IMPORTANT UPDATE ON FURLOUGH
The Treasury has issued an important direction to HMRC for making payments under the Furlough Scheme. Whilst this may be subject to yet further amendment, this is likely to be broadly the final scheme. The main points are:
- Employees who were employed on 19 March 2020 (not 28 February 2020 as before) are eligible for furlough, provided the employer had put the employee on its payroll by that date. Please note, being on the payroll is key as if a company’s pay date is the 25th or the 31st March, the employee may not be covered under the scheme.
- To claim furlough, the employer and employee must have agreed in writing that the employee will cease all work. This is very important as under previous guidance it was said the employee only required notification. As written agreement is now required, those employees who have already been furloughed may not be covered under the scheme.
- Although covered under previous guidance, employees can take on a second job whilst furloughed. Whilst the original guidance stated that employees with two jobs could be furloughed from one and remain in the other, employees with one job can be furloughed from that, accept 80% or 100% pay from their original employer, and then find another job.
- It was thought that the scheme applied only to employees who would otherwise have been made redundant but it doesn’t. It applies to any employee who is furloughed “by reason of circumstances as a result of coronavirus or coronavirus disease”.
- A director who is furloughed can only undertake work to fulfil a duty or other obligation relating to the filing of company’s accounts or provision of other information relating to the administration of the director’s company. This means that a director cannot carry out limited or even administrative duties outside of those narrow parameters. This appears to create a conflict between an employee’s duty under the Scheme not to undertake any work with a director’s duties to act in the best interests of the company – which would usually include working for it.
- The employer can claim for earnings which it “reasonably expects to be paid” to the employee. This is not entirely clear.
- The employer cannot claim for any salary which is “conditional on any matter”. This may exclude any salary payments which the parties have agreed are conditional on the Job Retention Scheme paying out.
- The amount of salary for the employee must disregard anything which is not “regular salary or wages”. That means disregarding any performance related bonus or discretionary payments (including tips), any conditional payments and any non-financial benefits.
- As for annual leave, the Direction is silent.