COVID-19 advice

The information in this blog is correct as at 21 April 2020. For the most up-to-date Employment Law and Health & Safety advice to support your organisation through the COVID-19 pandemic, visit our Coronavirus Advice Hub, which is updated daily and contains a variety of free guidance notes, letter templates, checklists, risk assessments and more.

The government has now issued six iterations of its furlough guidance, but just as the details of the Job Retention Scheme were starting to become clear, the position has changed once more.

On 15 April, just half an hour after version four of the guidance was published, the Treasury issued a Statutory Direction, which appeared to contradict certain aspects of the previous guidance as well as itself. The Direction gives the scheme its legislative footing and therefore takes precedence over GOV.UK guidance.

To make matters worse, on 17 April, the government published a fifth version of the guidance, followed by a sixth just days later on 20 April. Unfortunately for employers, neither update does anything to address the significant contradictions with the Direction – in fact, in many ways, these updates have only confused things further.

So what information can employers trust and act upon? What’s the truth about furlough? Well, for employers who are planning to apply for wage support now that the portal for applications has opened, there are a number of crucial points to note.

1. Who can be furloughed

The GOV.UK guidance states employers may only furlough employees if they are suffering from severely affected operations or unable to maintain their workforce as a result of COVID-19. The Direction, on the other hand, says no such thing. Instead, it allows for any employee to be placed on furlough leave so long as “the instruction is given by reason of circumstances arising as a result of coronavirus”. In effect, this gives employers a wide discretion to furlough any employee you see fit provided it relates to the pandemic. For example, if an employee is struggling with childcare arrangements due to school closures, the Direction suggests that it would be acceptable to furlough them.

2. Sick employees

The GOV.UK guidance and the Direction are directly contradictory on this point. In a nutshell, the guidance says that sick employees can be furloughed, while the Direction states that they cannot be furloughed until their period of entitlement to statutory sick pay (SSP) ends, i.e. SSP runs out or the employee is fit to work. Given the quasi-legislative nature of the Direction, this should take precedence.

To add to the confusion, HMRC continues to maintain that those eligible for SSP can be furloughed if you wish. As it is HMRC that polices and pays out from the scheme, employers could decide to furlough an employee on sick leave, though given the disparity between the Direction and the GOV.UK guidance, you may not be able to recover those sums from HMRC.

3. Shielding employees

The SSP Regulations were amended on 16 April to allow shielding employees to receive SSP. However, given that the Direction forbids employees who are entitled to receive SSP from being furloughed – irrespective of whether they are actually claiming SSP or not – this means that shielding employees cannot be furloughed currently. It’s likely that this was an unintended consequence of the Direction and amended SSP Regulations, so it may be subject to further review and change.

That said, given HMRC and the GOV.UK guidance is adamant that shielding employees can be furloughed, you may choose to do this. Again though, given the complete contradiction between the Direction and the guidance, there is no guarantee you will receive payment under the scheme.

4. The payment problem

On 17 April, we published a blog in which we noted that the Direction seemed to suggest that if, between 1 March and 18 April, there has been a period in which an employee has been furloughed and you have not paid the employee what they would get under the scheme, you will have to make up the pay they would be due under the scheme for that period BEFORE making a claim.

On closer reading of paragraph 7.12 of the Direction, the position may not be that clear cut. Unfortunately, the Direction itself is contradictory and talks of it being a reimbursement scheme to recover amounts that are “being paid” to employees. However, on the other hand, it does allow for amounts to be recovered that are reasonably expected to be paid.

Given the uncertainty, we would suggest that employers who can afford to pay employees before recovering amounts from HMRC do so to avoid any potential difficulties. What does appear clear from the Direction is that if you have already made any payments between 1 March and 18 April, these payments should be topped up so that they meet the amount you are claiming under the scheme before making a claim. What is not clear is why this provision is there at all.

5. Calculating furlough pay

The guide to calculating 80% of an employee’s wages covers this point in great detail and includes some worked examples. In short, the calculation should be based on regular wage, which the GOV.UK guidance says includes non-discretionary overtime, fees and commission. Discretionary bonuses and commission payments are excluded, along with non-monetary benefits.

However, it is worth noting that the Direction doesn’t quite line up with this. It states that regular pay should not include amounts that are “conditional on any matter”. Even non-discretionary overtime and commission will be conditional upon something. One can only assume that this is a mistake in the drafting of the Direction and the GOV.UK guidance should be preferred in this regard.

James Tamm

Director of Legal Services

Expert Comment

With so many U-turns over the past few weeks, it’s hard not to be disappointed with how the furlough scheme has been set up. Whilst I appreciate that the government is under an enormous amount of pressure at the moment, it’s difficult to see how they could have done a worse job in providing employers with information. There is simply no excuse for the contradictions we have seen in the different versions of the GOV.UK guidance and we now have an inconsistent Direction thrown into the mix. Given that the scheme was announced a month ago, it is unacceptable that it has gone live with so many unanswered questions. The Employment Law team here at Ellis Whittam have tried to address as many as we can in our Job Retention Scheme FAQ, which is available via our free Coronavirus Advice Hub. If you still have unanswered questions, I would recommend taking a look at this document as it addresses some of the central queries employers will have regarding the scheme.

This continues to be an incredibly frustrating situation for employers, who are in desperate need of straight, unambiguous answers so that they can make informed decisions regarding what’s best for their workforce and their business. With the HMRC portal for making claims now open, we can only hope that some of the grey areas will be clarified by how the scheme operates in practice. However, given the inconsistencies that remain, it seems inevitable that there will be further updates. As such, employers would be wise to save a copy of any online HMRC guidance they rely at the time, just in case HMRC asks questions at a later date.

Get the answers you need, fast

Furlough poses a considerable challenge for employers, not least due to how frequently the position changes. For practical advice on based on the latest developments, our Coronavirus Advice Hub contains a range of helpful resources, including regularly updated FAQs, step-by-step guides, letter templates and expert webinars.

Sign up for free now or, if you would benefit from professional advice on your specific situation, call 0345 226 8393 to enquire about our unlimited, fixed-fee Employment Law support.

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