Contractors’ Questions: Can my contractor umbrella company refuse to furlough me?

Contractor’s Question: Can my umbrella company refuse to furlough me even though I am still their ‘employee’ and cannot work due to Covid-19?

Expert’s Answer: Basically, yes.

Employers can access the Coronavirus Job Retention Scheme grants for any 'furloughed' workers that they paid within the 2019/20 tax year, where they submitted payroll information to HMRC on or before March 19th 2020.

Usually umbrella companies take on agency workers as their own employees. If this is the case for you, then theoretically it is possible for them to furlough you in order to be able to access a CJRS grant. I say theoretically, because unfortunately, there is nothing forcing them to furlough you. Indeed you may find that they are reluctant to do so!

Currently umbrella companies are unclear about a number of things in relation to how furloughing workers and the CJRS applies to them, including how holiday pay accrual would work for temporary workers on furlough and whether the ‘bonus’ that umbrella companies tend to use to top up pay over and above the NMW will count as pay.

The first point is important because it means that umbrella companies could well have costs and obligations that they need to fund, in excess of the CJRS grant.

The second point is important because umbrella companies need to understand whether the bonuses they pay out are 'qualifying' costs and whether they can be reimbursed under the scheme. If they get things wrong, they may end up paying out more than they can get back -- or worse, not be able to get back anything at all.

Many umbrella companies will be waiting to receive government clarification on such issues so that they can assess their overall position, before deciding whether to furlough workers. All of this means many umbrella companies are currently simply doing nothing (which they can do, as many of their workers are on zero-hours contracts) and workers are being left in no-man’s land.

We have asked HMRC for urgent clarification, as have other bodies. If you wanted to raise the issue yourself, then you can write to your own MP about it.

It is worth saying that there are a couple of other avenues for you to explore if your current umbrella company won't furlough you.

Firstly, is there a previous umbrella company that could furlough you instead? Government guidance confirms that it is possible to ask an old employer (where you were still with them as at February 28th 2020, even if you aren't paid again until after March 19th 2020) to put you back on their payroll and furlough you. However, you should be aware that there is no obligation on them to do this.

Secondly, I raise the possibility of staying on the books of your current umbrella company, but trying to find work elsewhere, to the extent your contract allows. Provided this was with a completely different employer/agency, this wouldn’t prevent you being designated furloughed by your current umbrella company at a later date (if you are furloughed, you are only prevented from working for the employer or agency that has furloughed you, including performing such work through or on behalf of the agency for the agency’s clients).

Finally, to the extent that you qualify for no support from the CJRS at all, nor can find other work, then you may need to claim welfare assistance. If you are looking at claiming support through benefits, we strongly advise you speak to a welfare rights adviser who will be able to go through things in detail with you and help you identify your best options. In addition, you can find lots of coronavirus information and guidance on our website which you may find helpful. Good luck!

The expert was chartered tax adviser Meredith McCammond, technical officer at the Low Incomes Tax Reform Group (LITRG).