Another week has gone by and yes, we have yet another update to the Government guidance on the job retention scheme to get our heads around. This is now the 8th (and possibly final – although who are we kidding…) iteration of the employers’ guidance and it provides some helpful clarity on re-engagements and the treatment of fixed term contracts. And just to keep us on our toes, a new exception has been added to the scheme in relation to short fixed term contracts which expired before 19 March 2020.
- Fixed term contracts: We finally have some clarity on fixed term contracts and it is good news for those affected. It has been confirmed that employees or PAYE workers on fixed term contracts that have expired can be re-engaged and furloughed subject to the relevant cut-off criteria. Workers whose contracts expired between 28 February and March 2020 will be eligible if an RTI submission was notified to HMRC on or before 28 February 2020. For those whose contracts expired after 19 March 2020, the RTI submission must have been notified to HMRC on or before 19 March 2020.
There is however a small wrinkle with this that employers need to be aware of. If a person was on a contract that ended after 28 February but prior to 19 March, they will not benefit from the 19 March cut-off date and will need to have been notified to HMRC on an RTI submission on or before 28 February 2020. This means that those workers who started work in February but missed the February payroll cut off or who started in early March will therefore not be eligible if their contracts ended prior to 19 March 2020.
- Re-engagements: The previous Government guidance extended the eligibility cut-off date from 28 February 2020 to 19 March 2020. However, this only applied to workers who had not yet had their contracts terminated – for those PAYE workers who had already been terminated the guidance suggested that they still needed to have been on the payroll on or before 28 February 2020. This has now been amended and the 19 March 2020 cut-off will also apply to workers who have already been terminated. The wrinkle mentioned above is also relevant here as well.
- Contracts of short duration: Surprisingly, the guidance has introduced a new category of individual that is excluded from the scheme which could be a sting in the tail for some. For any person who started and ended the same contract between 28 February 2020 and 19 March 2020, they will not be eligible regardless of the type of contract (i.e. permanent, fixed term, casual etc). This will unfortunately mean that those who were engaged in the first week of March and let go very quickly before 19 March will not be eligible. There is no obvious rationale for this but it’s crucial employers are aware of this distinction.
- Holiday pay: The guidance on holiday pay has been amended slightly. The references to paying employees “100% of their usual pay” and paying an “additional 20%” over the grant have been revised to refer to an employee’s “usual holiday pay” and “additional amounts”. One reading of this might mean there could be some flexibility on holiday pay. For our part, we consider that there may be scope to argue that for individuals who have been re-engaged and furloughed, their holiday should be paid at the furlough rate on the basis that this is their new usual rate of pay. We do however foresee that this will be an area that will be scrutinised and could lead to future disputes so care is advised when considering how best to deal with the issue of holiday. One potential option for employers who wish to avoid additional liabilities would be to require furloughed employees to enter into a settlement agreement under which they waive any potential entitlement to additional holiday pay.
- Claim periods: The guidance has made it clear that it is up to each employer to decide the length of their claim period, but that in doing so they should take into account the frequency of their payroll run. Employers are only able to make one claim during a claim period so all employees furloughed during that period should be included on the claim as it is not possible to make another claim for the same or an overlapping period. At present, it is also not possible to amend a claim once it has been submitted, but HMRC has said that it is looking into a process to allow for amendments to be made.
- Reporting payments: The Government has released new guidance on reporting payments in PAYE RTI which is available here.
While there are some very useful points covered in the new guidance there are still a number of grey areas, notably in relation to the question of whether it’s possible to backdate the date of a re-engagement, which will be particularly relevant now that it has been confirmed that individuals on fixed-term contracts can be re-engaged. As set out in our previous briefing note (available here) the current language seems to suggest that you should not backdate the start of someone’s re-engagement and that claims should be made from the date on which individuals are actually put back on contract.
Given the number of updates regarding the scheme recently, it’s easy to get confused over who is eligible under the scheme. In short, this is where we stand currently:-
- anyone who was employed as at 19 March 2020 will qualify provided that they were included on an RTI submission by 19 March 2020; and
- anyone who stopped working between 28 February and 19 March 2020 will also qualify provided that they were included on an RTI submission by 28 February 2020.
We hope you have found this update useful but should you have any further questions, please get in touch with any member of the team.