Sentient Group Ltd
Info Update 2020/29                                                         Issue Date: 27/05/2020
Furlough Scheme Updated
Just before the bank holiday weekend (Friday afternoon) HM Treasury released a further Treasury Direction for CJRS giving little chance for us to advise you of any changes this brought about. It really does not change a lot but provides further clarity on the areas of uncertainty between the Direction dated April 15th and the separate CJRS Government Guidance that we have reported on previously.

Claims for the 80% of Furlough pay under the CJRS after May 22nd 2020 will need to comply with the amended Direction but any claims made before May 22nd should comply with either the previous Direction dated 15th April or the May 22nd Direction. We believe they have realised the previous documents caused confusion and are taking a pragmatic approach. We recognise that the previous guidance documents have led to a certain degree of re-work regarding communications with employees in the early weeks of lock-down and this was frustrating for us all.

However, things are shaking down and one key change in the new Direction addresses the conflict about whether written agreement with employees was required or not. If you remember it was required by the first Direction but not by the HMRC Guidance. This new Direction removes that explicit requirement and resolves the previous inconsistency between the Direction and HMRC's guidance on this point.

The Direction now states that the agreement must be made or confirmed in writing by the employer. The agreement must specify the main terms and conditions and be incorporated into the employee's contract, although this can be by implication. The agreement may also be by collective agreement with a trade union. An employer must retain the agreement/confirmation until at least 30 June 2025.

Other changes of note are:
  • An employer and employee can agree to end a period of SSP and then put the employee on furlough.
  • A CJRS claim cannot be made for a period of unpaid leave and furlough leave cannot commence until any period of unpaid leave has expired. (Under the present terms the Employer and Employee could agree to end a period of leave earlier to commence furlough).
  • The Direction now explicitly allows employed directors who are themselves furloughed, in addition to fulfilling their statutory duties, to make CJRS claims and pay employees' wages. It appears that dealing with other payments (e.g. to suppliers/landlords) or other tasks required to keep the business running are still not permitted.
  • The Direction allows an employer to make a CJRS claim before they pay the employee the full amount to which they are entitled under the CJRS, provided that the employer intends to pay them within a reasonable period of receiving the CJRS grant. Employers who are experiencing significant cash flow difficulties may find this additional flexibility helpful.
  • Study and training can be undertaken provided; the purpose of the study or training is to improve - 
(i) an employee’s effectiveness in the employer’s business, or
(ii) the performance of the employer’s business,
But does not provide a service, contribute to business activities, generate income or profit or contribute to the production of goods or supplying of services.
  • A trustee or manager of an occupational pension scheme can carry out their duties in respect of the same except where the Employers business is the provision of these services.
  • When calculating the reference salary, the following must be excluded;
(i) benefits in kind;
(ii) anything provided or made available in lieu of a cash payment otherwise payable to the employee (including salary sacrifice schemes);
(iii) anything which is not regular salary or wages.
But variable non- discretionary payments for overtime, fees, commissions, or additional duties will be included.
  • For those employees transferred under TUPE the relevant date for Transfers has been changed to February 28th 2020. It has also been confirmed that the CJRS will cover those employees transferred from an insolvent transferor. Additionally, a CJRS claim may be made in respect of those employees who do not have the full qualifying furlough period of 21 days owing to a TUPE transfer.

All of this relates to the scheme up until 30th June 2020 but the scheme has been extended until October. We know the scheme should remain as it is until the end of July and we still await guidance on how the scheme will be amended from August onwards. So further Treasury Direction will be coming! Watch this space.
The advice and comment in this update is not meant to be an authoritative statement of the law. The articles and summaries should not be applied to any specific set of facts and circumstances without seeking further advice. Whilst every care is taken to ensure that the content is correct Sentient cannot accept responsibility for the accuracy of statements made nor the result of any actions taken by individuals after reading such.
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Ilkley Road
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