Global menu

Our global pages

Close

Education briefing: Coronavirus - New Guidance: Government update on the Coronavirus Job Retention Scheme

  • United Kingdom
  • Education - Briefings
  • Education - Coronavirus

07-04-2020

On Friday 20 March 2020, the Chancellor announced a new “Coronavirus Job Retention Scheme” (the Scheme) to help pay people’s wages. See our previous briefings of 23 March and 1 April.

Updated Guidance on the Scheme was issued on 4 April 2020 (the Updated Guidance).

This briefing seeks to identify some of the key aspects of the Updated Guidance.

In summary, all employers who are severely affected by the CV-19 pandemic are able to access a Government grant, via HMRC and the Scheme, to reimburse them for specified employment costs if they cannot maintain/retain their workforce because of the impact upon their operations. A pre-requisite is that the individual is placed on furlough (a temporary status whilst there is no work available for them to do).

Does the Scheme apply to education institutions?

As mentioned in our previous briefing, a key issue is the degree to which education institutions are able to use the Scheme. The guidance on “public sector organisations” remains unchanged and states:

“The government expects that the scheme will not be used by many public sector organisations, as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak.

Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.

Organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff.

In a small number of cases, for example where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff”.

Whist each institution will need advice on its unique circumstances, as a matter of general principle our view remains that the application of the Scheme is likely to be most limited in the FE, sixth form and schools/academies sectors. However, we do think that HEIs need to think carefully about whether and to what extent it is appropriate for them to use the Scheme to cover wage costs and to have a strong justification for accessing the Scheme.

HEIs will need to consider the extent to which their income is derived from public funding (including having regard to tuition fees which will ultimately be paid for from the public purse) and the extent to which the activities and wage costs of any staff groups for which they are considering a claim under the Scheme can be viewed as substantially met from public funding. This link would appear strong for example in the case of academic staff (teaching and/or research) – and indeed HEIs will want those staff to continue working as far as possible, so furlough leave may be unlikely for them. Other staff groups will have a much less tangible link to public funding in the form of teaching or research grants and tuition fees.

These are complex issues and the judgement on them may vary from institution to institution based on their particular circumstances, including the balance of their funding. The other key issue to consider is why the HEI wishes to make a claim under the Scheme – ie what is the justification?

In summary, our view is that an HEI can in principle use the Scheme but needs to do so only a) where it can show a significant operational impact from COVID19 that prevents the relevant staff group from working, and b) that it has considered the contents of the Guidance and the extent to which the wage costs that might be claimed are already attributable (to any significant extent) to public funding and c) that it has made its decisions on a considered basis, applying principles of good governance, and ensuring that there is a clear and defensible rationale for the decision.

In relation to general FE colleges, our view is that in most cases the application of the Scheme will be limited but it could apply to those areas of colleges’ services for which public funding will be impacted – in particular the apprenticeship training provision and trading income where activities have ceased as a result of CV19.

We suggest if an application is going to be attempted there should be an audit trail that identifies: lost income streams as a result of CV19; individual roles that can legitimately be said to have ceased for CV19 reasons and which cannot properly be said to be publicly funded; an understanding of the letter and the spirit of the job retention scheme and its guidance – and that those principles have been carefully taken into account in putting the application together.

As far as sixth-form colleges and schools/academies are concerned, given the wording of the guidance, it is likely that there will be very limited opportunities to use the Scheme.

The Updated Guidance now includes the following additional clarifications:

Re-hires

Former workers who left their employment on or after 28 February 2020 for redundancy or any other reason (including resignation) and who cannot be furloughed by a new employer, can be re-hired, placed on furlough and a claim made for their wages. Institutions are not obliged to rehire those staff, however, and they will be mindful of the circumstances in which the employee left, the likely availability of a long term role and the complications in re-employing staff (as regards, e.g., continuity of service, any redundancy payments and any other liabilities when the new contract is terminated) and, particularly for education institutions whether public funds should be used in this manner.

Sick leave

When staff are on sick leave or self-isolating, they cannot be furloughed until they are no longer sick and receiving SSP.

‘Shielders’

This group, i.e. those who are shielding, or those who need to stay home with someone who is shielding, can be furloughed if they are unable to work from home and the employer “would otherwise have to make them redundant”. Whilst unclear, it appears that the reference to “making the worker redundant” in this context may simply mean that, without work to do at home, the worker’s shielding situation means that there is temporarily no work for them to do as opposed to the employer having to show that that worker is “redundant” in the strict legal sense (such as in relation to unfair dismissal or a statutory redundancy payment).

Caring responsibilities

Those who are unable to work because they have with caring responsibilities resulting from CV19 (e.g. for children not able to attend school) can be furloughed, whether or not there is work for them.

Salary sacrifice

For salary sacrifice, it is confirmed that the costs of non-monetary benefits that reduce taxable pay should not be used as the reference pay and the cost of providing benefits should not be included. The Guidance states: “Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.”.

What is included in pay?

Regular pay (for salaried staff and for those whose pay varies) which is due under the contract can be included in a claim (including overtime and contractual commission but not discretionary bonuses, non-cash benefits or discretionary commission).

Working for a different employer during furlough leave

This appears to be permitted with certain conditions, in addition to voluntary work. Employees can continue working for another employer (i.e. not the furloughing employer) with whom they were already contracted pre CV-19. It also seems that employers may claim wages under the Scheme in respect of an employee who is furloughed by them but takes up work for a new employer during the furlough leave, providing that the contract with the furloughing employer allows the worker to work for third parties (such as with the employer’s consent). If the contract restricts the ability to work for third parties, it is unclear if this restriction could be varied or temporarily suspended at the time when furlough leave is agreed with the worker.

Despite the attraction of employees being occupied and in alternative paid employment, if employer consent is required to work for a third party under the contract, institutions will wish to consider whether allowing them to commence new employment for another employer is within the spirit of the Scheme - particularly given the point we have made above about public funds. On a practical level, this could be problematic e.g. if the employer is rotating employees on furlough, it may need the employee back in their main job. This explains why the employee guidance refers to the need for workers to be able to return to work for the employer that has placed them on furlough if they decide to stop furloughing them. We recommend that any consent to work for other employers should be given on the basis of an immediate return if required and this can be dealt with in the terms of the furlough arrangements.

Other than training (which the updated Guidance now encourages during furlough) it is confirmed that no work at all may be done for the employer during furlough.

Rotating workers on and off furlough

Furlough can be rotational and there is no limit on the number of times a worker can be furloughed. However, each furlough leave period should be a minimum of 3 weeks. Institutions will also be mindful of the potential ‘trigger’ of redundancy payment rights where lower pay and (depending on the contract) no work is provided for certain periods. This is more likely to be an issue for higher earners and those with substantial redundancy rights. Institutions should seek to mitigate those risks in their use of furlough and in the written terms of furlough leave.

Holiday

Disappointingly, given the upcoming Easter and May bank holidays, the issue of whether annual leave may be taken during a period of furlough is not addressed in the Updated Guidance. Current ACAS guidance is ambiguous in that it could be interpreted as stating that furlough and holiday can be concurrent and holiday does not break the furlough which may offer some comfort to employers concerned at accrual of significant holiday entitlements during a longer furlough period. However, given that the Guidance itself does not address the point, institutions will be wary of potentially breaking the minimum period by allowing or imposing any annual leave. For the time being, we consider it prudent for institutions to make clear to workers that no holiday is to be taken during furlough – e.g. bank holidays will be effectively added to accrued entitlement on return from furlough.

Is the Scheme only for employees?

No, ‘workers’ who are on PAYE as at 28 February 2020 as well as employees are covered, providing comfort to employers with a reliance on ‘casual’ workers.

Fixed term contracts

Employees on fixed term contracts can be furloughed. The Updated Guidance also states that the employer can “renew or extend the contract during the furlough period without breaking the terms of the scheme”. This suggests that the employer can do so without having to show that it would have extended or renewed the fixed term contract in normal circumstances or that there is any prospect that it has any future work for the fixed term contract worker to carry out.

Comment

In terms of the scope of the Scheme and an institution’s need to access it, the Updated Guidance confirms the scheme is available to an employer which “…cannot maintain [its] current workforce because [its] operations have been severely affected by coronavirus …” and that it is designed to “…help employers retain their employees and protect the UK economy…”. Whilst certain aspects of the Updated Guidance (such as the ability to rehire leavers and to extend/renew fixed term contracts) seem to contradict this, the Scheme should not be regarded as a Scheme which is unlimited or unrestricted in scope. Whilst it is clearly intended to avoid hardship and save jobs, we would advise institutions to consider the rules – and the stated purpose – of the Scheme carefully so that they can be as confident as possible that wages paid out will be reimbursed (in whole or in part) under the Scheme. Other factors for institutions to consider are the fact that any valid claim under the Scheme will be met by public money and the potential reputational impact of being perceived to be using the Scheme in an opportunistic or inappropriate way. This will be especially important for institutions given the comments in the guidance in relation to “public sector organisations”.

The HMRC claim portal will not be available it seems until end April at the earliest. Given the need for claims to be processed (with new infrastructure and HMRC staff applying many new concepts) it is likely to be mid-May before employers are paid under the Scheme.

This note is a generic briefing and is not a substitute for detailed legal advice on the specific circumstances employers are facing. Institutions should therefore take legal advice.

All our education briefings on coronavirus can be accessed on our education hub.

-->