The Treasury has released its most recent Treasury Direction, dated 25 June 2020. This is the semi-legislative framework provided by the Treasury to HMRC, essentially telling HMRC how to operate the Furlough Scheme.

Despite some unease over the drafting of the new Treasury Direction, it is confirmed that  money claimed under the furlough scheme must be used to continue to pay employees, which includes payment of monies due for a notice period, as during that time the individual continues to be an employee.

Paragraph 2.2 of the Treasury Direction does now make it clear beyond dispute that claims cannot be made under the furlough scheme to pay in lieu of notice, or to pay statutory redundancy payments.

As we mentioned in our previous update, from 1 July 2020 employers can bring furloughed employees back to work part-time (and still claim for furlough under the scheme for the hours the employee doesn’t work) - it will be up to businesses how to manage the split. The Government will contribute 80% furlough pay (subject to a cap of £2,500 per month) for time spent not working and staff must be paid full pay for time worked.

The guidance states that you need a “new written agreement” to confirm the new furlough arrangement. It’s not clear if you need separate agreements each time you flex the furlough period (which would be really cumbersome) or if you can make provision for this in one document which provides for flexibility which would make much more sense.

Employers should also be aware of changes to the claim process.  Any claims in respect of the original scheme ( covering the period up to the end of June) must be for a three week or more period and be made by 31 July.  From 1 July, any claim must start and end in a single calendar month.  More than one claim can be made each month although they must all be for at least a seven-day period.

Phased reductions in financial support

Currently, employers can claim grants under the JRS equal to 80 percent of a furloughed worker’s reference pay (capped at £2,500 per month) plus the associated employer’s NIC and minimum pension contributions.

As previously announced:

·   From 1 July the employer must bear the contractual salary costs of any part time hours worked by a furloughed employee, together with the associated employer’s NIC and minimum pension contributions;

·   From 1 August employers cannot claim a JRS grant in respect of any employer’s NIC or pension contributions;

·   From 1 September the grant will fall to 70 percent of reference salary, subject to a monthly cap of £2,187.50; and

·   From 1 October the grant will fall to 60 percent of reference salary, subject to a monthly cap of £1,875.

The employer must fund the difference between the reducing JRS grant and the minimum payments it is required to make to furloughed employees in respect of non-working hours. Employers must also pay employees for all the hours that they work.