On Friday 26 June 2020 the Government published the third Treasury Direction concerning the Coronavirus Job Retention Scheme ("the Scheme") which governs the operation of the Scheme in respect of the period from 1 July 2020 to its end date of 31 October 2020.
Following its announcement on 29 May 2020 of the extension
of the Scheme to 31 October 2020, the introduction from 1 July 2020
of "flexible furloughing" and the requirement on
employers to contribute to the funding of furlough payments, and
its publication of further detailed guidance reflecting these
changes, the Government has now issued its third Treasury Direction
("the Direction") which establishes the
legal basis for the operation of the Scheme as now amended.
The Direction sets out detailed and complex provisions
concerning a number of aspects of the operation of the Scheme
- what constitutes a claim period.
- the maximum number of employees in respect of whom a claim for payment under the Scheme can be made.
- the calculation of what can be
claimed where employees work on flexible furlough with different
approaches being prescribed for those with fixed and variable rates
Whilst there is regrettably no substitute for detailed review of
the Direction and its sometimes labyrinthine provisions, some
specific points to note are as follows.
As previously confirmed, employers will be able to furlough
employees fully or for part of their working hours under the Scheme
from 1 July 2020, subject to two key conditions.
First, save in relation to returners from family leave and armed
forces reservists, the employer must have made a claim under the
Scheme in relation to the relevant employees in respect of a
minimum three week furlough period during the period from 1 March
2020 to 30 June 2020.
Secondly, the number of employees in respect of whom a claim can
be made cannot exceed the maximum number covered by any one claim
in respect of furlough periods prior to 1 July 2020 - the Direction
describes this as the "high-watermark
Subject to the detailed provisions of the Direction, family
leave returners and armed forces reservists who are furloughed are
deemed to increase this high watermark number as do those who TUPE
transfer into the employer's employment and satisfy the
Direction's provisions permitting them still to be furloughed
by the new employer.
Family leave and army reservists
The Direction confirms that those returning from statutory
family leave and armed forces reservists can be furloughed after
the cut off date for new entrants to the Scheme of 10 June 2020
provided that certain conditions are satisfied – the employee
in question was on the employer's payroll on or before 19 March
2020 and commenced the relevant period leave before 10 June 2020
and that the employer had made a qualifying claim under the Scheme
in relation to other employees in relation to the period prior to
30 June 2020.
Use of Scheme payments
The description of the Scheme set out in the Direction has been
updated and now states that "[i]ntegral to the purpose of
CJRS is that the amounts paid to an employer pursuant to a CJRS
claim are used by the employer to continue the employment of
employees in respect of whom the CJRS claim is made whose
employment activities have been adversely affected by the
coronavirus and coronavirus disease or the measures taken to
prevent or limit its further transmission."
Employees who are vulnerable or are shielding
As the purpose of the Scheme references the continuation of the
employment employees affected by "the measures taken to
prevent or limit the further transmission" of COVID-19,
it appears that those who are vulnerable or are shielding can
therefore remain furloughed for the purposes of the Scheme even if
the employer terminates furlough arrangements for other staff as
operations move back towards normality.
Notice pay and furlough
It is understood that HMRC had indicated previously in response
to queries that employees could be served with notice during
furlough and claims made under the Scheme in respect of the
relevant proportion of their notice pay. However, the Direction now
provides that it is "integral to the purpose" of
the Scheme that its grants are used by the employer to
"continue the employment" of employees. It is
not clear whether this change is intended to preclude employers
from making claims under the Scheme in respect of notice pay to
those who they dismiss as redundant and are furloughed during their
The Direction confirms that furlough arrangements must be agreed
between the employer and the employee or by way of a collective
agreement between the employer and a trade union and that the
- specify the main terms and conditions
on which the employee will either do no work or will not work his
or her usual hours in full.
- be made before the beginning of the
period of furlough to which a claim under the Scheme relates -
although it can be varied subsequently.
- be made or confirmed in writing by
the employer – the Direction confirms that this can be done
in electronic form such as an email.
- be retained by the employer until at
least 30 June 2025.
This resolves the uncertainty presented by the Government's
Guidance in which it was indicated that written agreement was
required in relation to "flexible" furlough whereas for
"full" furlough an oral agreement recorded in writing
would suffice. As the Direction confirms that the employee's
agreement can be "made or confirmed in writing",
it is sufficient, in respect of all furlough arrangements, for
there to be an oral agreement which is then confirmed in writing.
It should be noted that the Direction requires that the relevant
agreement must be made before the beginning of the relevant claim
Flexible furlough calculations
The Direction also sets out how to calculate the amounts that
can be claimed under the Scheme for those who work on flexible
furlough. The complexity of the calculation of flexible furlough
grants as set out in the Government's Guidance previously would
appear anecdotally to have been quite offputting to employers
considering utilising flexible furlough - the provisions of the
Direction will do little to assuage that concern. However, where an
employee is fully furloughed for the entirety of a claim period a
less complicated approach is required. The complexity of the
approach to flexible furlough calculations may lead employers to
prefer rotating furlough arrangements rather than partial return to
work by way of flexible furlough.
Work during furlough
The conditions concerning an employee's work remain the same
as previously in relation to the period when the employee is not
working for the employer. They can do no work for the employer
while furloughed subject to the specific exemptions with regard to
training and the performance of functions as an employee
Timing of claims
As previously indicated, the Direction confirms that claims
under the Scheme in respect of the period to 30 June 2020 must be
made by 31 July 2020.
Repaying overclaimed payments
Separately, on Friday 26 June 2020 HMRC also issued guidance on how employers can repay any grant
monies received under the Scheme which have been overpaid.
Originally published by Dechert, June 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.