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Updated Treasury Direction issued on the Coronavirus Job Retention Scheme

27 May 2020

On Friday 22 May 2020 the Chancellor issued an updated Treasury Direction which deals with the Coronavirus Job Retention Scheme (CJRS). The updated Treasury Direction clarifies a number of matters including:

  • extending the CJRS to 30 June 2020;
  • amending the wording about the form of agreement required to place an employee on furlough;
  • amending the wording of the statutory sick pay (SSP) provisions;
  • setting out more detail on the definition of ‘regular’ pay that can be claimed for under the scheme;
  • setting out guidance on the study and training an employee can do whilst on furlough;

Many of these clarifications incorporate into the updated Treasury Direction matters which are already set out in the government guidance on the CJRS. However as the Treasury Direction takes precedence in law over the government guidance it is helpful to have certain matters set out on a firmer legal footing.

What happens from August 2020?

The updated Treasury Direction does not deal with the extension of the scheme to October 2020, which was announced on 12 May or the changes to the scheme that are due to take effect in August 2020. It is expected that from August 2020 employees will be able to return to work on a part-time basis whilst employers continue to claim part of their wages under the scheme and employers will require to contribute towards wages, at pre-furlough levels, of up to 20-30%. Clearly these are important details to allow employers to attempt to carry out future financial planning.

Agreement to be placed on furlough

The amended wording on the form of agreement required to place an employee on furlough removes the explicit requirement in the first Treasury Direction (15 April) that an agreement must be in writing. The requirement now is that the agreement can be made in writing or “confirmed in writing” by the employer. In either case documentation needs to be retained for inspection by HMRC until at least 30 June 2025.

Statutory sick pay and furlough

The amended wording on SSP says furlough cannot begin until immediately after the end of the ‘period of incapacity for work’ for which the SSP is being paid or due to be paid. It goes on to suggest that the timing of the end of the period of incapacity should be determined by agreement between the employer and employee.

What is regular pay for purposes of furlough?

The complications regarding the definition of “regular” pay continue. The amended wording provides that ‘regular’ pay means pay that ‘cannot vary according to a relevant matter except where the variation in the amount arises from a non-discretionary payment’.

‘Relevant matter’ is defined to include business performance, the employee’s contribution, the employee’s performance of his or her duties, and any similar considerations or otherwise payable at the discretion of the employer or any other person (such as a gratuity).

As to ‘variations arising from a non-discretionary payment’, the new wording says that this covers payments such as overtime, fees, commission or piece rates, payments made in recognition of the employee undertaking additional or exceptional responsibilities, payments made in recognition of the circumstances in which the employee undertakes his or her duties or the time when they are undertaken, and payments made in recognition of similar matters. Such payments are only covered if a legally enforceable agreement, understanding, scheme, transaction or series of transactions prescribes the method of calculating the amount of wages or salary payable (whether or not that method involves an exercise of discretion).

What does study and training on furlough mean?

Further guidance is set out about the study and training an employee can do whilst on furlough, without breaching the requirement that a furloughed employee do no work for the employer. The first Treasury Direction was limited in its terms providing that only training which was "directly relevant" to the employee's employment could take place. Meanwhile the government guidance was marginally wider in its scope, providing that training can take place provided that it is not used by the employer to generate revenue for the employer or for the provision of services to the employer.

The updated Treasury Direction now clarifies that study or training can take place if the purpose of the study or training is to improve an employee’s effectiveness in the employer’s business or the performance of the employer’s business. However such study or training must not directly provide a service to the employer or contribute to the business activities of the employer or generate income or profit for the employer or contribute to any significant degree in the production of goods or supply of services by the employer.

Therefore employers are still likely to remain cautious about offering study or training opportunities to furloughed staff. They will not wish, perhaps well intentioned attempts to offer study or training, to have the effect of bringing furlough to an end and limiting access to the CJRS.

This update contains general information only and does not constitute legal or other professional advice.

Employment law

Caroline Carr, Partner: E: cac@bto.co.uk / T: 0141 225 5263
Laura Salmond, Partner: E: lis@bto.co.uk / T: 0141 225 5313
Jacqueline McCluskey, Partner: E: jmcc@bto.co.uk / T: 0131 222 2936
Douglas Strang, Senior Associate: E: dst@bto.co.uk / T: 0141 225 5271

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