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Coronavirus Job Retention Scheme – revised Treasury Direction - UK

  • United Kingdom
  • Coronavirus - Workforce issues
  • Employment law


On 12 May, the Chancellor made an important announcement about the Coronavirus Job Retention Scheme (“CJRS”), confirming that it will continue until end of October. He indicated that furloughed workers will continue to receive 80% of their current salary, up to £2,500, and new flexibility will be introduced from 1 August. It was also suggested that further details of these changes will be supplied by the end of this month.

With employers and employees keen to know exactly what the planned changes will be, on 22 May the Government published a further Treasury Direction (“revised Direction”). The revised Direction is said to be aimed at clarifying some provisions within the original Direction dated 15 April and, it would appear, aims to reflect the ever-evolving CJRS Guidance. As we indicated in our previous Alert, a Direction amounts to a legally-binding order from the Treasury to HMRC, with which HMRC must comply. As such, it sets out the legal framework for the CJRS.

The revised Direction does not deal with the extension of the CJRS to October, nor the changes which are expected to take effect in August. However as any claims for payment under the CJRS submitted on or after 23 May must comply with this revised Direction, there are a number of issues which are worthy of note by employers.

Issues clarified by the revised Direction

The substantive changes to the Direction are as follows:

  • confirmation of the original extension of the CJRS to end June
  • where SSP is in payment or due to be paid, employers and employees can agree to end a period of incapacity to work and instead furlough staff. This appears to be aimed at the situation where an employer agrees to furlough someone whose is eligible for SSP because they fall within the “clinically extremely vulnerable” group of people who have been advised to shield, rather than them being unwell
  • a person is a “furloughed employee” for the purposes of the CJRS if:
    • the employer and employee have agreed that the employee will cease all work (including by collective agreement)
    • the agreement specifies the main terms and conditions upon which the employee will cease all work in relation to their employment and is incorporated into the employee’s contract (whether expressly or impliedly)
    • the agreement is made or “confirmed in writing” by the employer (although note there is no requirement that an employee has signed any written document or agreement)
    • a copy of the agreement is retained by the employer until at least 30 June 2025
  • study or training undertaken during furlough is not regarded as “work”. Its purpose can be to generally improve an employee’s effectiveness in the employer’s business or the performance of the employer’s business. However it should not contribute to business activities, generate any income or profit, or significantly contribute to the production of goods or services for sale
  • the relevant date for TUPE transfers has been changed to 28 February (in line with the latest CJRS Guidance). The TUPE position in an insolvency has also been clarified, allowing a claim under the CJRS to be made by the transferee even where the transferor has been wound up such that TUPE would usually be disapplied
  • the revised Direction has retrospective effect to cure any “defects” in previous claims which would not necessarily meet these new rules

How the revised Direction affects “regular” pay calculations

The revised Direction no longer includes the ambiguous requirement that, when calculating “regular salary or wages” for CJRS purposes, any part of the salary or wage which is “conditional upon any matter” should be excluded. More significantly, the revised Direction includes wording which allows voluntary overtime payments to be included within the CJRS claim.

The revised Direction thus reflects the latest version of the “Work out 80% of your employees' wages” CJRS guidance, which states that “non-discretionary overtime” can be claimed, and defines this as arising where the employer is contractually obliged to pay for overtime at a set and defined rate in the event that overtime is worked. This is a broader definition than in the previous Guidance/Direction. The focus now is on whether the employer is legally obliged to pay for any overtime hours worked, and whether there is a legally enforceable method of calculating the overtime payment. It does not matter whether the employee was contractually required to work the overtime or whether the overtime itself is categorised as compulsory, guaranteed or voluntary.

In fact, the revised Direction goes further than the Guidance. The definition of “non-discretionary payments” to be included in regular pay includes those for overtime, fees, commission or piece rates and other similar payments such as shift allowances. The key issue in each case, again, is whether there is a legally enforceable agreement setting out how such payments are to be calculated. If so, and if these payments were part of the wages paid to workers during the period relevant for calculating the claim under the CJRS, they may be included.

Now this approach has been confirmed in the revised Direction, it is clear this is how employers must calculate regular pay for CJRS claims submitted on or after 23 May. In practice, this is likely to be particularly significant where the claim is made in respect of “variable pay” employees. The employer’s obligation is to pay the furloughed worker 80% of the higher of average pay in 2019/20 or equivalent pay in the same month last year, so it is important that the calculation includes all elements which count towards regular pay.

Implications for pre-existing and future claims

Although the revised Direction does not set out the much-awaited details regarding the future implementation of the CJRS, these are expected to be announced imminently. The revised Direction is, in essence, an update which reflects the numerous changes already made to the various CJRS guidance documents, but also provides some helpful clarifications which will be relevant for claims submitted on or after 23 May. However, in our opinion, the revised Direction should not create any issues for employers in relation to CJRS claims which have already been made in accordance with the original Direction.

This note is a generic briefing, based upon the Treasury Direction published on 22 May 2020 and Government Guidance available as at that date. It is not a substitute for detailed legal advice on the specific circumstances employers are facing.