On Friday 22 May 2020 the Treasury published a new Coronavirus Job Retention Scheme Direction (CJRS) dated 20 May, to modify (and hopefully clarify) the legal framework for the Scheme. This replaces the previous Treasury Direction of 15 April, which we previously reported on. As David Roath discussed in his Job Retention Scheme update, the Direction of 15 April 2020 and government guidance at times conflicted in relation to several matters, causing difficulties for employers (and employment lawyers).
The new Direction aims to resolve these uncertainties and provide greater detail, and in this blog we discuss some key areas which have now been clarified.
It is important for employers to read the new Direction, as claims made after 22 May will have to comply with it.
The new Direction extends the Coronavirus Job Retention Scheme until 30 June 2020. However, as you will probably have heard, the Scheme will now be running until the end of October. Therefore, a further Direction will be needed to extend the current terms of the scheme until 31 July, and another Direction needed to define the new terms of the scheme from August onwards.
Although there have been various reports of the form the CJRS will take from August to October, we are still awaiting the official details and will report on these as soon as they are available.
The Direction of 15 April 2020 stated that, where an employee is off sick, and therefore entitled to SSP, the employer cannot start the furlough period until they have returned from sick leave (or, as is the “new normal” for most of us, are able to work from home again). This however conflicted with the previous government guidance which suggested that if an employee is off sick, an employer can bring the period of sick leave to an end and put the employee onto furlough instead.
As a result, uncertainty surrounded the position in relation to employees who fell within the vulnerable category and were advised to shield. Regulations provide that these individuals are deemed to be incapable of work, and therefore entitled to SSP. Under a strict wording of the previous Direction, these individuals would not have been entitled to be furloughed until their period of shielding comes to an end.
The new Direction resolves this issue, and will enable employers to furlough those individuals who fall within the vulnerable category and therefore have been advised to shield. It confirms that, whilst an employee cannot be paid SSP and receive furlough pay at the same time, the employer and employee can agree to end a period of SSP in order to now start furlough.
Under the scheme, furloughed individuals receive either 80% of their regular wage or £2,500 per month, whichever is lower.
Therefore, the key aspect to consider has always been the meaning of “regular wages”. Under guidance previously issued, it appeared that the intention was that variable commission can be included as falling within “regular wages” if it is a compulsory contractual entitlement. However, discretionary bonuses and discretionary commission payments would not be included.
The new Direction defines “regular” wages as that which:
“(a) cannot vary according to a relevant matter except where the variation in the amount arises from a non-discretionary payment, and
(b) arises from a legally enforceable agreement, understanding, scheme, transaction or series of transactions.”
A “relevant matter” is defined by the Direction 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).
Therefore, commission and bonus payments can be included if they are provided for in the contract and considered to be non-discretionary.
The new Direction has also removed reference to a requirement in the earlier Direction that the payment is “not conditional on any matter.” This created uncertainty, as virtually all commission payments will be conditional on something, such as for example the employee being ready and available to work.
Again, this was an area where previous government guidance and the earlier Direction conflicted. Guidance stated that an employer only needed to “confirm in writing to their employee confirming they have been furloughed”, whilst the Direction stated that the employer and employee would have to agree in writing.
The new Direction now provides that, for the purposes of eligibility to make a claim, the required instruction for the employee to cease work is satisfied if:
We had been advising employers previously that they may want to take a cautious approach and, if they hadn’t obtained the express agreement of their staff in writing, they could look to send a follow-up email to obtain that agreement. This was the case even for those employers who were paying full pay (i.e. topping up).
As the new Direction confirms that there is a requirement both for an agreement and for this to be made in writing or confirmed in writing by the employer, this advice still stands.
If you would like further guidance in relation to the above, please contact a member of the Employment team.
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This update was co-written by Adam Wheal, Trainee Solicitor and Clive Dobbin, Partner.