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Employment Law Update - Covid-19 - Furlough Leave – are we there yet?

The HMRC portal for claiming Furlough Leave payments is up and running. HMRC says it is confident that the system has capacity to deal with all claims and that it will make payments within 6 days of application. The proof will be in the pudding.

In advance of opening the portal the Government issued a flurry of further information in the latter part of last week, a fair amount of it on Friday afternoon. Clarification has been added, but there remain gaps and inconsistencies.

The full amount of information is now vast, but I thought it may be helpful to highlight a few points:-

Length of the scheme – It has now been extended to 30th June and could be extended further. It is thought that this change was undertaken now because some larger employers contemplating mass redundancies once the scheme ends would by law have had to start mass consultation by the middle of April. That wouldn’t have been great for morale at this very uncertain time and particularly so when businesses have no inkling of the ‘exit’ strategy and therefore cannot plan effectively.

The extent of the agreement between employer and employee – In the middle of last week the Treasury issued a Direction to HMRC setting out how it is required to operate the Furlough scheme. The document isn’t the easiest to understand, but said that in order to make a claim in relation to an employee there had to be a written agreement between the employer and employee, which could be in electronic form and in relation to which the employee specifically agreed to cease all work in relation to their employment. Prior to that point it had been understood that obtaining written consent from employees wasn’t essential. The various editions of the Guidance issued to employers, and we are now on our fifth version, have said different things. Subsequent to the Direction, Friday afternoon’s Guidance says that the agreement between employer and employee needs to be consistent with employment law and specifically envisages that this doesn’t necessarily mean that a written response is required from the employee. Good practice must be for employers to seek confirmation of agreement in writing, but if this is not possible it would seem that all is not lost.

Holiday during Furlough Leave – This has been one of the major omissions from earlier versions of the Guidance and indeed is still not dealt with in the Primary Guidance for Employers or the Direction. However, it is now addressed in the Guidance for Employees for the first time and in a Supplemental Guidance document on how to work out 80% of an employee’s wages. We already knew that holiday accrued during Furlough Leave. It is now clear that it can be taken during this period, but that when holiday is taken employers need to top up pay to 100% calculated in accordance with the Working Time Regulations.

The date by which an employee had to be working for an employer to be eligible – This has changed from 28th February to 19th March with a view to helping those who were newly employed after 28th February but before the Furlough scheme was announced. However, in practice a lot of new employees still won’t come within this scheme as if HMRC had not been notified of their employment through Real Time Information (RTI) by 19th March (which will include some late February starters) they are excluded.

How to calculate the 80%? – I have left the best – or perhaps the most complex – to last. The Government has now published supplemental guidance to employers specifically to help work out 80% of employees’ wages for calculating under the scheme. The following is included:-
• Regular wages
• Non-discretionary overtime
• Non-discretionary commission
• Non-discretionary fees
• Piecework payments
The following is not included:-
• Tips
• Discretionary bonuses
• Discretionary commission payments
• Non-monetary benefits including company car
• The¬ following are not included: -
It is also clear that salary sacrifice arrangements including pension related salary sacrifice and reduced taxable pay should not be included in the calculation.

In most cases this will assist, but there are significant situations which fall through the gap. In this respect, the Direction provides some further clarity and in particular appears to rule out any payments which vary according to the performance of the business or part of it or the performance of individual employees.

Precisely what is and isn’t included is likely to be the biggest source of argument in years to come. What is clear though is that anything paid by HMRC must relate to what has already been paid to the relevant employee or will very soon be paid to that employee and an employer cannot adjust the way in which it makes the payment, for example paying some of the sum into a salary sacrifice arrangement.


All clear then? The complexities of putting in the application should take minds off other things going on at the moment! The Government’s supplemental guidance on how to claim and how to calculate the 80% are key reading for anyone operating a payroll.

Stay safe everyone.

Nigel Tillott, Head of Employment and Regulatory Law, DDI 01452 689100 


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