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17 Apr 2020

The Chancellor issues Treasury Direction and updates on the Coronavirus Job Retention Scheme


On 15 April 2020, the Government updated the Coronavirus Job Retention Scheme (CJRS) guidance, shortly followed by a Direction from the Treasury to HMRS (the Direction) under the Coronavirus Act 2020. 

The Direction (which can be found here) is the legal framework that will be used by HMRC when processing claims under the CJRS, although it is possible this may be updated in the future. The Direction provides some clarity about how the CJRS works as well as some notable changes. We have summarised the key changes and ongoing considerations below. To read our previous updates, click here

Key changes:

1 Extension of CJRS – this afternoon the Government has announced an extension to the CJRS from 31 May 2020 to the end of June 2020.

2 Qualifying date – after much backlash, the qualifying date for when an employee has to have been on the employer’s payroll has been changed from 28 February 2020 to 19 March 2020. This was the day before the CJRS was first announced so it is still effective for the prevention of fraudulent claims.

  • In reality, this change will have minimal impact as the guidance clarified that an employer must have submitted Real Time Information (RTI) payroll data for an employee by 19 March 2020.

  • This means, if an employee was not enrolled in PAYE on the date of the last payroll run before 19 March 2020, they will not be eligible for the scheme or to be furloughed unless the employer made a payroll notification to HMRC before this date. In practice, unless an employer has run a payroll between 28 February 2020 and 19 March 2020, this extension is ineffective for any new joiners in March 2020.

  • The Direction also extended the redundancy date and the transfer date for a TUPE transfer to 19 March 2020.

3 Eligibility – Previously, an employee was eligible to be furloughed if they would otherwise have been made redundant as a result of the impact of Covid-19. The guidance has widened this and now states that the CJRS is available to all employees who are furloughed ‘by reason of circumstances as a result of coronavirus or coronavirus disease’.

4 Agreement to furlough – Earlier guidance had only required notification by an employer to an employee to be in writing and a record to be kept for five years. The Direction now requires agreement in writing between the employer and the employee to confirm the employee’s furlough status. Employers must keep the signed agreement for five years.

  • This may mean that employees who have already been furloughed fall outside the CJRS and their notification letters need amending.

  • This also renders part of the High Court’s recent judgment obsolete in ‘In The Matter of Carluccio’s Ltd’.  LJ Snowden confirmed that employees who failed to respond to a notification letter would be put “in essentially the same position as consenting employees if they do belatedly respond in the affirmative”. The Direction is likely to take precedence and employers should bear this in mind where they had previously accepted implied consent. 

5 Employees on unpaid leave – Employees who started unpaid leave after 28 February 2020, can be furloughed instead, however, employees who were place on unpaid leave on or before28 February 2020, cannot be furloughed until the date on which it was agreed they would return from unpaid leave.


6 Directors duties – The Direction has now clarified Directors duties for the purposes of furlough: “a director who is furloughed can only undertake work to fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of company's accounts or provision of other information relating to the administration of the director's company”. 

  • This is narrower than previously expected and Directors must be cautious not to undertake other duties which could be deemed ‘work’, invalidating a claim under the CJRS.

7 Reference date and calculating salary – The reference date for calculating a claim under the CJRS is now 19 March 2020. When calculating an employee’s salary, employers have now been directed to disregard anything that is not “regular salary or wages”. 

  • Contractual payments such as compulsory commission or guaranteed overtime and earnings which the employer “reasonably expects to be paid” to the employee are included in the calculation, provided they are not “conditional on the scheme paying out”.

8 Sick leave and furlough – The Direction has clarified situations of employee sickness, before and during furlough.

  • Employees who are on sick leave are eligible for Statutory Sick Pay (SSP) and “the furlough period of the employee does not begin until after the original SSP has ended”. If the same employee then becomes sick during furlough, they should remain on furlough rather than being moved to SSP.

  • The wording of the Direction suggests that only employees who had been on SSP immediately before furlough leave would be eligible to remain on furlough pay during a subsequent bout of sickness. It therefore follows, if an employee falls sick for the first timeduring the furlough period, they may have to be moved from furlough pay to SSP.

  • NOTE:  On 16 April 2020, SSP was extended to those who:

    (a)are shielding in line with public health guidance that defines them as extremely vulnerable and at high risk of severe illness from Covid-19 because of an underlying heath condition; or

    (b)have been advised by a notification that, in accordance with that guidance, they need to follow rigorous shielding measures.

Still unanswered:

Perhaps surprisingly, the Direction is silent on annual leave

  1. In the absence of guidance from the Government, HMRC Customer Support tweeted that it is possible to take annual leave whilst on furlough leave, and that the annual leave must be paid at full salary.

  2. The ACAS guidance also states that furloughed workers can request and take their holiday in the usual way if their employer agrees (this includes bank holidays) and they must get their usual pay in full for any holiday they take.

  3. We recommend agreeing specific days for employee’s annual leave where possible for the purposes of clear payroll reporting – especially where employers have instructed employees to take annual leave.

We have a dedicated Covid-19 team of employment lawyers keeping up to date on the latest developments and who are available to answer any questions you may have. You can find more information here.