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Furlough Scheme – The second Treasury Direction

On 20 May 2020, the Chancellor issued a second Treasury Direction to HMRC, modifying the earlier Direction that gave HMRC authority to operate the Coronavirus Job Retention Scheme (Scheme).

Unfortunately, the first Direction setting out the framework of the Scheme conflicted with the guidance that had already been issued by HMRC (and which is currently in its 10th iteration), causing much confusion as to what employers and employees needed to do in order to place staff on furlough.

Thankfully, the second Direction clarifies the earlier points of confusion and issues further instructions concerning the operation of the Scheme. Some of the main points of clarification to note are:

  • The employer and employee must agree that the employee will cease work for the employer to go on furlough and this agreement needs to either be made or confirmed in writing and incorporated into the employee’s contract of employment. Agreement can also be reached if there is a collective agreement between the employer and a relevant trade union.
  • A furloughed director will not be considered to be doing ‘work’ for the organisation if they are processing a claim under the Scheme or paying staff wages.
  • A furloughed employee can undertake training if its purpose is to ‘generally improve an employee’s effectiveness in the employer’s business or the performance of the employer’s business’. However, such training must not contribute to business activities or generate revenue.
  • When calculating furlough pay, benefits in kind or benefits provided via a salary sacrifice scheme should not be taken into account.

You can view the second Treasury Direction here.

If you have any questions about the Scheme, please email or call our Employment Law team today on 0113 207 0000.

 

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Paul Kelly

Partner and Head of Employment
Employment Law
PKelly@LawBlacks.com
0113 227 9249
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Paul Kelly Blacks Solicitors LLP