Updated 6th April 2020
HMRC has released over the weekend new information on the Coronavirus Job Retention Scheme (JRS). This provides points of clarification and include:
- An employer can claim for any regular payments it is obliged to pay its employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded. By “obliged” we interpret this to mean a contractual right. This is good news for those employees whose bulk of their wage is commission based.
- However the reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary. Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme. (Note: Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly).
- Employees can be furloughed multiple times, i.e. they can be furloughed, brought back to work, then re-furloughed (subject to each furlough period being at least three weeks)
- Employees can start a new job when on furlough (meaning they might end up earning 80% of the old salary and 100% of a new one). This was not prohibited in the earlier guidance, but the new guidance expressly allows it. The guidance does say it has to be allowed under the current employment contract, but presumably the existing employer can waive that should it choose to do so.
- A clear audit trail MUST be in place, demonstrating each employee within the company has given written consent to their employer to agree to be furloughed. All companies in the scheme will have to ensure that all furlough documentation remains available for a period of 5 years following the end of the scheme.
While we already know that directors could be furloughed there is further explanation on this point although we are no clearer on what ‘statutory duties’ actually cover for company directors?
Whether employees can be required to take annual leave when on furlough also remains un-answer, although many employers may consider this as a technical question they do not need answered.
It is anticipated that HMRC will carry out investigations on the take up of the JRS and will potentially focus on the SME sector.
HMRC will no doubt have the power to issue significant penalties as a result of non-compliance.
Finally it is interesting to note that HMRC state furloughed employees should be “encouraged to undertake training”.
The full guidance can be found here.
If you have concerns or questions, please contact us on 01932 830664 or a member of the WW Creatives team. As further details are announced, we will keep you informed.
