Do you need the employee’s written agreement?
One of the essential requirements of the CJRS is that a furloughed employee can’t do anything for their employer (or for a linked or associated organisation) that provides services to or makes money for them. If they do any work for you when on furlough, you may have to repay the grant. The Treasury Direction, which is the legislative source of HMRC’s power to make payments under the CJRS, provides that, to be a furloughed employee, the employee must have been “instructed by the employer to cease all work in relation to their employment”. It then goes on to state that “an employee has been instructed by the employer to cease all work in relation to their employment only if the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment”.
As a result of this, many employers, who had already placed employees on furlough without written agreements to cease work being in place, were concerned that this meant they now needed to obtain such written agreements.
The HMRC guidance on the CJRS has been amended several times since its original publication on 26 March 2020. Prior to the Treasury Direction being published, it mentioned nothing about having such a written agreement in place. The latest version of the guidance, published on 23 April 2020, states that:
“Employers should discuss with their staff and make any changes to the employment contract by agreement…. To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming through the scheme…. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years.”
So, the Treasury Direction says that a written agreement to cease work is needed, but the HMRC guidance confirms that there only needs to be a written record confirming the employee has been furloughed, produced in compliance with employment law, to which the employee doesn’t need to have provided a written response. Technically, the Treasury Direction is legally binding and the HMRC guidance isn’t. However, the guidance shows how HMRC intends to interpret and apply the Direction - and that is that it won’t require evidence of the employee agreeing in writing to cease work in order to allow a claim under the CJRS. If HMRC tried to go back on this at a later date, it would be leaving itself open to a judicial review claim. With the CJRS now being open for applications, there’s also no sign of HMRC requiring evidence of the employee’s written agreement as part of the claim procedure.
As matters currently stand, the cautious approach would be for you to seek agreement in writing from an employee that they will cease all work in relation to their employment prior to commencement of their furlough period if they’ve not yet been designated as furloughed. As for those already on furlough, it’s probably unnecessary to go back to them now, but do check whether your furlough letters to them made clear that they couldn’t do any work for you during furlough.
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