Coronavirus Job Retention Scheme: New Treasury Direction throws some doubt on claiming furlough subsidy during redundancy notice periods

Please Note: All information correct at time of writing on 6 July 2020. We do our very best to make sure our information is as up to date as possible, but we’d encourage you to check out our latest articles and to check the government website for updates as they happen.

 

As an employer, you’ve no doubt been keeping closely up to date with the Coronavirus Job Retention Scheme, especially following the announcement of how the new flexible furlough scheme will work.

On Friday 26 June, the Treasury issued a third Direction – which is the legal framework for the new flexible furlough scheme. Although this new Direction largely confirms many of the points set out in the existing HMRC guidance, it included some additional wording in the section setting out the purpose of the scheme which has cast some doubt on whether it is appropriate to claim for periods where an employee is serving notice of redundancy.

On 1 July HMRC also updated their guidance on flexible furlough which provided clarification on how holidays should be treated under the scheme.

We take a closer look at both these developments below.

Redundancy and the purpose of the Coronavirus Job Retention Scheme

In the latest Treasury Direction, additional wording has been included to make it clear that it is integral to the purpose of the scheme that the amounts claimed for an employee must be used to “continue the employment” of that person.

This could call into question whether claiming to cover wage costs during an employee’s redundancy notice period could be said to be continuing their employment. Technically, while serving notice the employee remains employed and therefore the payment could be argued to fall within the scope of the new wording. However, it is equally possible to argue that if the employee has been served with notice of redundancy, there is no intention to continue their employment in the wider sense.

At this stage, it’s unclear whether this wording is intended to be a significant shift in the Treasury’s stance.

HMRC have yet to confirm whether this change in wording will affect their interpretation of the rules but they have not made any changes to their guidance in this respect. However, until clarification is received, if you want to be sure that you are taking the correct approach, it’s wise to check with HMRC before submitting claims covering redundancy notice periods and keeping a record of the guidance you are given.

What does the updated guidance say about holidays?

The newly updated guidance confirms that time spent on holiday can be included as furloughed hours, rather than working hours, for the purposes of calculating flexible furlough claims. For example, if during a four-week claim period, the employee works for one week, is furloughed for two weeks and is on holiday for one week, the furlough claim will be based on three weeks furlough and one week worked.

However, it’s important to note that the guide makes it clear that employees should not be put on furlough simply to cover holiday periods

The flexible furlough scheme – a timeline

If you need a reminder of the timescale and key dates of changes for the flexible furlough scheme, we’ve briefly covered it below.

  • JULY – the government will pay 80% of wages up to a cap of £2,500 for the hours the employee is on furlough, as well as Employers’ National Insurance Contributions (ER NICS) and pension contributions for the hours the employee is on furlough. Employers will have to pay employees for the hours they work.
  • AUGUST – the government will pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough and employers will pay ER NICs and pension contributions for the hours the employee is on furlough.
  • SEPTEMBER – the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for the time they are furloughed.
  • OCTOBER – the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for the time they are furloughed.

Citation’s help is only a phone call away

There’s no doubt that the flexible furlough rules can look confusing on first glance. And you’ve got a lot on your plate making sure your business survives the next few crucial months.

If you want the reassurance and backing of our team of HR and Employment Law experts to help you navigate furlough, homeworking, changing terms and conditions, restructuring your business, redundancies and more – both during and beyond the COVID-19 crisis, we’re only a phone call away.

If you want to discuss your business’ needs, feel free to give our team a call on 0345 844 1111 to talk through your business needs. Or, simply fill out your details in the form opposite and we’ll be in touch as soon as possible.

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