The Chancellor has made a further Treasury Direction in relation to the Coronavirus Job Retention Scheme (CJRS). At its simplest, the Direction formally extends the CJRS to 30 June, as previously announced. It was presumably drafted before the recent extension to 31 October and so does not deal with the latest announcements. The new Direction also clarifies certain points about the CJRS and effectively replaces the original Direction. We summarise the key points you need to know.

Requirement for agreement with employee 

This Direction removes the explicit requirement that an agreement to place an employee on furlough must be in writing. This resolves the previous inconsistency between the Direction and HMRC's guidance on this point. The Direction now states that the agreement must be made or confirmed in writing by the employer. The agreement must specify the main terms and conditions and be incorporated into the employee's contract, although this can be by implication. The agreement may also be by collective agreement with a trade union. An employer must retain the agreement/confirmation until at least 30 June 2025.

Statutory sick pay 

Under the new Direction, where statutory sick pay (SSP) is "in payment or due to be paid", furlough cannot begin until immediately after the end of the "period of incapacity for work" for which the SSP is being paid or due to be paid. It goes on to say that the time of the end of the period of incapacity should be determined by agreement between the employer and employee. Presumably, if there is a dispute about incapacity, no claim can be made in respect of that employee. In practice that will hopefully be a rare occurrence. 

There is no longer any reference to whether or not a claim for SSP has been made, so presumably "due to be paid" is intended to mean only when a claim has been made. This still leaves some questions unanswered, in particular how to reconcile the Direction with HMRC's guidance on this point, especially in relation to employees who are shielding. 

Work done by directors

The Direction now explicitly allows employed directors who are themselves furloughed, in addition to fulfilling their statutory duties, to make CJRS claims and pay employees' wages. It appears that dealing with other payments (e.g. to suppliers/landlords) or other tasks required to keep the business running are still not permitted. 

Study/training during furlough

The new Direction sets out detailed guidance on the kinds of study and training that an employee can do while on furlough:

• the purpose of the training must be to improve the employee's effectiveness in the employer's business or the performance of the employer's business;
• the training must not provide a service to the employer, contribute to its business activities or generate income/profit for the employer; and
• the training must not directly contribute (to any significant degree) to the production of goods the employer intends to supply to a third party for payment or the provision of a supply of services for payment.

Trustees of pension schemes

The Direction now expressly allows pension scheme trustees to do work for the sole purpose of fulfilling their duties as trustees. Independent trustees who provide services as part of their employer's business activities are excluded, so if they are furloughed they cannot work as a trustee. 

Regular pay

The new Direction seeks to clarify what "regular" pay means. This is pay that "cannot vary according to a relevant matter except where the variation … arises from a non-discretionary payment".  So, the pay must still arise from a legally enforceable agreement but the confusing requirement that regular pay is "not conditional on any matter" has gone.

A new paragraph limits what counts as non-discretionary payments – these can include items such as overtime, fees, commission or piece rates, payments made in recognition of the employee undertaking additional or exceptional responsibilities, payments made in recognition of the circumstances in which the employee undertakes his or her duties or the time when they are undertaken, and payments made in recognition of similar matters. 

Timing of payment

The Direction allows an employer to make a CJRS claim before they pay the employee the full amount to which they are entitled under the CJRS, provided that the employer intends to pay them within a reasonable period of receiving the CJRS grant. Employers who are experiencing significant cash flow difficulties may find this additional flexibility helpful.

TUPE

The Direction has been brought into line with the guidance in relation to transfers. Transferee employers may make a CJRS claim for employees of a previous business who transferred to it after 28 February.

Future changes

The new Direction does not deal with the extension of the CJRS until October. The Chancellor will have to make another Direction to deal with that and the changes to the operation of the CJRS in August. The government announced on 12 May that employers will have to contribute to employees' furlough wages from 1 August and that they will be able to furlough employees part-time. The government has promised to release guidance on that by the end of this month. We will bring you another update once it is published.