This Commons Library briefing paper provides answers to a number of frequently asked questions on the Government's Coronavirus Job Retention Scheme. It covers Treasury Direction and how it interacts with the Government guidance.

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This is a fast-moving area and the paper should be read as correct at the time of publication (07.05.20).

This information is provided to Members of Parliament in support of their parliamentary duties and is not intended to address the specific circumstances of any particular individual. A suitably qualified professional should be consulted if specific advice or information is required.

On 20 March 2020 the Government announced the Coronavirus Job Retention Scheme.

The purpose of the Scheme is to provide grants to employers to ensure that they can retain and continue to pay staff, despite the effects of the Covid-19 pandemic.

The Government first published guidance for employers and employees on 26 March. These have been updated multiple times. On 15 April the Government published the Treasury Direction to HMRC, the formal legislative guidelines for the Scheme. In certain areas, there appear to be inconsistencies between the Government guidance and the Treasury Direction.

Under the Job Retention Scheme, the Government will provide a grant to employers to cover 80% of employee’s reference salary, up to £2,500 per month. The Scheme came into effect on 20 April but claims can be backdated to 1 March 2020. On 17 April the Chancellor announced that the Scheme will be extended until the end of June.

Employers can only claim for workers who are ‘furloughed’. This is a novel term in UK employment law and describes a situation where an employee remains employed but is not provided with any work. Employees working reduced hours are excluded.

The Scheme is tied to PAYE. Employers can only claim for employees who were a payroll which was notified to HMRC through a real time information (RTI) submission on or before 19 March 2020. Employees who were on a payroll on or before 28 February or 19 March but who stopped working after those dates can be re-employed and furloughed.

The Job Retention Scheme is simply a mechanism through which employers can claim money from HMRC. It does not alter existing employment law rights and obligations.

Employers will normally be liable under the employment contract to pay employees their full wages, even if they cannot provide any work. In many cases, the employment contract would need to be varied to allow employers to furlough an employee on reduced pay.

It is for employers to decide whether to furlough an employee. This could cause problems for zero-hours workers and agency workers whose employers could simply reduce their work to zero without making a claim under the Scheme.

The Scheme also sits amongst a range of existing statutory employment rights. These include protections from discrimination, protections from unfair dismissal and rights to consultation in cases of collective redundancies. It also includes the rules on statutory sick pay, statutory maternity pay and holiday pay. In some cases, the current Government guidance does not provide an indication of how the Scheme will interact with these rights.

This paper covers a number of frequently asked questions on the Job Retention Scheme.

Download the full report