What risks will the new ‘Flexible Furlough Scheme’ pose to businesses?

Businesses may have been alarmed by press reports this weekend that HMRC are to be given extensive powers to crack down on “furlough misuse”.  It is anticipated that the Chancellor, Rishi Sunak, may add legislation to the Finance Bill to enable HMRC to vigorously pursue those they believe have broken the Coronavirus Job Retention Scheme (CJRS) payment rules.

In the meantime we do know that the CJRS is being amended so that employees can be brought back to work part time from 1st July.  Employers will still be able to claim the furlough grant for the hours the ‘flexibly furloughed’ employee would normally have worked. We have discussed this point in a previous blog here.

We also know that it is remains a strict condition of the CJRS that employees do not work for their employer whilst furloughed.  The government Guidance is clear that employees must ‘not do any work that makes money or provides services for your organisation or for any organisation linked or associated with your organisation’.

The Guidance was updated on 12 June to supposedly provide further details of how part time furlough will work in practice. It contains just one sentence on the topic:

‘From 1 July, employers can bring furloughed employees back to work for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked’. The minimum period for which employers can claim the furlough grant from 1 July will be one week rather than the current three weeks. Updated guidance is found here.

This new part time flexible furlough might be relatively straight forward – though when is it ever? – for businesses bringing back part time employees whose working hours can be measured by their physical presence in the work place. Think of retail, manufacturing or the hospitality sector.

But what about professional and creative services where roles can be performed remotely: accountancy, law, insurance, marketing, customer services; any role, in fact, that can be performed with access to a telephone and a computer.

How are these sectors going to keep accurate track of the hours part time staff are working so as not to fall foul of HMRC’s threatened anti misuse measures? Or, to put it the other way, how can businesses prevent a conscientious, client-orientated professional from making a quick update call or email to a client or colleague during the working hours they are supposed to be furloughed?  Actions that are likely to fall under the government’s furlough prohibition on ‘making money or providing services’.

What’s more, many businesses will have cut off the furloughed employee’s access to the company computer network whilst they were on full time furlough: a prudent move that provided businesses with persuasive evidence that they did not allow employees to work whilst furloughed. But is it really practical to be continually turning access to the server on and off throughout the week? Almost certainly not.

What businesses must do now?

If businesses want to take advantage of part time furlough they better start planning now exactly how they are going to measure and record the amount of time flexibly furloughed employees are working.

The Guidance makes it clear that before employers submit their claim for the furlough grant to HMRC they must be certain about the exact number of hours their flexibly furloughed employee has worked in the claim period. If employers claim too much furlough pay because the employee works more hours than expected employers will need to pay it back, outlined in guidance here.

It follows therefore that employers will need to be very clear with employees about how many part time hours they may work and the potential consequences if an employee subsequently clocks up more hours than anticipated without prior management approval.

We doubt that HMRC will penalise employers for genuine recording errors but employers who fail to plan ahead on how to implement, measure and record flexible furlough could find the amended CJRS costs them dear.

Cartwright King has lawyers in many areas of law, and the information we are sharing has been written by employment lawyers Deborah Scales and Philip Pearson.

For specialist advice in any of our areas of law, please email your enquiry to us.