Furlough duration and the employer

jmb1

Just wondered, is having an employee on furlough means tested? i.e is the employer required or likely to be asked at any point to demonstrate (such as reduced profits due to Covid) that they are unable to pay an employees wages?

Jeremy535897

No. An employer may only furlough an employee if coronavirus affects their employment, though.

jmb1

Oh, ok that's surprising, I thought it was solely a job retention scheme to prevent staff being made redundant due to the business not making enough profit. What would examples of coronavirus effecting their employment be (aside from the very obvious such as testing positive and can't come into work say)? Does that need to be demonstrable or likely to be asked for?

MattMattMattUK

jmb1 said:

Oh, ok that's surprising, I thought it was solely a job retention scheme to prevent staff being made redundant due to the business not making enough profit. 

It is to keep people in employment, nothing to do with profit. If an employer had a bunch of employees sitting idle due to lockdowns, Covid related restrictions etc. then most rational employers would make those people redundant as they are an ongoing cost. CJRS by covering most (but not all) of the cost of those employees allows them to retain their employment for when the economy reopens properly. 

jmb1 said:

What would examples of coronavirus effecting their employment be (aside from the very obvious such as testing positive and can't come into work say)? Does that need to be demonstrable or likely to be asked for?

Reduced turnover due to Covid, it is as open as that, from pubs and non-essential retail that are not allowed to open, to coffee shops which have lost the majority of their custom due to work from home, to businesses which themselves were not restricted, but served sectors which had be shut down or severely limited. Yes the company does need to be able to demonstrate if asked by HMRC, but most sectors will have had some impact.

I am guessing that you have a grievance against a particular company with specific circumstances, if you do it would be better for you to be open about what you really want to ask and then people can give a more specific response. 

Andy_L

jmb1 said:

Oh, ok that's surprising, I thought it was solely a job retention scheme to prevent staff being made redundant due to the business not making enough profit. What would examples of coronavirus effecting their employment be (aside from the very obvious such as testing positive and can't come into work say)? Does that need to be demonstrable or likely to be asked for?

Their business being on the list of those that must close
A downturn in demand because customers don't want, eg, decorators working in their home
Airlines/airports who, whilst they can stay open, don't have as many people flying

Since furlough costs employers money why would they want to furlough staff if they have work for them to do? Unless they have created fictitious employees purely to commit fraud

unholyangel

Jeremy535897 said:

No. An employer may only furlough an employee if coronavirus affects their employment, though.

Isn't there something in either direction or gov blurb about "if you are unable to maintain your workforce)?

Jeremy535897

The direction dated 15 April 2021 says:
"2.3 Integral to the purpose of CJRS is that the amounts paid to an employer pursuant to a CJRS claim are only made by way of reimbursement of the expenditure incurred or to be incurred by the employer in respect of the employee to which the claim relates whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission."

You are thinking of the guidance, which says:
"If you cannot maintain your workforce because your operations have been affected by coronavirus (COVID-19), you can furlough employees and apply for a grant to cover a portion of their usual monthly wage costs where you record them as being on furlough."

I don't know what "maintain your workforce" means, and would follow the law as set out in the direction.

unholyangel

Jeremy535897 said:

The direction dated 15 April 2021 says:
"2.3 Integral to the purpose of CJRS is that the amounts paid to an employer pursuant to a CJRS claim are only made by way of reimbursement of the expenditure incurred or to be incurred by the employer in respect of the employee to which the claim relates whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission."

You are thinking of the guidance, which says:
"If you cannot maintain your workforce because your operations have been affected by coronavirus (COVID-19), you can furlough employees and apply for a grant to cover a portion of their usual monthly wage costs where you record them as being on furlough."

I don't know what "maintain your workforce" means, and would follow the law as set out in the direction.

Well no, but the directions do include paragraphs that the claims need to be made in the manner prescribed by HMRC, containing the information requested by them (so could include a declaration about being unable to maintain their workforce) and that that no claim may be made if it is abusive, or contrary to the exceptional purpose of cjrs. 

But the direction does state

2.2 The extension of CJRS by this direction is necessary for the purpose of CJRS described in paragraph 2.1 arising from the emergency resulting from the resurgence of the incidence of coronavirus and coronavirus disease and the measures taken to reduce further transmission, loss of life, demands upon healthcare resources and damage to economic activity in the United Kingdom

To me, that reads as cjrs being available to reduce the impact of economic damage to the business caused by lockdowns (not quite the same as means tested mind you) or because the business is affected by the health impact of covid (staff having to isolate and employer needing to pay them and pay for replacement cover). Although I don't think that wording has been consistent throughout. 

Jeremy535897

I don't think any of that impacts on the answer to the question "i.e is the employer required or likely to be asked at any point to demonstrate (such as reduced profits due to Covid) that they are unable to pay an employees wages?"

unholyangel

Jeremy535897 said:

I don't think any of that impacts on the answer to the question "i.e is the employer required or likely to be asked at any point to demonstrate (such as reduced profits due to Covid) that they are unable to pay an employees wages?"

Well, if we only answered the question asked, it can get very misleading - if the question asked is the wrong one. 

I'm not saying they'd need to show the company would be insolvent if not for cjrs. Just that they should be able to show there was grounds for claiming and not (for example) a situation where they claimed cjrs despite profits being unaffected. Burden is on the claimant to show they're eligible, not on HMRC to prove they aren't. 

Jeremy535897

My answer to the original question was, to use an expression from another of our exchanges, of commendable brevity, consisting of the word "No.", plus a simple expression of what is the real issue, namely the need for the employment to be impacted by coronavirus (as you can't have a reply of only three characters). I actually think the most relevant part of the direction regarding this question is:
"6.1 An employee is a flexibly-furloughed employee in a CJRS claim period if-
(a) the employee is a qualifying employee for the purposes of CJRS,
(b) the employee has been instructed by the employer-
 (i) to do no work in relation to their employment during the CJRS claim period, or
 (ii) not to work the full amount of the employee’s usual hours in relation to their employment during the CJRS claim period,
(c) the employee-
 (i) does no work in relation to their employment during the CJRS claim period, or
 (ii) does not work the full amount of the employee’s usual hours in relation to their employment during the CJRS claim period,
(d) the instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease or measures taken to prevent or limit its further transmission, and
(e) there is an agreement in accordance with paragraph 7 having effect for the period covered by the CJRS claim period."

It would be illogical to have some sort of fiscal hurdle, particularly a retrospective one, because the stated purpose of CJRS is after all to retain jobs. Without CJRS, companies would not have taken the risk of retaining so many employees, particularly in the RHL sector, right at the start of the first lockdown. Many companies were actually better off by claiming under CJRS and keeping staff on, as opposed to incurring redundancy and rehiring costs (otherwise they wouldn't have done it). However, I accept that the court of public opinion obliged some large employers to repay CJRS claims they didn't really need to make.

I recall another debate we had about this issue, where I quoted another part of the (first version) of CJRS, which is still here in the latest version, as you mention:
"2.6 No CJRS claim may be made in respect of an employee if it is abusive or is otherwise contrary to the exceptional purpose of CJRS."
My recollection is that the debate was whether one could set up a sole trade next to an existing sole director company, furlough the director, and do any new work in the sole trade. I still believe 2.6 would catch this, but not cases just because there isn't a reduction in profit, and I don't think that an administrative provision to include a declaration to this effect would have any point. Nor do I think that this administrative provision about claims needing to be made in the "manner prescribed by HMRC" can be used to add new requirements like a declaration about maintaining the workforce.