Furlough Scheme EXTENDED: But The Penalties For Abusing It Are Still Very Real


21 May 2020

By Elizabeth Bradshaw

Employers will be aware that the government has announced the extension of the furlough scheme for a further four months.

This means that it is now extended to October and Chancellor Rishi Sunak has confirmed that its purpose is to continue to pay employees up to £2,500 per month, or 80% of their wages. This will be welcome news to approximately 7.5 million employees that are currently covered under the Coronavirus Job Retention Scheme (CJRS).

Mr Sunak has also announced that with the extension, there will be some greater flexibility for  employees to be supported back to work, so that employers can take some of the pressure off the current, more stringent rules of the CJRS.

We have previously written about how some businesses have, unfortunately, been rumoured to abuse the system for a variety of reasons – all of which are heavily discouraged but we have had some further thoughts on this and wanted to share the advice with our clients – existing and new – with a simple Q&A below. However, if you have any other questions on the CRJS, and its potential consequences to the business, please do contact our expert team and we will be happy to assist you.

Q: Can our employees work whilst we claim their wages under the CJRS?

A: The short answer is no. If the business has elected to place any employees on furlough then they cannot work whilst claiming their wages from HMRC under the CJRS. The extension of the CJRS will allow for businesses to bring their employees back to work on a somewhat phased return basis, but the specifics have not yet been announced. This means that until it is allowed under the CJRS, employers can either have their employees working or on furlough (thus claiming their wages).

Q: What if we do not record our employees shifts or working hours and declare them as being on furlough?

A: This doesn’t make a difference, it would still not be allowed under the CJRS. The Government has not announced exactly what the penalty would be for employers who abuse the scheme, but it is clear that at the very least they would have to repay the full wages and contributions that had been claimed from HMRC which will potentially have a serious financial implication on the business.

Dishonestly making a false representation to HMRC with the intention of making a financial gain is a Criminal Offence of Fraud. Being found guilty of such an offence by abusing the CJRS could mean an individual faces up to 10 years imprisonment and unlimited fines. Those that assist in making the abuse possible could face similar punishment. Fraud gives rise to risk of Prosecution, significant reputational damage and financial loss to any business. HMRC has put in place an online portal for employees and the public to report suspected fraud in the Furlough Scheme. If you are contacted by HMRC regarding suspected fraud an obvious ‘paper trail’ of legitimate financial transactions would assist greatly in responding to any allegation.

Q: Can the business withhold payment to furloughed staff until they return to work following the CJRS or furlough period?

A: No, even under the CJRS there is no express right for employers to not pay their employees. In some limited circumstances, a business could reach an agreement with their employees to only start payments once the Government’s contribution has been received, but this is incredibly limited, and must be by clear and agreed by all parties. However, this is not an absolute right for the employer and the business must continue to pay their employees even whilst they are on furlough – failure to pay would attract potential issues of unpaid wages or even breach of contract.

Q: Can the business claim under the CJRS knowing that it is insolvent or likely to become insolvent in the very near future?

A: There is no penalty under the CJRS, as such. However, despite the Government relaxing some wrongful trading rules during this pandemic (we recommend seeking advice if you wish to rely on them), a business that continues to operate when they know that they are insolvent or likely to become insolvent soon after, may face issues under Insolvency Laws including the directors or shareholders becoming liable for repayment of the money that the business has taken or being investigated and penalised as the business closes down.

Q: Can an employer make an employee return to work?

A: Yes. It is important that the employer is ready to protect the employee and ensure that the workplace is safe for their return. This will include ensuring that Social Distancing guidelines are capable of being followed in the workplace or that employees have Personal Protective Equipment (PPE) where appropriate and necessary.

Q: Can an employee refuse to return to work?

A: In short, they could. An employer has a duty of care to their employees to ensure that the workplace is a safe place for them to do so and that they are comfortable with it. If the employee has reasonable concerns about the workplace being unsafe then it is for the employer to seek to resolve those concerns.

In the event that those concerns are serious, and the employer ignores them for whatever reason, the employee can refuse to return to work and may well turn “whistle-blower” for which there is protection under existing Employment law. This means that if an employee raises these concerns and it leads to their dismissal then it may well give rise to an automatic unfair dismissal situation due to whistleblowing under the legislation.

This article is means only for information and is not comprehensive legal advice.

We appreciate that there are many questions that may arise as a result of the current circumstances and / or the information in this post. If this is the case, please do not hesitate to contact our expert Commercial, Employment or Criminal teams who will be happy to assist you further.