On 15 April 2021, the Treasury released its seventh Treasury Direction (the "Seventh Direction") in relation to the Coronavirus Job Retention Scheme (CJRS), intended to cover the last phase of the CJRS, running from 1 May 2021 to 30 September 2021. What do employers need to be aware of?
What's Different?
Not that much has changed. The CJRS still operates so as to allow employers to reclaim wages paid to furloughed employees at the lower of 80% of the employee's salary or £2,500 a month; however, what is different if the tapering of relief from July 2021 (see below). Employers can still use flexible furlough with employees either working and being paid by their employers in full or not working and the grant covering unpaid wages (subject to the cap).
Key Dates
The Seventh Direction took effect from 1 May 2021. In order to make a claim for an employee after this date, the employer must have been registered on a PAYE scheme with HMRC on or before 2 March 2021, and have made a Real Time Information (RTI) submission, in respect of the employee between 20 March 2020 and 2 March 2021 inclusive.
If an employer has received an employee via TUPE transfer since 1 January 2021, they can claim under the scheme if either they or the previous employer made an RTI submission between the above dates.
It is not necessary to have claimed previously under CJRS in respect of the employee.
What is furlough for?
The Seventh Direction sets this out at paragraph 2.1, stating:
The purpose of CJRS is to provide for payments to be made to employers on a claim made in respect of them incurring costs of employment in respect of employees who are within the scope of CJRS arising from the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease.
This is not the most illuminating statement of purpose, but it does state that there should be a connection with the pandemic, such that one can surmise that furloughing should not be used simply to save on payroll costs, or maintain unviable jobs, especially where not connected to the pandemic.
Contractors
There is government guidance suggesting contractors who are inside IR35 rules governing off-payroll working, may be eligible for furloughing, subject to meeting the other requirements.
Re-engagement of recently terminated?
In a number of cases we have handled, recently redundant or dismissed employees have proposed being re-engaged so that they can be furloughed. We have normally advised that this is outside the purpose of CJRS and best avoided. The Seventh Direction makes this arrangement impossible by excluding employees who had been dismissed after their last RTI submission date from the scheme. It is now not possible to re-engage an employee and then place them immediately on furlough.
Tapering
The CJRS will reimburse the lower of 80% of salary or £2,500 per month up to 30 June 2021. In July 2021, it will cover 70% or £2,187.50. In August and September 2021, it will pay 60% or £1,875 per month. The employer will be obliged to make up the difference so that the worker always receives 80% of salary or £2,500 per month. Employers will continue to cover related employer taxation costs and minimum pension.
Next Steps and considerations
The Government does not want to extend the scheme past September 2021. However, it did not want to extend it past May 2020, October 2020, March 2021, or April 2021 either.
Depending on the development of the pandemic, it is possible the scheme could need further extensions, and further Treasury Directions.
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.
