From the time that the first guidance on the Coronavirus Job Retention Scheme was published on 26 March 2020, it was clear that 28 February 2020 was a crucial date for HMRC. 

In this version (and the versions updating it on 04 April and 09 April 2020), it said:

Employees hired after 28 February 2020 cannot be furloughed and claimed for in accordance with this scheme.   

There was also the comment:

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

 On 04 April 2020, the above line was changed to:

If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can reemploy them, put them on furlough and claim for their wages through the scheme.

Therefore, with the above statement, the scheme also covers the employees that left voluntarily to go to another job, only to see that job fall through as a result of the pandemic.  In these cases, the ex-employer can re-hire or re-employ the ex-employee if they want and claim.

However, the employees that made the choice to come to your organisation on or after 29 February 2020 are not covered.  So, employers can either choose to furlough these employees and pay them at their own cost or consider terminating their employment, pointing them towards support via Universal Credit.

Fair Enough?

The above seems perfectly clear:

  • The CJRS is not open to people who started on or after 29 February 2020, although
  • If an employee was made redundant as a result of the pandemic, or left of their own choice to go to another job which fell through, these employees can be re-employed / re-hired

I suppose that is in line with Rishi Sunak’s statement on 20 March 2020 when he said:

I have a responsibility to make sure we protect, as far as possible, people’s jobs and incomes.

‘As far as possible’ seems to exclude an awful lot of employees to me and I cannot see that this is in line with the basic intentions of the scheme:

  • Retain employees
  • Furlough them and pay them, then
  • Reclaim from HMRC
‘On your PAYE payroll’

Two lines that have caused confusion are the ones that say eligible employees are those ‘on your PAYE payroll on 28 February 2020’ and ‘created and started a PAYE payroll’.

On the payroll

Looking at a couple of online dictionaries for a definition:

  • Longman says that if someone is on the payroll ‘they are employed by that company’
  • Macmillan Dictionary Online says that if someone is on the payroll they are ‘employed by a particular company’

The industry interpretation of someone being on the payroll is someone that is employed, regardless of whether they have been paid.

On 07 April 2020, I was made aware of a statement made by Richard Garth from HMRC, co-chair of the Employment and Payroll Group (EPG).  This was in a response to a question from a member who queried the term ‘on the payroll’.  The response was:

Advice from Policy colleagues on the meaning of “on the payroll” on 28 February is as follows; As set out in the guidance, furloughed employees must have been on your PAYE payroll on 28 February 2020. This means employees that were hired in February, but were not on February’s payroll would not be eligible.

‘Not on February’s payroll’ clearly means that there is a requirement for the employer to have sent a Full Payment Submission (FPS) with the employee contained in it so that the appropriate employment record can be created on HMRC’s systems.

Not on HMRC’s systems on or before 28 February 2020 means the employee’s wages cannot be reclaimed under the CJRS.

This was further confirmed when Jim Harra, First Permanent Secretary and Chief Executive, HM Revenue and Customs and Cerys McDonald, Director, CV-19 policy co-ordination, HM Revenue and Customs appeared before the Treasury Committee on 08 April 2020.  Both civil servants acknowledged that there would be some disadvantaged people, however, there were schemes in pace such as Universal Credit.

However, HMRC takes requires us to take things like Income Tax and National Insurance Contributions from the earnings from employment.  This is from the time that they are employed.  Therefore, it does not seem right, fair or in line with the intentions of the scheme that an employer is excluded from making a reclaim just because they were not physically paid on or before 28 February 2020.

There are many employers who will have fallen foul of this clarity from HMRC that has emerged.  The initial guidance on 26 March 2020 did not contain this clarity and this is the time that thousands of employers will have been following the guidance for millions of employees.  Now we have the realisation that, for example, the following are not covered:

  • A new starter, say, on 24 February 2020 who missed the payroll cut-off for that month – a common and frequent occurrence. These would normally have been paid with backpay in March 2020.  If they have been furloughed, their employer will not be able to reclaim the monies from HMRC
  • A new starter on a payroll that pays in arrears, say the week 24 February to 01 March 2020 that pays on 06 March 2020. This new starter would not have been on the FPS to create an employment record on or before 28 February 2020. If they have been furloughed, their employer will not be able to reclaim the monies from HMRC

There will be thousands of employees that were not on HMRC’s systems on or before 28 February with the employer that has furloughed them.  I cannot see that this is in line with the basic intentions of the scheme:

  • Retain employees
  • Furlough them and pay them, then
  • Reclaim from HMRC
‘Created and started a PAYE payroll’

This is another line from the guidance that is now clarified.  An employer had to have created a PAYE scheme on or before 28 February 2020 and actually started paying people through it and submitted at least one FPS.  This is to ensure that employment records are on HMRC’s systems.

HMRC require us to establish a PAYE scheme or register as an employer for the first time up to 4 weeks before paying new staff.  So what about a totally new employer that hired all staff on or before 28 February 2020 but is not paying until March?  If this employer has furloughed in good faith and in accordance with the unclarified guidance, this new employer will be more than disappointed to find out that that they are bearing furloughed staff costs when all indications were that the UK Government would be bearing it.

I cannot see that this is in line with the basic intentions of the scheme:

  • Retain employees
  • Furlough them and pay them, then
  • Reclaim from HMRC
The Forgotten Thousands
The implications

There will be many employers up and down the land that have furloughed staff that are not registered on HMRC’s systems.  This is, simply, because the FPS was not submitted on or before 28 February 2020.

In my opinion, this is penalising employers who acted in good faith and interpreted the scheme as per the guidance available at the time in line with the basic intentions:

  • Retain employees
  • Furlough them and pay them, then
  • Reclaim from HMRC

The biggest implication is one of cost.  There are furloughed employees in every industry, however, a grant from HMRC will only come if the employee was on HMRC’s systems on or before 28 February 2020.

Will employers re-consider their options they previously made in good faith and in line with the guidance available at the time?  In my opinion, it is not right to issue guidance that can be interpreted one way or another, only to provide clarification when it is too late.

Why 28 February 2020 in the first place?

I accept and understand that HMRC will have to have in place some sort of compliance regime.  The one that they have chosen seems to be one that is totally reliant on the employer having submitted the FPS with the employee actually on it.  If the employer subsequently claims a grant from HMRC for an employee that was not registered on their system, they will refuse the grant.

Though why 28 February 2020 in the first place?  Wouldn’t it have been better and more logical for a compliance regime to apply to new starters after the ‘lockdown’ was announced?  It was first announced by Prime Minister Boris Johnson in a television address to the nation on 23 March 2020, taking effect the next day.

Although, I can see the terrific compliance issues for HMRC, with employers, possibly, ‘manipulating’ start dates so that they can pay wages and claim under the CJRS.  However, regardless of the compliance activity that HMRC would have to undertake, having 28 February 2020 as the date is not in line with the basic intentions of the scheme:

  • Retain employees
  • Furlough them and pay them, then
  • Reclaim from HMRC
Action for Employers

Absolutely, we need to be holding the UK Government to account on Mr Sunak’s statement that included the line:

I am placing no limit on the amount of funding available for the scheme. We will pay grants to support as many jobs as necessary.

I have already contacted my Member of Parliament and Assembly Member.  I have also made protestations to HM Treasury.  The more people that are contacted, the more there will be pressure on the UK Government and HMRC to abide by the basic intentions of the CRJS:

  • Retain employees
  • Furlough them and pay them, then
  • Reclaim from HMRC

As employers and professionals, we have taken action at various times in accordance with the differing guidance.  Now the UK Government must stick to its pledges about supporting employees and the employers that have done the decent thing and furloughed employees on the belief that they will be able to reclaim this money.

There can be no abuse of this admirable system, so compliance is essential.  However, we cannot forget thousands of employees.

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