New Starters and the Coronavirus Job Retention Scheme

UPDATE: Wednesday 15 April 2020

In a major change to the Job Retention Scheme the Treasury has announced that the cut off date of 28 February has been moved to 19 March.

The guidance now says this:

Employees you can claim for
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. Employees that were employed as of 28 February 2020 and on payroll (i.e. notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for the employer after that and prior to 19 March 2020, can also qualify for the scheme if the employer re-employs them and puts them on furlough.

If you want to read the full Treasury Direction setting up the scheme you can now read that here – but be warned, it’s a bit complicated!

As a result of this major U-turn, the remainder of this post is of historical interest only!

——————————————————————

The Coronavirus Job Retention Scheme is the unprecedented – in the UK at any rate – government scheme that will award grants to employers who have ‘furloughed’ employees, potentially funding up to 80 per cent of their wage costs to a maximum of £2,500 per month.

The scheme is not yet up and running and we are reliant on Government guidance as to how it will work – which is being updated almost in real time, it seems, as the details are being thrashed out.

At first, it is fair to say, everybody was simply impressed – and taken aback – at the sheer scale of what the Chancellor was proposing. Since then, however, some of the shortcomings of the scheme have become more apparent.

One of these is that employees are only eligible to be furloughed by the employer whose PAYE system they were on as at the 28 February. Anyone who has started a new job in March – and that must cover thousands of individuals – will not be covered by the scheme.

The reason for this is simply that HMRC does not want to face fraudulent claims from companies entering into bogus employment arrangements purely to take advantage of the scheme. An employer should obviously not be allowed to start hiring people with the object of placing them on immediate furlough and claiming £2,500 a month for them. But the furlough scheme was only announced on 20 March. Why should someone who had been in a new post for two weeks by that time be excluded from it?

The Government’s view is that the only evidence of employment that works for them is the PAYE system. The scheme is being run and administered by HMRC and the PAYE records are something that HMRC can easily check. An employee starting in March will have all sorts of documentation showing that the appointment is a genuine one, but the system will not allow for HMRC sifting through letters of appointment and signed contracts of employment – it is PAYE that counts.

Last week the Chancellor ran an #AskSushi event on his Twitter feed. Rather predictably he was swamped with questions which allowed him to carefully select the half-dozen of so that he felt comfortable answering. In fairness however, he did address the issue of new starters. Watch this:

 

I am no expert on running a PAYE system (in fact that is a massive understatement), but it seems that keeping the cut off date at 28 February is the only way of ensuring that employees were not entered onto the system after the furlough scheme was announced. That at any rate appears to be the Government’s position. Any accountant or payroll professional will know better than me whether that stands up to scrutiny.

The best that the Government can offer those who are no longer employed by the employer they were with on 28th February is that the old employer can take them back and then put them on furlough. The Guidance updated on 4 April makes it clear that this applies whatever the reason for the employee leaving. It is not confined to cases where the employee was made redundant as a result of the lockdown.

But it is hopelessly unrealistic to expect that employers are going to reemploy people who have resigned or been dismissed purely so that they can be placed on furlough. To be blunt, what is in it for the employer? They incur the cost of administering the employee’s furlough pay and face potential legal difficulties when the furlough period ends.

This is an odd feature of the furlough scheme. It is designed to protect the income of employees but it is the employer that receives the funds from government. Employers are placed under no obligation to even consider furlough and there is no mechanism for employees to claim furlough as any sort of right.  With the scheme itself not due to be in place until the end of April – and that is in itself an ambitious target – it is understandable that many employers remain reluctant to commit themselves to retaining employees that they simply cannot afford to pay.

When all this is over (this too shall pass) there will be a flood of Tribunal cases picking over how employers reacted to the coronavirus outbreak. There will be claims for unlawful deductions from wages, discrimination claims arising from who was offered furlough and who was not, and unfair dismissal claims where the Tribunal will have to decide whether having the option of furlough made it unfair to dismiss an employee for redundancy.

But those cases will not be heard until next year at the earliest. Right now the priority is to cushion businesses and employees against the massive shock that has hit the economy. Widening the scheme to cover employees covered by the March payroll may increase the risk of fraud – but an employer would have to be pretty quick off the mark to invent bogus employees and set them up on the system in the 10 days following the Chancellor’s first announcement.   It is surely a risk that is worth taking.

 

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Darren Newman

https://darrennewman.org/

 

About Darren Newman

Employment law consultant, trainer, writer and anorak
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