Extended furlough – a big win for Directors?

Office presentation

This week the Government announced that the Coronavirus Job Retention Scheme would be extended until October, however from August while workers will continue to receive 80% of their salary, new rules will mean that employers share the cost.

It is yet to be revealed how the financial responsibilities will be proportioned; whether this will be 50/50 or the State shouldering the lion’s share but the amendments to the scheme, but of the key details that have been announced it is clear that workers will be allowed to return to work on a part-time basis.

At present, workers must either return to work without any (furlough) Government subsidy, or remain completely inactive in the organisation. This poses challenges for many business owners both in relation their own Director function and their staff. For many employers, who do not have enough work to fill a full time role, but do need some support from their staff it means choosing to manage without their workers or depriving them of 80% of their full-time pay, in exchange for what may only be 16-20 hours per week (maybe 40-50% pay)

The hidden benefit for Directors

Until now, Directors have been pretty hard done by. With most taking the majority of their pay via dividends – unearned income on paper, and therefore illegible for the Self Employed Grant, and unable to furlough themselves because the requirements of the scheme demand complete commercial inactivity, could this provide the opportunity for directors to claim a portion of their salary and continue working?

While the amendments to the scheme are presumably designed to reduce the burden on the tax payer, the Government may very well have overlooked the potential for new claims from directors, and the potential for fraud, with employers no longer fretting that their staff could be evidenced as working, but asking them to work full-time none the less and Director;  taking a ‘business as usual’ approach, while claiming part of their salary via the scheme.

The devil is in the detail

The details are yet to be announced, but one would assume that the Government have pre-empted a deluge of new claims and therefore one might expect the split to be 50/50 or even a higher responsibility on the employer.

However, it seems likely that this extension has been formulated with leisure and hospitality businesses in mind and with a view that the Government does not want to see a spike in Universal Credit claims. If so, it seems probable that the Government wedge of the bill will reach at least 50%.

With the furlough scheme currently costing the tax payer £100bn up to October, we would hope that it fulfils its brief and successfully prevents many jobs from being lost.


Nikki Hesford

Nikki Hesford is an award-winning entrepreneur having appeared on Dragons Den in 2010 before securing £250,000 of angel investment to scale up her fast-fashion brand. Exiting the company in 2015 for a slower pace of life with her young family, Nikki now works with small and start-up businesses to create attention-grabbing Marketing, Social and PR strategies from small budgets.

Nikki Hesford

http://www.nikkihesford.co.uk

Nikki Hesford is an award-winning entrepreneur having appeared on Dragons Den in 2010 before securing £250,000 of angel investment to scale up her fast-fashion brand. Exiting the company in 2015 for a slower pace of life with her young family, Nikki now works with small and start-up businesses to create attention-grabbing Marketing, Social and PR strategies from small budgets.