What criteria will HMRC use to assess applications for furlough from publicly funded organisations?
The government released further clarification on the Coronavirus Job Retention Scheme on 4 April. The wording referred to concerning public sector organisations and organisations receiving public funding remains the same.
The revised guidance does provide a helpful insight into how HMRC will deal with applications made to it for assistance under the scheme. It appears that there won’t be a particularly forensic approach adopted by HMRC. The guidance says you can furlough staff if you cannot maintain your current workforce because your operations have been severely affected by coronavirus.
It goes on to say that all employers are eligible to claim under the scheme and the government recognises different businesses/organisations will face different impacts from coronavirus. The need to demonstrate the impact of coronavirus on your business/organisation is not one of the criteria businesses/organisations are going to need to satisfy, so the government does not appear to intend to set a specific test to determine if a business/organisation is “severely impacted by coronavirus”. It is hoped that this should provide additional comfort to publicly funded organisations facing significant restrictions to their operations during the Covid-19 crisis.
Related FAQs
- Certain workers will become “furloughed workers”.
- Furloughed workers cannot carry out any work for their employer while designated as furloughed, or a linked or associated organisation but they can do voluntary work as long as they are not providing services for or generating revenue for the employer or a linked or associated organisation.
- A furloughed worker can be furloughed part time and work the rest of the time.
- The furlough period begins when the employee stops work, not when agreement is reached.
- If furloughed employees are expected to do online training while furloughed they must receive the National Living Wage/National Minimum Wage for the time spent training.
- Workers must be told of and agree to this change in writing. This written agreement must be kept for five years as part of the scheme. The guidance has confirmed that collective agreement reached between an employer and a trade union on furloughing staff is acceptable for the purposes of making a claim under the scheme.
- However it should also be noted that this is a change in status and pay (if pay is not being topped up) and therefore subject to the usual employment law rules on changing terms and conditions.
- Changes to the contract must be made by agreement with the worker and the government guidance is clear that to be eligible for the subsidy employers must document their communication with the employee on being furloughed.
- You must confirm in writing that an employee has been furloughed, but that the employee does not need to provide a written response. Please note that this is for the purposes of making a claim under the scheme. Any reduction in pay must be agreed in writing under normal employment law principles and failure to do so may result in Employment Tribunal claims. You should not rely on a term in the employment contract to effect this change. We can advise you on how to document this properly.
- Employers must also keep a record of the agreement for at least 5 years.
- If employers have collective bargaining arrangements in place, they must agree this change with the union in the usual way.
- Collective consultation obligations may be triggered if there are 20 or more employees that are proposed to be dismissed and re-engaged in order to effect the change to terms to be furloughed. You should take advice if you think this may apply.
It is possible to review working arrangements for contractors before the new rules come into effect. This will require immediate action.
You could consider terminating current contracts and entering into new terms that reflect working arrangements for a self-employment arrangement.
Another possibility is encouraging contractors to abandon the PSC model and provide services under a compliant umbrella company.
In the event of a determination of employed status you should seek to enter new terms that at the very least reflect the new tax arrangements .
A common feature of corporate acquisitions is that part of the consideration is paid on deferred terms or by way of earn out over a period of years following completion. Where deferred consideration is payable, this is either on the basis that outstanding payments will be made on scheduled dates or, less usually, subject to certain agreed (typically financial) objectives being met. These objectives almost always relate to a period before completion of the deal and are dealt with as part of a completion accounts mechanism.
As we move to look at re-opening businesses and getting people back into the workplace there is work to be done by employers, firstly in planning how they are going to do this, and secondly, communicating those plans to staff. The only way in which businesses are going to be able to manage the transition back to some form of normality is by speaking to their staff and re-assuring them about the measures that will be put in place to safeguard their health and safety in order to enable them to return. Any successful return to work will need to based on carefully thought out plans and providing re-assurances to employees that necessary action is being taken.
Employers will be focusing on:
- How do I get my workforce back safely, and
- How do I give my workforce the confidence to return.
- The Pensions Regulator has published regularly-updated guidance for employers.
- It will take “a proportionate and risk-based approach towards enforcement decisions … with the aim of supporting both employers and savers”. In other words, the law remains the same, but the Regulator will show restraint in enforcement against breaches.