More updated guidance on the Coronavirus Job Retention Scheme

The Government updated its employers’ guidance regarding its Coronavirus Job Retention Scheme (the Scheme) once again on 20 April 2020. The guidance has clarified a number of sections, which we have summarised below.

The Government’s employee guidance was updated on 17 April 2020, in an effort to clarify the issue of annual leave while on furlough. At the time of writing the employer’s guidance has not been updated on this topic.

This note summarises the latest additions and is accurate as at 24 April 2020. This note should be read in conjunction with our previous update which is available online here.

Furlough and holiday pay

The latest guidance for employees has clarified that annual leave will continue to accrue in accordance with the terms of the employment contract.

Employers can agree with their employees to vary contractual holiday pay entitlement as part of the furlough arrangement. However, workers must retain the minimum of 5.6 weeks of statutory paid annual leave each year.

As anticipated, it is possible for employees to take holiday while on furlough leave and holiday must be paid at the normal rate of pay. This means that employers may need to “top up” wages to 100% of normal pay for days when employees are on annual leave; if wages are not already being topped up at the employer’s discretion.

The guidance has also clarified the position on bank holidays whilst staff are furloughed. If employees are usually required to work bank holidays, then it is possible to agree that this is included in the grant received under the Scheme. Alternatively, if employees are usually required to take bank holidays as annual leave, then it will be for the employer to top up the employee’s pay to 100% of their normal pay or provide a day’s holiday in lieu.

However, the guidance remains silent on whether employers can compel staff to take holiday while on furlough leave. We anticipate that, provided the employer gives the required notice under the Working Time Regulations (i.e. twice as much notice as the number of days of leave), then it may be possible for employers to require staff to take leave.

It is also worth remembering that employers do have the right to restrict when annual leave can be taken, if there is a genuine business need to do so. This could prove to be very useful both during furlough and the “recovery” period thereafter.

HMRC has confirmed that the policy on holiday pay during furlough leave will remain under review during this unprecedented time. Accordingly, we anticipate that further guidance will be published in the near future.

Some clarification

The updated guidance has also helpfully clarified a number of further points:

• employees are encouraged to report instances of employers abusing the Scheme via HMRC’s online portal. Examples of abuse include, employees being asked to work whilst furloughed; where a submitted claim pre-dates the date that the employee was actually furloughed; or where the employee has not been paid the subsidy from the Scheme;
• for employees on fixed term contracts (FTC), employers can renew or extend the FTC whilst the employee is on furlough if it is so minded. There is no minimum period which must be left to run on the FTC to enable it to be renewed or extended, but it must not have terminated. FTC which have naturally terminated, without extension or renewal on or before 19 March 2020, will not qualify for the grant under the Scheme;
• to be eligible for the grant, employers must confirm in writing to their employee(s) that they have been furloughed. Provided this is done in a way that is consistent with employment law, the employee’s consent is valid for the purposes of claiming under the Scheme. The revised guidance suggests that there needs to be an auditable written record of the agreement, but that the employee does not have to provide a written response. This is inconsistent with the wording of the Treasury Direction, which suggests that written consent from the employee is required. Ideally, we would recommend that employers seek written confirmation from an employee of their agreement to be furloughed.  However, it is our understanding that it is not the intention of HMRC to reject claims from employers who have not obtained such written consent to cease all work for the employer. We consider that it is unlikely that HMRC will change this approach. If they do, there would likely be grounds for challenge; and
• HMRC have the right to retrospectively audit all or parts of an employer’s claim under the Scheme.

Some welcome clarity; but gaps still remain

The latest version of the Government’s guidance has helpfully provided further clarity for employers regarding the Scheme. However, a number of uncertainties remains, not least in relation to the interaction between furlough leave and annual leave. We anticipate further guidance in the coming weeks, particularly now that the Scheme’s portal is fully operational, with several hundreds of thousands of businesses entering claims.