Orr Litchfield
Solicitors and Business Lawyers
Solicitors and Business Lawyers
Introduction
The UK Government published updated Guidance on the Coronavirus Job Retention Scheme (the ‘CJRS’) on 15th April 2020 and the Treasury issued a Direction under the Coronavirus Act 2020 shortly afterwards on 15th April 2020. The updated Government Guidance and the Treasury Direction attempted to clarify several issues relating to CJRS. However, a number of issues require further clarification.
Perhaps most importantly, the qualifying date for employees has changed from 28th February 2020 to 19th March 2020. This qualifying date is the date when the employee has to have been on the employer’s payroll. This date was presumably chosen as it was the day before the Government made its initial announcement on CJRS on 20th April 2020. Accordingly, the risk of a greater number of fraudulent claims being made under CJRS due to the date change is low.
The updated Government Guidance issues on 15th April 2020 can be found at: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
The Treasury Direction issued to HMRC pursuant to the Coronavirus Act 2020 on 15th April 2020 can be found at: https://www.gov.uk/government/publications/treasury-direction-made-under-sections-71-and-76-of-the-coronavirus-act-2020
What is the CJRS?
It seeks to provide income protection for those employees, who would otherwise be laid off or made redundant during the coronavirus outbreak. It does so by making payments to employers, who apply under the CJRS in relation to qualifying employees. Eligible employers will be able to reclaim up to 80% of the wage costs of furloughed employees up to a cap of £2,500 per month (plus associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions).
For an overview of the CJRS and answers to a range of questions relating to it, see our article at Get ready for the Coronavirus Job Retention Scheme Launch on 20th April 2020
Why is the qualifying date change relevant?
In general terms, it appears that those employees who started working for an employer between 1st March 2020 and 19th March 2020 can now also be furloughed and the employer can claim furlough pay for these employees. The previously Government Guidance included a requirement that, in order to qualify under the CJRS, an employee had to have been on the employer’s payroll on 28th February 2020 in order to qualify for the CJRS.
However, caution is required at this stage because there is a practical problem with the qualifying date change relating to the way in which the payroll system works.
Payroll, RTI submissions and qualifying employees
The updated Government Guidance states that “You can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020.This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.”
RTI or Real Time Information was introduced in April 2013. Under RTI, employers send information to HMRC every time they pay their employees, rather than waiting until the end of the year.
The problem with this requirement is that most employees are paid monthly around the end of each month. Accordingly, it is unlikely that many employers will have made an RTI submission in relation to employees who started working for them between 1st March 2020 and 19th March 2020.
Where an employee is paid on a weekly or bi-weekly basis (as may be the case with casual, seasonal and temporary staff but less likely with permanent employees), an employer may have made an RTI submission on or before 19th March 2020, depending on the date on which the relevant employee commenced employment. Where such an RTI submission has been made then the relevant employee may qualify under the CJRS.
Further clarification required
There is a need for further Government clarification as to the effect of the change in the qualifying date for employees from 28th February 2020 to 19th March 2020. Whilst the Government may be concerned with the risk of fraudulent claims, there must be alternative methods of dealing with those claims so that employees who genuinely started working for an employer between 1st March 2020 and 19th March 2020 qualify under the CJRS.
Need to talk?
Whatever stage you or your business has reached, we can help you to understand the different legal and related issues arising from the coronavirus outbreak so that you can choose the option that is right for you and/or your business.
Contact us
If you would like more information about the Coronavirus Job Retention Scheme or the other measures taken by the UK Government in relation to the coronavirus outbreak or would like to discuss a potential or existing issue, please contact us by telephone on +44 (0)20 3126 4520 or +45 38 88 16 00 or by email at enquiries@orrlitchfield.com
Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full Legal Notices on our website.
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