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  • Rob Wilks

Benefits of an umbrella company – Part 1 – Furlough

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 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. But 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 other reputable businesses, Clipper Contracting Group wanted to do the right thing and explore how to support its workers.

There was initial hesitation though; the HMRC guidance on the CJRS was so new, that legal opinion was required. We could not find ourselves in a situation where we 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 this time and through online discussions organised by the FCSA and APSCO with various legal experts and our own private legal interpretation, Clipper Contracting Group was satisfied that it could implement furlough for workers that qualified.

Benefits to Clipper Contracting’s employees

To highlight the impact Clipper Contracting Group had on the contingent workforce:

· Supported our employees with £1.6 million of furlough payments made to workers

· Supported circa 400 individuals through the furlough period to July 2020 (representing a third of our overall employed workforce)

These numbers are HUGE. All this was done on behalf of the workers for free (in line with the guidance!) – just by being an employee of a reputable and ethical umbrella company. And not only that – Clipper Contracting was able to leverage its size and strong financial health to pay its workers prior to actually receiving the grant money from the government. Our workers had cash in their bank quickly during this time of uncertainty.

Now whilst the CJRS was voluntary and not all umbrella companies chose to furlough workers, the vast majority of reputable umbrella companies did. The fact these businesses such as Clipper Contracting Group can aggregate costs and processes, allowed us to process furlough payments where some smaller umbrella companies or recruitment agencies simply could not due to the expertise and costs involved.

As for the umbrella companies that did not furlough workers, many were 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.

As you can imagine, most workers were grateful for the support offered and some took to the internet to review their experiences:

“They always pay on time and once they had their own queries answered regarding JRS, they have paid me on time each week without any problems” Anonymous,

“Umbrella is acting very professionally paying the Furlough always in time it was very helpful” Anonymous,

Cost to the umbrella company

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 Clipper Contracting Group alone.

For example, we could not furlough many of our own staff, in order to keep our phone lines open and systems online to deal with the compliance and many queries relating to the furlough scheme. We incurred legal costs in working out whether we could implement the scheme. And we continue to bear the liability if we 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.

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