Updated guidance on Furlough Leave scheme

Coronavirus National Crisis – Updated Furlough Leave HMRC Guidance


The government’s Coronavirus Job Retention Scheme poses many questions about how it applies in particular scenarios. Thankfully, HRMC have provided further guidance for employers.

The full guidance is captured below:

Employees – https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme

Employers – https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

This article will provide you with a quick refresher of the basics of Furlough and run you through the vital parts of the guidance.


What is the Coronavirus Job Retention Scheme?

If your employer is unable to operate or hasn’t got work for you to do because of the coronavirus, you could both agree to keep you on the payroll on 80% of your regular wages up to a monthly cap of £2,500. This is paid by the government through the Coronavirus Job Retention Scheme, whereby you’ll be ‘on furlough’.

Your employer will still directly pay you and your tax from your income. However, you must be careful not to work during this leave. The government predicts that the scheme will be set up by the end of April.


What are the key parts of revised HMRC guidance?

  1. Eligible employers – any UK business with a UK payroll can apply through the scheme, provided they have:

. Created and started a PAYE payroll scheme on or before 29 February 2020;
. Enrolled for PAYE online (this is new); and
. A UK bank account


  1. Eligible workers:

. Workers who ceased to be on their payrolls after 28 February 2020 can be re-employed and furloughed. The reason the worker has left doesn’t matter – they don’t have to have been made redundant but the decision as to whether to re-employ is ultimately the employer’s. However, employers should be cautious when selecting those whom they re-employ to avoid potentially discriminatory outcomes.
. Salaried LLP members, company directors, agency workers (including those employed by umbrella companies) and ‘Limb (b) Workers’, who are paid via PAYE are all covered. So are apprentices and foreign nationals.
. Employees who are shielding, or who can’t work due to caring responsibilities, are covered, as are employees that started unpaid leave after 28 February 2020
. To be eligible for scheme’s grant, employers must confirm in writing to furloughed employees that they wish to furlough them and that this is kept on record for five years


  1. Rules during the furlough leave:

. Furloughed employees must not be allowed to perform any work for their employer (or a linked or associated company) other than training.
. However, furloughed employees are permitted to work for other employers
. Employers are to consider allocating any critical business tasks to staff that are not furloughed
. Employees with more than one job can be furloughed by all or any of their employers and the pay cap applied to each employer individually
. Employees can be furloughed multiple times, as long as the furlough leave period is a minimum of 3 weeks (thus allowing employers to rotate staff on and off furlough)


  1. How much can employers claim through the scheme?

. Employers can claim for 80% of pay up to a monthly cap of £2,500. Please note that the guidance specifies that these figures are before tax.
. Where an employee’s pay varies, ‘pay’ means ‘regular’ contractual pay, which includes wages, ‘compulsory commission’ (most likely meaning contractual past commission earned) and past overtime
. Variable pay does not include discretionary bonuses, discretionary commission, tips, non-cash payments or benefits in kind (e.g. gym membership)
. The lower salary on salary sacrifice is the amount taken into account under the scheme. However, HMRC have confirmed that employees can revert to their pre-salary sacrificed salary if they wish
. Grants under the scheme cannot be used to cover redundancy payments


  1. What uncertainties remain?

What do ‘statutory obligations’ actually cover for company directors?

The guidance states that directors should only exercise ‘statutory obligations’ to the extent that they do no more than ‘would reasonably be judged necessary for that purpose’. This doesn’t cover work generating commercial revenue or providing services on behalf of their company. Questions immediately arise from this. For example, would it allow a Board Director to manage and oversee in redundancy exercises that the company deemed necessary to ensure solvency? The guidance also states that furloughed directors may sometimes be undertaking duties without falling outside of the scope of the furlough scheme. We hope to see further guidance on these matters so as to prevent difficulties in the application of the scheme.


Are employers who TUPE into a business after 28 February covered?

TUPE also throws up some difficult grey areas. The guidance states that staff transferred under TUPE after 28 February who might have been eligible fail to meet the scheme’s eligibility requirements. The guidance confirms that employers can take back staff who have ceased to work for them (for whatever reason). The old employer and new employer who want their TUPE deal to go ahead (but need to furlough staff) could therefore achieve this with some creativity and coordination. However, we hope that future guidance will provide clarity on these matters so as to avoid needless complications.


The position on Statutory Sick Pay

We know that those who are receiving Statutory Sick Pay (whether they’re actually sick or self-isolating) cannot be furloughed. What if an employee who is sick during furlough reverts back to sick leave and therefore Statutory Sick Pay and their employer’s sick pay scheme (if relevant)? Does this mean that both furlough and Statutory Sick Pay can run at the same time? Would transferring to sick leave break the minimum furlough period and thus impact on an employer’s ability to reclaim for other salary payments in said period? Again, further guidance is awaited.


The regularity of ‘pay’ under the scheme

There is no guidance on how regular a payment must be to satisfy ‘pay’ under the scheme. Nor does it clarify whether a fluctuating allowance can be paid at an average calculated against the 2019/2020 tax year.


Annual leave whilst on Furlough Leave

The guidance is also silent on whether annual leave can actually be taken during furlough leave. This therefore poses questions.

Can an employer make an employee take holiday whilst on furlough and then use the grant to claim back the holiday pay?  Under current employment law, it is clear that an employer can generally require some holiday to be taken at a time specified by the employer. Further, recent Acas guidance, (last reviewed on 2 April 2020), continues to use furlough as a reason why a worker may be unable to take annual leave. Further clarification on the matter.


Maternity Pay whilst on Furlough Leave

Does an employer’s claim for a grant under the scheme to cover enhanced maternity pay effectively end maternity leave? This could put Statutory Maternity Pay entitlement at risk when furlough leave ends.


Pattinson & Brewer’s employment law services

Thank you for taking the time to read our summary of the latest guidance on furlough leave as of 7 April 2020. Please be alert to the possibility that further guidance could change the above.

We’re also currently offering free legal advice to working people during the Coronavirus National Crisis. Please follow our link below for more information:


Call us free on our 24/7 helpline on 0800 307 7660, and our team will get back to you to see if we can help.

Patrick O'Donovan,
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