The Treasury published a Second Direction on 22 May 2020 (dated 20 May) which amends  the legal framework for the Coronavirus Job Retention Scheme (Scheme).  

The new Direction clarifies certain points about the Scheme but only extends the scheme until 30 June 2020. A further Direction will be required to cover the new amendments to the Scheme announced by the Chancellor on Friday 29 May. 

In summary, the new Direction:-

  • removes the express requirement that an agreement must be in writing, stating that it must be in writing or confirmed in writing by the employer (which includes in electronic form). This has resolved the previous inconsistency between the Direction and HMRC’s guidance on this issue. It also includes a requirement that the agreement should specify the main terms and conditions upon which the employee will cease work and should be incorporated (expressly or impliedly) into the employee’s contract. Such agreement may also be made by way of a collective agreement with a trade union. Employers must retain the furlough agreement/confirmation/collective agreement until at least 30 June 2025.
  • provides that employees and employers can agree to end a period of incapacity (notwithstanding continuing SSP eligibility), stop SSP and place the employee on furlough. This is a direct contrast to the previous Direction which appeared to state that an employee could not be placed on furlough until they were no longer entitled to receive SSP (whether or not a claim was made).
  • includes more detail on what constitutes regular pay and the circumstances in which amounts such as overtime, piece rates, contractual commission and other variable payments can be recovered under the Scheme.
  • sets out further detail regarding the type of study and training activities can be carried out by employees on furlough. Its purpose can be to generally improve an employee’s effectiveness in the employer’s business or the performance of the employer’s business, provided it does not contribute to business activities, generate income or profit, or significantly contribute to the production of goods or services for sale.
  • expressly allows pension scheme trustees to fulfil their duties while on furlough without this counting as work (except where the employer’s business is the provision of occupational pension scheme independent trustee services).
  • expressly allows employed, furloughed, directors to make claims under the Scheme and pay employees' wages in addition to carrying out their statutory duties. However, other work which may be required to keep the business running is still not permitted under the new Direction.
  • Changes the relevant date for TUPE transfers to 28 February (in line with the current HMRC guidance). A new provision also extends the Scheme coverage to business transfers under the TUPE regulations from an insolvent transferor (where the automatic transfer of employment contracts does not apply). Transferors may also be able to claim for employees whose furlough periods do not last 21 days only because of a TUPE transfer.