HMRC publishes second update to employer and employee guidance on Coronavirus (COVID-19) Job Retention Scheme

HMRC publishes second update to employer and employee guidance on Coronavirus (COVID-19) Job Retention Scheme

Employment analysis: HMRC has published, on 9 April 2020, a second update to its guidance notes for employers and employees on the Coronavirus (COVID-19) Job Retention Scheme (CJRS), under which an employer can place employees on ‘furlough’ and claim a grant for a proportion of their wages from HMRC during the coronavirus outbreak. Further guidance is given on, among other things, pension contributions, the interaction with statutory sick pay (SSP), those returning from statutory leave, and TUPE.

Guidance for employers: Claim for your employees’ wages through the Coronavirus Job Retention Scheme (updated 9 April 2020)

Guidance for employees: Check if your employer can use the Coronavirus Job Retention Scheme (updated 9 April 2020)

Key updates to the guidance

Key updates to the employer guidance include:

  1. in relation to statutory sick pay (SSP), clarification that:

    1. the CJRS is not intended for short-term absences from work due to sickness, and there is a three-week minimum furlough period

    2. short-term illness or self-isolation should not be a consideration in deciding whether to furlough an employee

    3. if, however, employers want to furlough employees for business reasons and they are currently off sick, employers are eligible to do so, as they are with other employees; in these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee

    4. employers are also entitled to furlough employees who are being shielded or off on long-term sick leave. It is up to employers to decide whether to furlough these employees. Employers can claim back from both the CJRS and the SSP rebate scheme for the same employee but not for the same period of time. When an employee is on furlough, an employer can only reclaim expenditure through the CJRS, and not the SSP rebate scheme. If a non-furloughed employee becomes ill, needs to self-isolate or be shielded, then the employer might qualify for the SSP rebate scheme, enabling the employer to claim up to two weeks of SSP per employee

    5. furloughed employees retain their statutory rights, including their right to SSP. This means that furloughed employees who become ill must be paid at least SSP. It is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate

    6. if a furloughed employee who becomes sick is moved onto SSP, the employer can no longer claim for the furloughed salary. Employers are required to pay SSP themselves, although they may qualify for a rebate for up to two weeks of SSP. If an employer keeps a sick furloughed employee on the furloughed rate, the employer remains eligible to claim for these costs through the CJRS

  2. in relation to pension contributions, clarification that employers can claim under the CJRS for employer pension contributions that are paid on the subsidised furlough pay, up to the level of the minimum automatic enrolment employer contribution. The maximum level of grant for employer pension contributions on subsidised furlough pay is set in line with the minimum automatic enrolment employer contribution of 3% on qualifying earnings. Grants for pension contributions can be claimed up to this cap provided the employer will pay the whole amount claimed to a pension scheme for the employee as an employer contribution

  3. in relation to those returning from statutory leave (maternity leave, paternity leave, shared parental leave, adoption leave, sick leave and parental bereavement leave) confirmation that, in line with other employees, claims for full- or part-time employees returning from statutory leave after 28 February 2020 should be calculated against their salary, before tax, not the pay they received while on statutory leave. Claims for those on variable pay returning from statutory leave should be calculated using either the:

    1. same month’s earning from the previous year, or

    2. average monthly earnings for the 2019-2020 tax year

  4. a new section on TUPE, which confirms that a ‘new employer’ (presumably referring to a transferee who takes on new employees after 28 February 2020) is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 28th February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership. For further guidance, see:

    1. TUPE—overview

    2. Practice Note: TUPE—transfer of employees

    3. Practice Note: Employment tax implications of a TUPE transfer, and

    4. HMRC guidance: Payroll: what to do if your business merges or changes

  5. guidance on the approach HMRC expects public sector bodies to adopt when seeking to furlough contractors with public sector engagements in scope of the IR35 off-payroll working rules (see Practice Note: IR35—off-payroll workers), which also refers to guidance already available on the Crown Commercial Services website

  6. clarification that where a group of companies have multiple PAYE schemes and there is a transfer of all employees from these schemes into a new consolidated PAYE scheme after 28 February 2020, the new scheme will be eligible to furlough those employees and claim the grants available under the CJRS

Areas that still remain unclear

The guidance still makes no mention at all of the interaction between being on furlough under the CJRS and rights to annual leave, such as:

  1. whether employees can take annual leave at all while they are on furlough

  2. whether employers can require employees to take some (or all) of their holiday while they are on furlough

  3. if they do take holiday, at what rate an employee must be paid (ie their normal remuneration, or the reduced furlough rate)

Anecdotally, we understand that those raising queries in relation to holiday and CJRS with HMRC are typically being referred to the Acas Coronavirus (COVID-19): advice for employers and employees. However, this guidance is itself less than clear.

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