that claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they are written to confirming their furlough status. Consequently, we consider that it should still be open to those employers who haven’t yet sought written agreement to do so retrospectively.
Employees on unpaid leave, sick leave or self-isolating
  • The Direction states that employees already receiving Statutory Sick Pay (“SSP”) when instructed to stop working cannot be furloughed until they are no longer eligible for “original SSP”. Thereafter, subsequent entitlements to SSP by virtue of the employee becoming unfit for work again after the original SSP has ended must be disregarded
  • This contradicts the Employer Guidance which provides that employers can choose whether to pay employees who are on sick leave or self-isolating as a result of coronavirus SSP or furlough pay under the CJRS. As the Direction is binding on HMRC, our view is that it should be followed in preference to the Guidance.
  • The Employer Guidance states that those who become sick whilst on furlough must be paid at least SSP, but it is up to employers to decide whether to move these employees onto SSP or keep them furloughed at their furlough rate; whereas the Direction does not deal at all with what happens to those employees who become sick for the first time whilst on furlough. However on 19 April 2020, HMRC updated its manual to state that employees on furlough do not qualify for SSP (see here). Despite the Employer Guidance, it would seem likely that once an employee is furloughed they will remain on furlough until it is ended by the employer and sickness will not trigger any change in payment.
  • If an employee was on unpaid leave on 28 February 2020 then they cannot be furloughed until the originally contemplated end date of that leave.
Calculating an employee’s reference pay
  • The Employer Guidance states that employers can claim for “past overtime, fees and compulsory commission payments”, but cannot claim for discretionary bonuses such as tips, nor for benefits in kind, nor contributions to salary sacrifice schemes.
  • The Direction on the other hand states that any payment which is “not regular salary or wages” cannot be claimed under the CJRS. “Regular salary or wages” is defined to exclude any payment that is “conditional on any matter” This definition is highly ambiguous and could be interpreted so as to exclude from regular pay a vast number of payments including overtime pay. In the Claims Guidance, it clarifies that non-discretionary overtime and non-discretionary commission should be used when calculating 80% of employee wages, but is silent on discretionary overtime. However, from the nature of the examples of payments which cannot be included, our assumption is that HMRC do not intend to exclude overtime pay from the calculation of wages for a CJRS claim.
  • If, based on previous guidance, the employer has calculated the claim based on the employee’s salary as at 28 February 2020 (and this differs from the employee’s salary in their last pay period prior to 19 March 2020) the employer can still choose to use this calculation for their first claim.

More details on how to calculate 80% of an employee’s wages can be found in our briefing note here.

  • Whilst HMRC is “keeping the policy on holiday pay during furlough under review”, the position at the moment is that holiday will continue to accrue and can be taken during furlough.
  • The employer and employee could agree to vary holiday entitlement under the furlough agreement, but this is still subject to the minimum annual entitlement of 5.6 weeks per year. As a result, reductions could only be agreed for those employees with more generous contractual holiday entitlements.
  • If holiday is taken during furlough, it should be paid at the usual holiday rate and employers may therefore need to top up CJRS payments accordingly.
  • If an employer usually takes bank holidays as annual leave, then the employer would either have to top up the employee’s CJRS to account for holiday pay or give the employee a day’s holiday in lieu.
  • Employers will be able to restrict when annual leave is taken both during furlough and the “recovery period” if there is a business need. However, employers already had such rights to deny holiday requests or give notice to employees to take holiday.
Foreign nationals
  • The Employer Guidance has clarified that employees on all categories of visa can be furloughed.
Working for the employer or connected organisations
  • The Direction clarifies that, whilst furloughed, an employer must not undertake any work for a person or company connected with the employer, or otherwise work indirectly for the employer. For the purposes of determining whether a person or company is connected with the employer, the Direction refers to specific statutory tests which must be applied to establish if a person or company is connected with the employer.
Contractors with public sector engagements in scope of IR35 off-payroll working rules
  • The Employer Guidance advises that contractors who are deemed employees according to the public sector off-payroll working rules might be eligible for the CJRS and sets out a procedure to achieve this.
Employee transfers under TUPE
  • The updated Employer Guidance confirms that a new employer is eligible to claim under the CJRS for employees transferred after 19 March if either TUPE or PAYE business succession rules apply to the change in ownership.
Payroll consolidation
  • If a group of companies choose to consolidate their PAYE schemes after 19 March then the employees in the consolidated scheme are eligible for furlough.
Employer pension contributions
  • The Direction has clarified that the maximum level of grant for employer pension contributions on subsidised furlough pay is set in line with the minimum automatic enrolment employer contribution of 3% on qualifying earnings. This can be claimed on the condition that the employee pays this whole amount to a pension scheme for the employee as an employer contribution.
Payments to be made to the employee
  • No part of the CJRS grant can be used to pay for the provision of benefits or a salary sacrifice scheme.
  • In addition, furloughed employees must receive no less than 80% of their reference pay (up to the £2,500 cap) and employees cannot enter into any transaction with their employees which reduces the pay below this amount, such as by attempting to impose an administration charge.
Returning from statutory leave, unpaid sabbatical or unpaid leave
  • The salaries of employees returning from statutory leave (which includes maternity, paternity, shared parental, adoption, sick and parental bereavement leave) should be calculated based on what those employees received before they went on statutory leave.
  • Similarly those returning from unpaid leave should also have their salaries calculated on the basis of what they were paid before the period of leave.
Further details on what employers will need to make a claim
  • In order to make a claim HMRC advise that employers will need the following:
    • employer PAYE reference number;
    • the number of furloughed employees;
    • National Insurance Numbers for the furloughed employees;
    • Names of the furloughed employees;
    • Payroll/employee number for the furloughed employees (optional);
    • the employer’s Self-Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number;
    • the claim period (start and end date);
    • amount claimed (the minimum length of furloughing is 3 consecutive weeks);
    • bank account number and sort code in to which the furlough payments from HMRC are to be paid; and
    • an employer contact name and phone number.
    • Employers furloughing fewer than 100 employees will need to enter relevant employee details directly into HMRC’s system, whereas those with 100 or more furloughed employees will have to upload a file with the relevant employee details.
    • Agents who are authorised to act on an employer’s behalf can make claims on behalf of those employers, unless they are ‘file only’ agents, in which case the employer will need to make the claims.
Reporting Fraud
  • The Employee Guidance now provides details of how employees can make reports to HMRC if the employee is concerned that their employer is abusing the scheme.
Claiming back SSP
  • Guidance has been published on how employers can claim back SSP for employees due to coronavirus (see here).

If you require further information on any of the points covered in this briefing, or more generally in relation to the CJRS, please get in touch with one of the team.

Lidia Poczok

Justin Costley


Miranda Cass


Julia Cockroft


Rachel Arnison

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