Furlough Leave: New Treasury Direction 22 May 2020

On 15 April 2020, the Government published a Treasury Direction on the Coronavirus Job Retention Scheme (the Scheme).  This was updated last Friday (22 May 2020) and the full updated Direction can be found here but in summary, these are the major changes and clarifications.

Sick Leave

• The original Direction stated that where Statutory Sick Pay (SSP) is payable, the furlough period would not begin until that entitlement to SSP had ended. It went on to say that any subsequent entitlement to SSP was to be disregarded.
• This last sentence has now been removed. Instead, the new Direction confirms that the furlough period will not begin until entitlement to SSP has ended and says that the employer and the employee should agree when the period of sickness incapacity ends, such that the employee then goes onto furlough leave.

Director’s Duties and Occupational Pension Schemes

• The new Direction confirms that a director of a company who has been furloughed will be able to (1) make a claim under the Scheme in respect of an employee of that company and (2) make a payment of salary or wages to an employee of that company. This widens the interpretation of director’s duties.
• The new guidance also confirms that tasks undertaken by an employee whilst on furlough, for the sole purpose of fulfilling their duties as a trustee or manager of an occupational pension scheme will not be regarded as work under the Scheme.

Agreement in Writing

• To claim furlough, an employer and an employee must have agreed that the employee will cease all work in relation to their employment. The original Direction stated that this had to be agreed in writing.
• The new Direction seems to suggest that this isn’t strictly necessary. Instead, it states that the agreement between employer and employee must specify the main terms and conditions upon which the employee will cease work, be incorporated (either expressly or impliedly) into the employee’s contract, and be made in writing or confirmed in writing by the employer.
• The new Direction goes on to require that the employer retain the agreement or confirmation until at least 30 June 2025, so essentially for five years.

Training whilst on furlough and unpaid leave

• The new Direction sets out detailed guidance on the type of training an employee can do whilst on furlough. The Direction confirms that an employee can, for example, undertake training to improve the performance of the employer’s business as long as it does not directly provide a service to the employer, contribute to their business activities or generate income or profit.
• It also provides further detail on how the Scheme applies to employees on unpaid leave and confirms that a claim cannot be made in respect of these periods (see paragraph 6.5 of the Direction).

Pay

• The new Direction confirms that anything that is not regular salary or wages must not be included in the calculation of an employee’s ‘reference salary’.
• ‘Regular’ means the amount of the salary or wages that cannot vary according to a relevant matter except where the variation in amount arises from a non-discretionary payment.
• ‘Relevant matters’ include the performance of the business of the employer and non-discretionary payments include payments in respect of overtime, fees or commissions or payments in recognition of the employee undertaking additional or exceptional responsibilities. The Direction confirms that such payments are only to be included as ‘regular’ if they arise from a legally enforceable agreement, understanding, scheme, transaction or series of transactions.

Transferring employees

• The new Direction confirms that a new employer is now eligible to claim under the Scheme in respect of employees of a previous business transferred after 28 February 2020, rather than only after 19 March 2020 as was previously the case. This change chimes with the Government guidance issued on 30 April 2020.

Duration of the Scheme

• The new Direction confirms that the Scheme will be extended until 30 June 2020. However, somewhat disappointingly, the Direction does not deal with the promised extension to 31 October 2020 or the changes to the Scheme that are due to take effect on 1 August 2020. We await further guidance on this point which was promised at the end of this month.

We will continue to monitor the situation and provide further updates as they become available. If you have any questions, please contact Linky Trott or any member of the Furlough Advice Team.

To view our previous blogs on furlough leave, please click here.

 

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