HMRC updated ten Guidance documents relating to the Furlough Scheme on 10 November 2020, to cover the extension to the Scheme.
In essence, the updated documents provided that:
- the extended Scheme runs from 1 November 2020 to 31 March 2021, although the Government will review the terms of the Scheme in January 2021 (including crucially whether employers will need to start contributing towards a furloughed employee’s pay for their non-worked hours);
- there is no requirement for employers to have used the Scheme before or for employees to have been furloughed before;
- there is no cap on the number of employees who can be furloughed;
- employers can claim 80% of an employee’s usual salary for hours not worked, up to a maximum of £2,500 per month, but will need to pay employer’s NI and employer pension contributions – this is broadly equivalent to the position in August;
- employers can only claim for furloughed employees who were employed and on payroll on 30 October 2020 (subject to specific rules about employees who transferred under TUPE – see below). An RTI submission must have been made to HMRC between 20 March 2020 and 30 October 2020;
- employers can re-hire and furlough employees who were employed and on payroll on 23 September 2020 but thereafter made redundant (or otherwise stopped working for the employer such as through expiry of a fixed-term contract). An RTI submission must have been made to HMRC between 20 March 2020 and 23 September 2020;
- employers can fully furlough employees, or put them on flexible furlough;
- employees will not be able to do any work for their employers during their unworked furlough hours;
- an employer needs an employee’s agreement to be furloughed and if the agreement is to be retrospective (i.e. backdated to 1 November 2020) then it needs to be in place by 13 November 2020;
- for employees who were eligible under the previous scheme (whether or not actually furloughed), the previous calculations must be used in the calculation of wages;
- for employees who were not eligible under the previous scheme but meet the requirements for the new Scheme, new calculations have been provided;
- claims for November 2020 need to be made by 14 December 2020 and claims for each subsequent month need to be submitted by the 14th of the following month;
- from December 2020, HMRC will publish the names of employers who have claimed under the Scheme from December 2020;
- the Job Retention Bonus will not be paid in February 2021. Another “retention incentive” will be “deployed at the appropriate time”;
- the Job Support Scheme has been put on hold.
As might be expected in relation to any new set of rules, there were various areas of concern and uncertainty in relation to the extended Scheme.
The Government then published and updated Direction late in the afternoon of Friday 13 November 2020, which clarified some of those issues, as follows.
1. Backdating Furlough arrangements
The updated Guidance said that, if employers wanted to enter into a furlough arrangement with an employee which is to be backdated to 1 November 2020 (which is when the extension to the Scheme took retrospective effect), they were required to have a valid furlough agreement with the employee in place by Friday 13 November 2020.
It was not clear whether this rule also applied to a period of furlough which started on 2 November 2020 or later.
The Direction has confirmed that the rule applies to any period of backdated claim between 1st and 13 November 2020 (see Para 7). It was perhaps harsh for employers that this was confirmed so late.
The Direction also confirms that an agreement with the employee must be made or confirmed in writing before the start of the relevant claim period to which the agreement relates (but may be varied during the claim period).
2. TUPE transfers
According to the updated Guidance, the new employer of an employee who that employer inherited under TUPE could only make a furlough claim in respect of that employee if the employee was employed by old or their new employer on 30 October 2020 (a correction from the previous guidance) and transferred from the previous employer to the new employer on or after 1 September 2020. An RTI submission must have been made to HMRC (by either their new or old employer) between 20 March 2020 and 30 October 2020.
This has been confirmed by the Direction, which provides that the TUPE transfer needs to have happened between 1st September and 20 October 2020 (Para 29).
3. Furlough claims during notice periods
Under the old furlough scheme, the view was taken that employers could make furlough claims for employees who were serving out their notice periods.
The Policy Paper said that the Government was however apparently reviewing this position, and might change the rules in respect of any notice periods starting on or after 1 December 2020 (with further guidance promised by the end of this month).
The Direction has confirmed that employers may not make CJRS claims for periods of notice (whether statutory or contractual) running between 1st December 2020 and 31 January 2021 (Para 27).
This approach is likely to encourage employers to serve notice on employees this month, which does not seem to meet the aims of the extension to the Scheme.
4. Re-engaging former employees
If an employer has made employees redundant, or they stopped working for their employer, on or after 23 September 2020, the employer can re-employ them and put them on furlough, under the new rules.
Whilst this initially seems to be a good way of keeping employees in post, we would recommend that advice is sought on the specific circumstances. Some issues to consider include:
- whether it would be worth the employer doing this, if the employee’s post has essentially disappeared;
- what type of contract the employee would be engaged on, and any additional costs to the business;
- the risks of discrimination claims if employers do not make offers of reinstatement to all of their employees who would be eligible for furlough under this new rule; and
- whether it would be possible to recoup the former employee’s redundancy payment, any payment in lieu of notice or any other payments made to such an employee arising from their dismissal (this is unlikely to be possible without the employee’s agreement).
5. Publication of claim details
The Direction confirms that, from December 2020, in addition to HMRC publishing the names of employers who have claimed under the Scheme from December 2020, HMRC may also publish a “reasonable indication” of the amount claimed, unless an employer can show that publication would expose them to “serious risk of violence or intimidation”.
In summary, the extension of the Scheme is to be welcomed as a way of saving jobs and improving cashflow for employers. It is a pity however that the rules were not set for the whole of the furlough extension period right from the beginning, and that the rules were not published before the extension period started, as any uncertainty makes it considerably harder for employers to plan for the future.