The new furlough scheme rules – what employers need to know

Following the recent announcement that the Coronavirus Job Retention Scheme (generally known as the “furlough” scheme) will be extended until 31 March 2021 – despite original plans to end it in 2020 – the UK government has now published the rules governing furlough claims.  These are set out in its fourth Treasury Direction, which forms the legal framework for the scheme.

Although the new Direction has extended the length of the scheme until 31 March 2021, it has only set out how the scheme will operate until 31 January 2021.  At this point a further Treasury Direction will be published covering how the scheme will operate (most likely on a less generous basis) for the remaining two months. The Direction also withdrew the Coronavirus Job Retention Bonus scheme that was to start on 1 November 2020.

Employers should note the key changes to the way in which the furlough scheme will operate: In order to make a claim, employers will have to consent to HMRC publishing information about the company including its name and a “reasonable indication” of the amount of pay claimed. An exception to publishing this information will only be made if employers can show publication would expose their workforce to “serious risk of violence or intimidation”. This is an effort to keep employers accountable for the amount of furlough pay they claim and to stop employers (for fear of potential reputational damage) from claiming furlough pay when they are not suffering any financial losses due to the pandemic.

• Furlough agreements must already be in place by the start of the claim period, but such agreements can be varied during that period if already in place.  Furlough agreements are the agreement between the employer and employee which vary the employee’s normal contract by agreeing that he or she will do no work in relation to their employment or will not work the full amount of usual contracted hours. Previous furlough agreements between an employee and employer can still be used, provided any update which needs to be made (for example a change to the number of hours the employee will now work) is made before the employee is placed on furlough under this phase of the scheme, which started on 1 November.  Employers should continue to review the agreements they have with employees during the current phase.  

• Claims may not be made for any day in which an employee is serving notice of termination between 1 December 2020 and 31 January 2021. The purpose of this rule is to encourage employers to keep employees on the scheme over the festive period. For many employers this new rule will make it more challenging to make employees who are on furlough redundant and will likely bring a pause to any processes that are underway, at least until the end of this period.

• The time periods during which a furlough claim needs to be submitted by an employer are narrow: the rule is that claims need to be submitted within two weeks following the end of the preceding calendar month, unless the claimant has a “reasonable excuse” for failing to do so.  So, for example, claims for furlough for time not worked in December must be submitted by 14 January 2021.  HMRC has updated its guidance as to what may be a reasonable excuse for failing to submit before the deadline.  Such excuses might include being incapacitated by a serious illness (including Covid-19), the death of a close relative, IT failures or HMRC errors.

Please contact the Fox Williams team for any questions relating to the new rules or for assistance with updating or drafting furlough agreements.