The government’s online Guidance, “Check if you can claim for your employees' wages through the Coronavirus Job Retention Scheme”, was updated on 23 April 2020. It provides further information about which employees are covered by the Coronavirus Job Retention Scheme (CJRS), specifically in relation to former employees and also employees on fixed term contracts. On first reading of the updated Guidance, it appears unnecessarily complex; however, key to understanding the relevant rules is to keep in mind the two critical dates and their significance to the aims of the CJRS.
Two critical dates
In assessing whether an employee is covered under the CJRS, the Guidance identifies two critical dates: 28 February 2020 and 19 March 2020.
The significance of the second date, 19 March, is self-evident: it was the day before the government announced the CJRS. The significance of the first date, 28 February, is not as clear. It was the date on which the first case of a patient with COVID-19 being infected in the UK from an unknown source was reported. 28 February 2020 is, therefore, likely to be considered the date from which the potential impact of the COVID-19 pandemic on the UK became evident; however, we doubt many could have predicted at that time the full impact of the pandemic on today’s society and economy.
Three eligibility criteria
The Guidance identifies three areas of consideration in relation to these two critical dates:
- was the employee employed?;
- were they on the employer’s payroll?; and
- had a Real Time Information (RTI) submission notifying payment been made to HMRC in respect of that employee on or before that date?
Then it gets a little tricky…
Employed on 19 March and then furloughed
The starting point is the general rule that, if an employee (a) was employed on 19 March; and (b) was on the payroll on or before 19 March; and (c) an RTI submission had been made to HMRC on or before 19 March in respect of that employee, the employee is covered under the CJRS.
An employer cannot claim for employees who started employment on or after 20 March, the date on which the CJRS was announced. This is to avoid abuse of the CJRS. The payroll and RTI criteria were likely chosen as traceable evidence of a financial relationship between the individual and the employer from which employment could be inferred, again to avoid abuse of the CJRS.
Employees made redundant or who stopped working for their employer after 28 February
The CJRS also covers employees who were made redundant or stopped working for their employer on or after 28 February, the date on which the potential impact of the COVD-19 pandemic became known, provided that they are re-hired by their employer.
To qualify under the CJRS, there is no requirement that such employees are re-hired on or before 19 March. All that is required is that the employee (a) was employed on 28 February; and (b) was on the payroll on or before 28 February; and (c) an RTI submission had been made to HMRC on or before 28 February in respect of that employee. This is an exception to the general rule that, to be covered under the CJRS, an employee must have been employed on 19 March (and on payroll / been included in an RTI submission on or before 19 March). The logic is to protect the income of individuals whose jobs may have been lost as a result of the COVID-19 pandemic, before their employers knew about the existence of the CJRS, which may well have avoided their redundancies in the first place. It should be noted, however, that there is no express requirement for an employer to show that such jobs were lost as a result of the COVID-19 pandemic.
Employees made redundant or who stopped working for their employer after 19 March
As set out in the general rule above, we know that an employee is covered under the CJRS provided they were employed on 19 March, on the employer’s payroll on or before 19 March, and an RTI submission had been made to HMRC on or before 19 March in respect of that employee. The Guidance confirms that, if an employer subsequently made such an employee redundant or their employment terminated for another reason after 19 March, the employer can re-hire them and place them on furlough leave and the employee will be covered by the CJRS.
How does this apply to fixed-term employees?
The same rules and exception apply to the expiry of fixed-term contracts.
Previous versions of the Guidance had already confirmed that employees on fixed-term contracts could be furloughed under the CJRS and their fixed-term contracts could be extended and renewed while on furlough leave.
If a fixed-term contract expired after 28 February and was not extended or renewed, provided that an RTI submission was made to HMRC on or before 28 February in respect of that employee, an employer may re-hire the employee and that employee would be covered under the CJRS. Although not expressly stated in relation to fixed-term employees, it is assumed that, as for permanent employees, the employer does not need to re-hire the fixed-term employee on or before 19 March for the employee to be covered under the CJRS.
Likewise, if a fixed-term contract expired after 19 March and was not extended or renewed, provided that an RTI submission was made to HMRC on or before 19 March in respect of that employee, an employer may re-hire the employee and that employee would be covered under the CJRS.
Which employees are not captured?
There appear to be three categories of employees which are not covered by the CJRS:
- Those whose employment commenced after 19 March;
- Those employed on or before 19 March but in respect of whom an RTI submission was not made to HMRC on or before 19 March. This could even include individuals employed prior to 28 February, whose employers run monthly payrolls on or after the 20th of each month (for example, an individual could have started employment on 25 February, but the next date on which the employer submits an RTI to HMRC was 20 March); and
- Those employed on very short fixed-term contracts that commenced after 28 February and expired before 19 March.
We imagine those employed after 19 March (once the CJRS had been announced) are deliberately excluded, to avoid abuse of the CJRS. It does, however, seem an unfortunate oversight to exclude those employed before this date but not eligible simply because of the date on which their employer runs their monthly payroll. We will have to wait and see whether there is further Guidance to remedy this.
Is written consent required from an employee to be furloughed under the CJRS?
There are inconsistencies between the government’s Guidance on the CJRS and the Treasury Direction. One critical inconsistency is in relation to the need, or not, for written consent from an employee in order to qualify for a grant under the CJRS. The Guidance, published prior to the Treasury Direction, suggested that a verbal agreement that is recorded by the employer in writing, would be sufficient. The Guidance states that, “employers should discuss with their staff and make any changes to the employment contract by agreement”. It also states that, in order to be eligible for the grant, employers must write to their employee confirming that they have been furloughed and keep a record of this communication for 5 years. The Guidance is specific that there needs to be a written record, but the employee does not have to provide a written response.
The Treasury Direction, on the other hand, indicates that an express written agreement from the employee not to work is necessary. The Direction provides that a furloughed employee must have been instructed to cease all work in relation to their employment and that this instruction will only be effective “if the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment”.
By the time the Treasury Direction was published, many employers had already furloughed staff on the basis of the Guidance.
In some welcome clarification from Jim Harra, HMRC Chief Executive, employers should consider the government’s Guidance in the first instance when seeking to understand the operation of the CJRS. In particular, “the employer and the employee must reach an agreement and an auditable written record of this agreement must be retained. It does not necessarily follow that the employee will have provided written confirmation that such an agreement was reached in all cases.”
This guidance is correct as at 24 April 2020. It is not intended as legal advice and should not be used as a substitute for such advice.