Furlough – further updates to the Coronavirus Job Retention Scheme
5 April 2020
On Saturday 4 April, HMRC amended its guidance to clarify some of the many outstanding questions about furlough. This clarification is helpful, but unfortunately does not address all of the outstanding issues.
The main clarifications, or in some cases pieces of new information, are as follows:
- It is now clear that an employee on furlough can start a new job with another employer whilst still employed by the employer who has furloughed them. The guidance does state that this is only permissible if the original employment contract allows for this. Many full time employment agreements will expressly state that an employee may not have another job whilst in that employment, but the employer may of course waive that provision if they choose to. This could lead to the rather (presumably unintentional) result that an employee could be paid 80% of their wage from their original employer, plus 100% of their wages from the new employer.
- The revised guidance changes the position with regard to commission. The original guidance expressly excluded commission from furlough pay, but the revised guidance says that 80% of “compulsory” commission can be recovered. This is not defined, but it would need to relate to commission already earned before the employee was furloughed as they are not allowed to do any work for the employer during the period of furlough.
- The revised guidance states that employers can recover 80% of fees. It is not clear what HMRC has in mind here.
- It is now expressly stated that employers can not recover 80% of non monetary benefits such as health insurance or company cars. In contrast, car allowances do appear to be included in the calculation of furlough pay as the guidance states it includes “any regular payments you are obliged to pay your employees”, but excluding discretionary bonuses and discretionary commissions, including tips.
- It is clarified that directors who are also employees can be furloughed (as we had already covered in our article here). As with all furloughed employees they may not provide any work for their employer, but the guidance does state that they may carry out their statutory duties owed to the company. There is no clarification as to what is meant by that, and the dividing line between what is a statutory duty to the company and working for the company is a very grey area.
- The updated guidance now requires employers to give written notification to employees that they are being furloughed. A record of this written notification must be kept for 5 years. In practice, in our experience every employer was getting furlough agreed in writing with employees anyway.
We have updated our briefing note (with all new/changed information highlighted). To view a copy, please click below.
The situation continues to develop and in many ways the scheme is now becoming more complex. For up to date advice on the best way to implement the scheme in your organisation, please do get in touch. Please call us on 01243 836840 for a no obligation chat, or email us at [email protected].