The Government have issued a new Treasury Direction in relation to the Coronavirus Job Retention Scheme. There has been a series of Treasury Directions since the introduction of the furlough scheme in March 2020. These Treasury Directions set out the legal framework for the scheme itself.
The most recent Treasury Direction, issued on 25th January 2021, confirms that the furlough scheme has been formally extended from the end of January 2021 to the end of April 2021.
An issue which will start to arise in the coming months is about the calculation of “normal” wages when someone is furloughed. The existing rules state that you should either take an average of usual hours worked prior to furlough or to look at the corresponding month from the previous year.
This latter point would have caused problems, as someone paid in April 2021 would have had their wages based on their wages for April 2020, which could have been reduced due to furlough.
However the new Treasury Direction has confirmed that when referring to a corresponding month from a previous year, this must now be a period prior to furlough, e.g. someone paid in April 2021 will have their wages based on their usual hours in April 2019, not April 2020.
At the time of writing, it is not known whether the furlough scheme will be extended beyond the end of April 2021. This will largely depend upon the rate of inflections and vaccinations, as well as the number of deaths and those admitted to hospital with COVID-19, and crucially its impact upon the economy. The Chancellor is due to deliver the Budget in March 2021, at which it is widely expected an announcement will be made.
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