A number of contractors have been contacting FCSA due to views of various “experts” suggesting that umbrella employers can calculate furlough pay based on all average pay rather than solely on the NMW/NLW element. We would be absolutely delighted if these so-called experts were able to make this assertion with confidence and are indeed correct. However, we have our doubts and here the FCSA outlines why.
One such website asserts that they have received an answer from HMRC, which, in essence, suggests that contract terms of employment can be disregarded in order to consider which elements of pay should be included in furlough calculations. The FCSA finds it very surprising that HMRC are able to make such a statement given that they are not themselves employment lawyers and given that most employment lawyers would strongly advise against ignoring contractual terms. In addition, the relevant contractual terms used are specifically addressed in the guidance and at present, appear to go against the position expressed by this comment piece and others.
It is unsurprising that the initial Coronavirus Job Retention Scheme (CJRS) guidance, issued of course at very high speed by government with input from various departments, has had to be amended and explained in more detail each week. Indeed, we have now had at least seven versions of the supporting guidance. The guidance has had to be amended in response to various uncertainties and no doubt more guidance will be issued. This is because various aspects are not clear, and so for commentators without sector-specific expertise, or a specific source from HMRC, to suggest that this very difficult issue is clear, is not credible.
Furthermore, the assertion assumes that there are no further considerations except the contractual position. However, this is an over-simplified view as there are a number of technical reasons for the pay structure. The argument to disregard the contractual arrangement will have additional, and potentially significant, consequences beyond just the contract for any particular individual. It is extremely unlikely that HMRC’s quoted view takes into account any of these additional factors and therefore is unlikely to be accurate for most umbrella employers.
It is interesting that the quote is not actually attributed to anyone – given that HMRC employ some 50k people there is nothing to say that the quote came from anyone authorised to give it! We are aware of numerous instances of HMRC quotes being given, which are both credible and attributed to an authorised individual, but which later turn out to be incorrect / withdrawn entirely. For any firm to put commercial reliance on such a quote would be unthinkable, instead sensible businesses will obtain proper professional advice which is specific for their circumstances.
If the government does indeed intend that the quoted “HMRC” view should be followed, then it is supremely simple for them to confirm this for umbrella workers on the relevant contract structure, in the regularly updated guidance.
Given the complexities of the issues, which can and do vary for individual umbrella businesses, then it is unsurprising that some are able to calculate furlough pay according to average pay, which is extremely good news for their umbrella employees. Given the variability of specific circumstances, FCSA does not mandate any particular approach for members to take, and indeed it would be wrong to do so. It is unfortunate that seemingly credible media has asserted the opposite in recent weeks, and we have requested a correction accordingly. Instead, the FCSA’s role has been to disseminate government information and advice to our members and outline the potential risks of different courses of action.
It is worth noting that any FCSA members deciding to calculate furlough pay based on average earnings do not have the luxury of being able to accrue huge debts and subsequently liquidate their business leaving behind vast sums of money owed to HMRC. FCSA membership standards prevent such poor business behaviour from any directors wishing to retain their FCSA status.
In our experience, umbrella firms have no wish to prevent their employees from receiving financial support at this time, indeed they are doing everything in their power to ensure their employees can access the maximal funds possible. However, if they make claims which are later disputed by HMRC, due to misinterpretations of guidance, these mistakes are likely to be business-ending.
In addition, as the guidance only permits one claim for a worker for a period, firms will want to make the right claims: they cannot amend them later. For these reasons, we are continuing to ask for the clarity we need. It is not reasonable to suggest that businesses should take a guess based on the current guidance, when we have a dialogue in place with government and while the guidance continues to be updated.
A number of umbrella employees have also contacted us this week suggesting that their contracts could be amended to remove any discretionary pay element. However, such an amendment would be at risk of being perceived as fraudulent in order to receive increased furlough pay.
Furthermore, a number of FCSA members report being contacted by their employees who are quoting various sources of inaccurate advice and incorrect interpretations of the law. It is irresponsible of such “experts” to mislead people into believing that they will be able to receive more financial support than the current legislation and guidance allows for. Be assured that no business wants to pay anyone less than what is due, it is simply not in their interests to do so.
The simple fact is that the government must clarify the position either way for umbrella employees which we have been asking for well over 5 weeks now. This clarification must come from official government guidance, not from a quote that isn’t actually attributed, and must be provided to the FCSA directly in response to our direct communications with government. Without certainty, the financial risks to an umbrella that gets furlough pay wrong are enormous, leaving many with no option but to only consider paying furlough based on NMW/NLW.
The FCSA appreciates that this is hugely frustrating for all concerned, to say the least. That is why, since the outset some 5 weeks ago, the FCSA has been doing everything possible to get our message across to the government. We are infuriated that the government has so far chosen not to support the UK’s 650k umbrella employees, so we are not going to let this drop.
