Coronavirus Job Retention Scheme (furlough) UPDATE

17 April 2020

This advice note considers the provision of the Coronavirus Job Retention Scheme (“CJRS”) announced by the government on 20 March 2020.

It is important to note that the situation is very fluid and Government guidance is being updated regularly. We are keeping our ears close to the ground for our clients who are all, understandably, desperate for more certainty regarding the furlough scheme whilst we all await the publication of the formal government Regulations. 

The information in this note is based on updated information released by the Government as at 15 April 2020.

The Government has now produced its 4th iteration of advice and guidance on the Coronavirus Job Retention Scheme in the form of a Direction to HMRC authorising payments under the scheme which can be found at:


What’s new?

Employees who were employed on 19 March 2020 (previously 28 February 2020) are now eligible for furlough, provided the employer had submitted real time information payroll data by that date. This is likely to have been a reaction to complaints from new starters that they were excluded. The 19th March was just before the scheme was announced, so HMRC believe that later date still prevents fraudulent claims.

The Scheme is not limited to those employees who would otherwise be made redundant. It is applies to any who are furloughed “by reason of circumstances as a result of coronavirus or coronavirus disease”. This is a welcome clarification that, whilst it is still discretionary for employers, it can be used to assist employees in a wider set of circumstances.

A director who is furloughed can only undertake work to fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of company’s accounts or provision of other information relating to the administration of the director’s company. We flagged in a previous update that this exception was likely to be narrow – and indeed it is, very narrow.

To claim furlough, the employer and employee must have agreed in writing that the employee will cease all work (para 6.7). This is significant; the guidance only required notification. The Direction from the Treasury requires written agreement. This may mean that many employees who have already been furloughed may not fall within the meaning of the Scheme. Most furlough letters contain a statement that the employee will not do any work and there is a requirement that the employee agrees either by signing the letter or confirming by email. We will have to see the extent to which paragraph 6.7 will be widely or narrowly interpreted.

The amount of salary for the employee must disregard anything which is not “regular salary or wages”. That includes disregarding any performance related bonus or discretionary payments (including tips), any conditional payments (eg where a threshold must be met) and any non-financial benefits. This is likely to further confuse matters in the motor industry, in particular what amounts to a “performance related bonus” and what is a “conditional payment”. The caveat provided by 7.4(d) to the matters at 7.5 will be open to interpretation.

The employer cannot claim for any salary which is “conditional on any matter” (para 7.4(b)). This may exclude any salary payments which the parties have agreed are conditional on the Job Retention Scheme paying out. It is unclear whether that is going to exclude written agreement for repayment by the employee in due course if the employer is later audited by HMRC, although it is questionable the extent to which HMRC will be able to review such evidence.

The employer can claim for earnings which it “reasonably expects to be paid” to the employee (para 8.1(a)) – that seems to include deferred earnings, deferred until the Scheme pays out (provided they are not conditional on the Scheme paying out).

In conclusion

Whilst this is the latest guidance and amendments are possible, this is the most detailed guidance to date and is likely to be the definitive guidance on how the Job Retention Scheme works. It provides a useful level of detail that has been missing to date but crucially appears to complicate further the discussions regarding the payment of commission as part of a furloughed employee’s salary. Surprisingly the one area not covered (but still a major area of debate) is how annual leave and furlough interact.  We will keep you updated with any further news.