The Job Retention Scheme: have you got it right?

13th May 2020

DAS Law Associate Carly Owen looks at the latest developments regarding the government’s Job Retention Scheme…

Initial government guidance

The initial requirement on employers was merely to write to staff stating that they were looking to make them furloughed and inform them of this.

This requirement was repeated in subsequent editions of the Government’s Guidance for Employers and expanded to say that the employer was required to keep the written notification for five years.

There did not appear to be any specific timeframe when the employer needed to do this, i.e. it did not have to be sent before or on the first day of them being furloughed. This was the position for three weeks.

Current employer obligations

On 15 April 2020 the government released the Treasury Direction to HMRC regarding the Job Retention Scheme. This set out that HMRC will only recognise furlough as being valid if the employer and employee have agreed in writing that the employee will cease all work in relation to their employment.

This is more than the initial guidance to employers set out.  This requires more than notification to an employee, it requires actual written agreement with them.

What happens if this was not done?

The question that will be asked by many employers is if they did not obtain written agreement with their employee and merely provided written notification what happens now? Will HMRC meet the claims?

In short, HMRC has to follow the Direction as set out.  That said, if HMRC does refuse to meet the claims on the basis that a written agreement was not obtained there is a strong argument that employers who have furloughed staff in reliance of the government guidance at the time could have grounds for a judicial review against HMRC.

Judicial Review is essentially a judge reviewing a decision of a public body and in this case it would be likely to be brought on the grounds of “Legitimate Expectations”, i.e. expectations that HMRC would act in a particular way based on guidance but it has now acted differently. The outcome of which could be that HMRC is ordered to quash its decision and consider it again.

That said, it is very doubtful that the issue with the wording is now likely to lead down the Judicial Review route. The reason for this is further guidance was produced by HMRC after the Treasury Direction on 15 April 2020 was released which set out again that the requirements for making a claim was only written notification by the employer and evidence that this would be kept for five years.  There was no mention of a written agreement.

It therefore appears that HMRC will accept claims without evidence of the employee’s written agreement. The reiteration of this position in a guidance published after the Treasury Direction can only act to demonstrate the stance HMRC are looking to take when considering claims. Despite this, it is advisable to speak to and consult with your employees when considering furlough and adopt best practice of writing to the employees and getting written agreement.

What if a claim to HMRC is rejected?

There do not yet appear to be any reported incidents of claims being rejected for lack of evidence of an agreement with employee. In the event that this does occur, however, HMRC has set up a helpline dedicated to support the portal (0800 024 1222) and when online, there is an option for a ‘chat’ service which is reportedly helpful.

What should employers do going forwards?

When you have objectively selected the employees that you want to furlough, it is advisable to do the following:

  • Confirm the employee’s new status of being placed on furlough;
  • Obtain the employee’s consent to furlough and the reduction in salary and record this in writing;
  • Instruct the employee to cease all work during the furlough period;
  • Obtain confirmation that the employee agrees to cease all work in relation to the furlough period;
  • If the furlough period is to be extended, provide further notification to the employee in writing;
  • Retain a record of the agreement for five years.

ACAS have published a template furlough agreement, which you will find at their website.

Disclaimer: This information is for general guidance regarding rights and responsibilities and is not formal legal advice as no lawyer-client relationship has been created. Note that the information was accurate at the time of publication but laws may have since changed.

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