The CJRS: a developing picture

The Coronavirus Job Retention Scheme (CJRS) went live, as planned, on 20 April. The number of employees reported as furloughed is in the millions. The first reimbursements were due to be made on 30 April. Payments will take four to six days to be processed, to allow HMRC to carry out fraud checks. HMRC will consider criminal proceedings where appropriate.

As at 1 May, the CJRS is extended until 30 June 2020 (from an initial end date of 31 May).

Any entity with a UK payroll (through PAYE) can claim, so foreign companies employing people in the UK through PAYE will be eligible.

While almost all employers were confirming furloughs in writing, this is now a requirement. You must keep evidence of the written confirmation for five years. Ideally, employers should also seek written agreement, although this does not currently appear to be being insisted on, despite the terms of the Treasury direction.

Workers covered

Employers can claim for furloughed employees who were on PAYE payroll, and notified to HMRC on a real time information (RTI) submission, on or before 19 March 2020. This was amended from an earlier date of 28 February. Employees who were employed as of 28 February and on payroll (i.e. notified to HMRC on an RTI submission on or before 28 February), but were made redundant or stopped working for the employer prior to 19 March, can also qualify if the employer re-employs them and puts them on furlough.

Employers may furlough “workers” who are not employees (sometimes called “limb (b) workers”) if they are paid through PAYE. If not paid through PAYE, they may be able to claim independently under the Self-Employment Income Support Scheme (SEISS). Agencies can furlough agency workers if they are paid through PAYE (though, as the guidance says, they should first discuss this with the end client).

Fixed-term employees can have their contracts renewed or extended during furlough and the employer will remain eligible for the scheme grant. As you would expect, the grant stops for a fixed-term employee whose employment ends.

Furloughed workers can do volunteer work, and employers can help them find such work without jeopardising their claim under the scheme. They can also undertake training.

A furloughed employee is also entitled to take on a new job, not just continue an existing second job, provided that is not in breach of their contract. It appears the first employer can waive any obligation not to take additional employment, but it would make sense to state expressly that this is only for the furlough period.

Employers may furlough employees on and off, subject to the three-week minimum furlough period (which applies for each period of furlough).

Employers may also furlough employees who hold tier 2 visas; this will not constitute a breach of the minimum salary threshold.

Guidance also now confirms that the scheme covers company directors with an annual pay period, provided they meet the relevant criteria.

Annual leave and bank holidays

Since the Government announced the CJRS, questions have been raised regarding how furlough and annual leave interact. Long-sought clarification arrived when the Government updated its guidance (on 20 April) to state that employees can take holiday leave whilst on furlough leave.

Employees are entitled to their usual holiday pay for holidays taken whilst on furlough, in accordance with the Working Time Directive and the Working Time Regulations. If employers are paying employees at 80% of wages during furlough, they will be obliged to top up the grant to full normal pay for any holiday days.

As regards bank holidays, the guidance states that, if the employee usually works bank holidays, the employer can agree that this is included in the grant payment. If the employee usually takes bank holidays, the employer will either have to top up to their usual holiday pay, or give the employee a day of holiday in lieu.

The Government’s policy approach on annual leave and furlough remains under review. It has confirmed that furloughed workers planning to take paid family-related leave will be entitled to pay based on their usual earnings rather than the furloughed pay rate.

First judgment

In what must be the first judgment on the CJRS (all hearings were carried out remotely), the High Court issued directions to the administrators of Carluccio’s Ltd in relation to furloughing employees. In doing so, it confirmed that administrators are able to furlough employees under the CJRS and how funds paid out by the scheme are to be treated.

That administrators can utilise the scheme is in itself not breaking news. The Government’s guidance expressly states that administrators will be able to access the CJRS provided there is a “reasonable likelihood of rehiring the workers”. The High Court confirmed that this could (and most likely would) involve employees resuming work having transferred to a buyer following a business sale. The judgment goes on to consider in detail the existing statutory mechanism that administrators can use to make furlough payments. Critically, funds paid out by the scheme are effectively protected from other creditors and therefore can be used exclusively to pay the furloughed employees.

Both administrators and employers should welcome the proactive approach demonstrated by the High Court in this case. It is hoped that this approach is followed in other cases to find practical solutions to the questions posed by the CJRS.

Wage costs

Employers can now claim for obligatory “regular payments”. This includes past overtime, fees and commission payments that the employer is obliged to pay. This would seem to include things like regular shift premiums too, although there is still debate about that. Employers may not claim for discretionary bonuses and tips.

Employers can claim for enhanced maternity, adoption, paternity and shared parental pay under the scheme (subject to the normal scheme requirements applicable to ordinary wage costs).

They cannot claim the cost of non-monetary benefits, including taxable benefits in kind. Similarly, they cannot include benefits provided through salary sacrifice (including pension contributions) in the reference salary. Redundancy pay is expressly excluded, but there is no mention of notice pay.

Next steps

Has your business (or your clients’ businesses) considered what its next steps will be when the CJRS ends? If you would have to consider large numbers of redundancies, have you considered the collective consultation timetable?

With no certainty over how long the current restrictions on movement will last, employers need to plan for the worst while hoping for the best.

As a reminder, if a business proposes 20 or more redundancies within a 90-day period, it will trigger the obligation to consult collectively for a period of at least 30 days before the first dismissal takes effect. If a business proposes 100 or more redundancies within a 90-day period, the collective consultation period increases to 45 days.

If your business (or your clients’ businesses) does not recognise a trade union, and does not have a standing body of appropriate representatives, collective consultation requires you to organise an election of employee representatives. Bear in mind that the relevant legislation sets out prescriptive rules on the election process. There are challenges as to how these elections (and subsequent consultation) will take place remotely. This means there is even more reason to start preparing early and to gear your clients up to doing so.