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06th April 2020

Coronavirus Job Retention Scheme: An Update from HMRC

HMRC has published guidance on the Coronavirus Job Retention Scheme (the Scheme), in particular in respect of an employer’s claim for wages of employees on furlough leave due to COVID-19.
As we know, where an employer cannot maintain their workforce due to the fact that their business has been severely affected by COVID-19, they can claim 80% of the furloughed employee’s usual wage costs, capped at £2,500 (gross) per month, plus the associated employer’s National Insurance Contributions and minimum automatic enrolment employer contributions on that wage.

Whilst the guidance does include a significant amount of information we were already aware of (albeit providing some further flesh on the bones), HMRC has helpfully clarified some areas which were unclear to date and had employers, lawyers and academics making educated guesses as to what the Government intended.

Many such clarifications will come as welcome news to employers who have already furloughed staff or are considering furloughing. We have highlighted below some of the main take away points for employers from this latest guidance.

Can apprentices be furloughed?

Yes, apprentices can be furloughed in the same way as other employees. Furthermore, apprentices can continue to train whilst furloughed, subject to the requirement to ensure that they are paid at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (as appropriate) for the time spent training.

Practically, this means that if there is a shortfall between the amount claimed in respect of the apprentice whilst on furlough leave and their appropriate minimum wage, the employer will need to cover it.

Can employees that need to look after children be furloughed?

Yes, HMRC has confirmed that employees who cannot work because they have caring responsibilities resulting from COVID-19 can be furloughed.

Can employees take on a new job whilst furloughed?

Whilst the Scheme specifically prohibits furloughed employees from undertaking any work which makes money or provides services for their employer, HMRC’s guidance has confirmed that such employees are permitted to work for another employer whilst on furlough. This could mean that an employee would earn 80% of their wages (capped at £2,500 per month) from their current employer under the Scheme as well as earning 100% of wages by taking on a new job with a new employer.

It is worth remembering, however, that furloughed employees are still employed whilst on furlough leave and so whether or not they are able to take on other work whilst furloughed will ultimately be subject to the terms and conditions of their contracts of employment. In most cases such contracts will have clauses in them which prevents the employee from working elsewhere without their employer’s consent.

Whilst the new guidance is therefore welcome news to employees who may want to take the opportunity to top up from 80% (particularly if they are high earners and their pay will be capped at £2,500 per month), in most cases it will still be down to their employer as to whether they can take on a new job whilst on furlough leave.

Can employers claim back commission, overtime, fees or bonus?

Whilst previous guidance indicated that the wages that employers could claim for meant actual gross salary as at 28th February 2020, excluding any fees, commission or bonus.

HMRC’s latest guidance, however, has confirmed that employers are able to claim back “any regular payments you are obliged to pay your employees”.

In terms of what this means, HMRC has clarified that this not only includes an employee’s wages but also past overtime, fees (although there is no clarification as to what is meant by fees) and compulsory commission payments. This will be welcome news for employees who work in sectors or roles which are heavily commission based (for example, estate agents or salesmen).

However, discretionary bonus and commission payments cannot be claimed.

Can employees be furloughed more than once?

Yes. Whilst unclear to date and so subject to speculation, HMRC has confirmed that employees can be furloughed “multiple times”, provided that each time they are furloughed for the minimum period required of 3 consecutive weeks.

Must an employee’s agreement to being furloughed be recorded in writing?

Yes. Whilst previous guidance did not require this, HMRC has confirmed that employers should discuss furlough with their staff and make any changes to the employment contract by agreement.

Any such agreement by employees to be furloughed must be confirmed in writing in order for the employer to be eligible for the grant.

Further, HMRC has stated that the written record of the employee’s agreement to be furloughed should be kept for 5 years (presumably in case of audit).

Whilst HMRC’s guidance has provided some clarity there are still a lot of unknowns, including in particular the conundrum of whether employees can take annual leave whilst furloughed, in respect of which many legal commentators and academics disagree.

You can read the full guidance from HMRC by clicking here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme?mc_cid=177bacbc11&mc_eid=3323199c95.

If you wish to discuss any of the contents of this article, please contact Lynne Adams in our Employment Team on 01908 247025 or click here to email Lynne, who will be happy to assist.
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