Our employment team are ready to provide advice to those worried about furlough and what the future holds.
HMRC stated that by the end of May there were almost 1,900 reports of fraudulent use of the Coronavirus Job Retention Scheme. Employees and their families have started to report their employers for asking them to work while claiming the allowance. This is a clear violation of the rules and is a criminal offence.
The Coronavirus Job Retention Scheme was designed to keep the economy going through the pandemic. However, these reports indicate that many of the businesses are potentially misusing it. We believe that this could be due to a lack of understanding of the rules. Remember the scheme is intended to be used where redundancy is the only alternative.
Here we outline the rules and set-out how it effects your business or job.
Short Guide for Employers
HMRC have announced that they will seek to recover any claims where businesses have furloughed staff but made them work. They stated though, that they are not going to punish companies that have made honest mistakes, just seek to recover the claims. However, any serious breaches of the rules, they will take serious action.
So it is important to know what exactly staff can do while on furlough.
Can staff do basic things such as reply to emails and admin on furlough?
The short answer is no, however the rules are changing and therefore it is slightly different from July.
If you or your staff were furloughed between March and June
Staff cannot do any work for the employer that either:
- Makes money for the employer or any linked entity.
- Provides services for the employer or any linked entity.
Even basic admin tasks and handover notes are services even if they do not generate income. Therefore employees cannot provide these services while furloughed. We suggest that these arrangements desist or the employee is removed from furlough.
If you or your staff were furloughed between July and October
Under the next phase of furlough, employers can ask employees back for an allotted amount of time within their contracted hours.
The employer can then claim a grant for the outstanding hours not worked whilst paying the amount of workable hours themselves.
What if we have claimed furlough and the employee is still working?
Well, as we have stated previously, the most important aspect is to ensure that they are not working now. If you have mistakenly claimed while the employee is still working then HMRC are likely to recoup the claim but not take further action.
HMRC retrospectively have the right to audit claims. They have announced that once the pandemic is over that they will audit every claim. Those who are found seriously abusing the scheme face criminal charges of fraud.
The Fraud Investigation Service are responsible for investigating these breaches.
It is in the interests of your company not to breach the rules so that furlough payments for all staff continue. If it is found you are breaking with one employee, they may seek to recover for all employees.
However, the government are aware that it is important companies continue to trade to protect the economy. Therefore, if the evidence suggests a company officer breached the rules and pressured a furloughed staff member to work then they become ‘jointly and severally liable for the Income Tax charge raised’. This is intended to protect companies while targeting the individuals, who are responsible for the repayment.
Remember that some professionals will have more scrutiny than others. If you are a financial officer, solicitor or another officer of the law and are aware of breaches it will be looked on less favourably.
How will the government audit firms?
It is believed that HMRC as part of its PAYE post-COVID audit will request information such as selection criteria, financial criteria and decision making in regards to all furloughed staff.
We suggest that companies keep records as to why those staff were chosen. Why they are redundant, why financially they were chosen and whether the company needed to furlough staff at all. This is good practice to prevent falling foul of discrimination laws. You should be looking at whether Directors should be furloughed and not just support staff.
Although, HMRC have already introduced short term measures to audit claims including: employees authenticating the process, process times built in for HMRC to review claims, checks on the employer and the whistle-blower hotline. It is believed that future audits will be much more rigorous. Post-COVID audits are likely to include:
- Communication records of employee – emails, phone calls, texts and other messages
- Communication records of line manager – emails, phone calls, texts and other messages
- Employment contract
- All correspondence between directors and furloughed employees
- Client list with contact details to ensure that they were not contacted by furloughed staff
- Payroll records
- Training records
- Financial solvency of the firm in respect of claims.
HMRC are likely to recover any overpayments of Coronavirus Job Retention Scheme with the investigations carried out by the Fraud Investigation Service.
So we suggest keeping records of everything so you can evidence if the situation arises.
What can staff do while furloughed?
You can request that furloughed staff do training. The government are actively encouraging this.
However, training may jeopardise the grant if it involves services to the business. Further, it cannot increase the services that can be supplied by the firm either. For example, you cannot ask the furloughed employee to research into a specific client circumstance and you cannot ask them to research another area and write a business plan to diversify the companies offering. Both circumstances would be misuse of the scheme and a criminal offence.
When deciding what training staff should do, you should be looking to develop employee’s credibility and skills that they can use in their role when they return.
What are the new changes announced from July?
The government announced the scheme would be extended through to October. However, there are some changes from:
- July furloughed employees can work part-time and employers claim grant for the hours not worked;
- July employers are required to pay the full-time salaries for any time worked;
- August companies are required to pay the pension and NI contributions of the employee;
- September employers are required to pay 10% of the furlough amount; and
- October employers are required to pay 20% of furlough amount.
The additional 10% and 20% cannot be negotiated between the employee and employer. To claim the scheme the employer must contribute the additional amount.
These changes mean that your business can be more flexible, utilising staff when required and claiming the grant when not. It is important to recognise that this is based on the contracted hours worked and not days. Therefore any grants made on the contracted hours remaining. If an employee is contracted to a 40 hour week, works then of those hours in one day then the grant is made for 30 remaining hours.
We suggest that you keep a recording of the furloughed employee’s hours to ensure accurate reporting.
What can we do?
Our experts are standing by to help. We can provide advice on how you can utilise the scheme and help correspond with HMRC if your firm has mistakenly misused the grant. We can provide advice around whether the training staff are doing while furloughed would fall foul of the rules. Let us take some of the burden.
Short Guide for Employees
HMRC have asked anyone who is concerned that their employer is abusing the scheme to come forward and report it.
Reports highlight that some employees are being pressured to work or “volunteer” for companies while furloughed. You may have been threatened with dismissal if you refuse to work.
What should I do if I have been pressured to work while furloughed?
In the first instance, you may want to raise your concerns with your line manager or the person requesting you to work. Allowing them to respond, it may be a genuine mistake. They may not be aware that you are furloughed or fully understand the rules.
If you continue to be pressured, we can provide initial legal advice on how to deal with the situation. Our employment team can help with responses and escalate if necessary. HMRC have a fraud reporting site where you can report the following:
- Claims on your behalf and not paying you the entitlement;
- Asking you to work while furloughed; and
- Making backdated claims that include times you were working.
You should keep records of correspondence and requests to work whilst furloughed.
If your employer has decided to make you redundant or fired you because you have refused to work while furloughed then you can look to take them to an employment tribunal. Evidence is essential here so document everything.
Our team can discuss with the employer to navigate to an amicable solution for you.
What can we do?
If you have been asked to work when you are furloughed and are nervous about how to respond? Our employment team can help you to put together a response.