The confusion and concern created by Paragraph 2.2 of the third iteration of the Treasury direction, which stated that a claim should only be made where the payment will be used to continue employment, has hopefully been alleviated by HMRC after this morning’s update to the guidance.
We recently highlighted that the third Treasury direction appeared to introduce a new requirement which is arguably designed to prevent the use of CJRS funds in this type of situation. Paragraph 2.2 states that a claim should only be made where the payment will be used to continue employment. This suggested that it would be contrary to the purpose of the scheme to use the funds where employment has been terminated and the employee is working under notice.
Accordingly, we advised caution and recommended that Employers intending to use CJRS funds to pay employees working under notice should contact HMRC for guidance and advised against doing so unless or until they receive confirmation from HMRC that they can.
Well, in yet another update from HMRC it has this morning updated its guidance to remove any uncertainty. The relevant passage now says: “You can continue to claim for a furloughed employee who is serving a statutory or contractual notice period, however grants cannot be used to substitute redundancy payments.”
This further clarification from HMRC will be warmly welcomed by Employers who were deeply concerned about the financial impact of having to fund 100% of notice pay to those employees who were serving their statutory or contractual notice.
We anticipate that the Treasury direction will soon be updated to reflect this latest guidance, but in the meantime Employers can take comfort from this morning’s update from HMRC and continue to claim for furloughed employees who are serving their notice period with confidence.
As we have been doing from the outset of the COVID-19 crisis, we will continue to monitor developments, digest and interpret the guidance, and keep you updated to ensure you remain informed.
The COVID-19 pandemic and associated furlough scheme continues to present numerous and complex challenges for Employers.
If you are an Employer and require advice and support on extending full furlough, introducing flexible furlough, or are contemplating a restructure/reorganisation and/or redundancies as a result of the ongoing COVID 19 restrictions, call us now on 0800 612 4772 or Contact us via our website and we will set out clear options for you to help ensure you comply with your legal obligations.