The Coronavirus Job Retention Scheme – What’s new?

Just when we thought we had a handle on the Coronavirus Job Retention Scheme (CJRS) and had published a series of questions and answers, the situation changed, yet again, on 4th April in the middle of a weekend break.


What do we know for sure now that we did not know last week?

Employees can start a new job when on furlough

This one surprised me. Although earlier guidance did not strictly prohibit a furloughed employee from starting a new job, as the scheme is intended to protect the UK economy (and presumably employees), allowing them to claim 80% of one salary and 100% of a new one seemed incongruous. But employees can start a new job with a new employer when on furlough with the old one. The guidance does say it has to be allowed under the old employment contract, but the old employer can waive that if it chooses to.

Employees who have been made redundant and those who have left since 28th February 2020 can be re-hired and placed on furlough

The original guidance stated that employees who had been made redundant since this date could be rehired and furloughed. It was less clear on employees who had left their employer. The updated guidance states that ‘If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough …’

A word of caution on this one, while an employer can re-employ employees who resigned after 28 February, it does not have to. This remains at the discretion of the employer. There are other issues to consider – importantly, these employees will continue to accrue statutory rights and their holiday.

An Employer can include compulsory commission, past overtime and fees

An employer can reclaim 80% of the ‘regular payments’ it is obliged to make to employees back from HMRC under the CJRS.

The new guidance clarifies that the regular payments will, in addition to basic salary, include compulsory commission, past overtime and fees. By ‘compulsory’ we believe the guidance is referring to contractual pay. This would benefit an estate agent, for example, whose salary comprises of both basic pay and a guaranteed contractual commission payment.

Discretionary bonus (including tips) and non-contractual commission payments and non-cash payments remain excluded. Bad news for waitressing staff, no doubt.

The 80% does not include benefits in kind and salary sacrifice

Wages and salary do not include the cost of non-monetary benefits provided to employees.

Where an employer provides non-monetary benefits to furloughed employees, these should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.
Importantly benefits provided through salary sacrifice, such as pension contributions, should not be included in the reference salary.

Employers operating salary sacrifice will know that this is an arrangement whereby the employee agrees to reduce their annual earnings by an amount equal to their pension contributions. In exchange, the employer agrees to pay the total pension contributions, thus reducing employee NI contributions.

If the employee’s annual salary is £30,000 and £2,000 is paid into their pension as a salary sacrifice, the reference salary becomes £28,000 for the purposes of the CJRS grant. For this reason, some employees may not want to remain in the salary sacrifice scheme.

COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements

This is another useful clarification from HMRC and could benefit furloughed employees whose basic annual salary is less than £30,000 and who participate in a salary sacrifice scheme. Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 does count as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly. Accordingly, employees who are furloughed can opt out of the salary sacrifice scheme.

What’s still unclear?

The interplay between furlough and annual leave remains uncertain. Employment lawyers have never had an easy time explaining annual leave and the situation is no different now.
We know that annual leave continues to accrue when an employee is furloughed.

What remains unclear, however, is whether annual leave during furlough will interrupt furlough leave (employees must be on furlough leave for at least three consecutive weeks to benefit from CJRS). At present there is nothing in HMRC guidance suggesting annual leave will interrupt furlough.

This of course leaves open the question of pay and what remuneration employees would be entitled to if they took annual leave during furlough. Acas guidance published on 2 April 2020 suggests that furloughed employees can still request and take holiday in the usual way but does not state whether they should be paid their normal remuneration or the furlough rate.

Until this is clarified we suggest caution. We remain bound by EU law which is clear that during the first four weeks of annual leave employees should receive their normal remuneration to include regular overtime, bonuses and commission. Logic would suggest that ‘normal remuneration’ has to be viewed over a longer period than the period of furloughed leave and since 6th April 2020 should be referenced to average earnings over the previous 12 months. Time (and hopefully a new update) will tell if this is the case

Link to HMRC guidance: