Blog post written in collaboration with Clipper Contracting.
Up until the start of the Covid-19 pandemic in 2020, the term ‘furlough’ was little known in the UK. Unlike our neighbours across the pond and other European nations, the UK didn’t have an existing ‘short-time work’ scheme and so the Coronavirus Job Retention Scheme (or CJRS) was announced by the Chancellor in late March 2020. This would become commonly referred to as ‘furlough’ and supported up to 11 million people at a cost of £53 million.
With the CJRS announced on the 20th of April 2020, the first national lockdown was announced shortly afterwards. The CJRS paved the way to allow workers to stay home without businesses having to make wholesale redundancies.
The announcement in the press led to a wave of questions from workers, especially temporary workers whose assignments were coming to an abrupt end. There was concern for workers on how they would survive the uncertainty. For umbrella companies, just like other businesses, there was an initial lag period as the official government guidance was digested.
As an employer, it seemed logical that umbrella companies would be able to access the scheme and use it to fund 80% of an employee’s normal income. And just like reputable businesses in other sectors, umbrella companies wanted to do the right thing and explore how to support their workers.
There was initial hesitation though; the HMRC guidance on the CJRS was so new, that legal opinion was required. Umbrellas could not find themselves in a situation where they had fallen foul of the guidance only to have HMRC asking for funds to be repaid. This liability had to be managed. The umbrella company sector pulled together at the time and through online discussions, organised by the FCSA and APSCo with various legal experts and individual private legal interpretation, Accredited Members were satisfied that they could implement furlough for workers that qualified.
Now whilst the CJRS was voluntary and not all companies chose to furlough workers, the vast majority of umbrella companies did, and by aggregating costs and processes, the contractors were able to access this government scheme.
There were also many uncompliant ‘umbrella’ companies whose contracts were not true employment contracts. Those using hybrid schemes missed out on this vital support whilst those offering genuine employment arrangements, such as those umbrella companies that adhere to the FCSA codes of compliance, were able to support workers.
It is important to note that umbrella companies could not provide the furlough scheme to some workers due to certain restrictions in place. The main being government legislation surrounding length of employment.
Of the FCSA Members who have been audited by HMRC for their furlough payments, all have passed.
Cost To Umbrella Companies
What many didn’t appreciate at the time, was the considerable cost involved in administering this voluntary scheme. The CJRS guidance didn’t allow the employer to hold funds back to cover their costs of implementation. These costs were borne by the umbrella companies alone.
For example, many could not furlough their own staff, in order to keep phone lines open and systems online to deal with the compliance and many queries relating to the furlough scheme. Legal costs were incurred in working out whether the scheme could be implemented. The umbrellas continue to bear the liability if they furloughed a worker against the CJRS guidance.
In employing workers, an umbrella company bears all the employment liabilities, even in the hard and unexpected times.
Clipper Contracting During Furlough
- Supported their employees with £1.6 million of furlough payments made to workers
- Supported circa 400 individuals through the furlough period to July 2020
- Paid its workers prior to receiving government grant money