We have undergone the challenge of offering a furlough scheme for our PAYE workers and we understand there has been a lot of confusion about how it should be delivered, especially for Umbrella PAYE workers. This is our latest update to offer some clarity on a few of the key topics!

Contract clarity

The over-arching Umbrella PAYE contract is nothing new and has been constantly scrutinised by HMRC over the years, Orbital has experienced this first-hand with Employer Compliance reviews in 2014 and 2016. They work well for individuals who are going to be engaged on different assignments at various temporary workplaces, under one employment and who don’t want to be self-employed.

The typical Umbrella contract will:

• Provide a legal guarantee to pay NMW regardless of if it is paid by the agency and/or end client.
• Allow for genuine business expenses as per the agreed model and SDC considerations.
• Include part of the pay that is a discretionary commission/bonus when all funds are received.

What this means - So basically, part of the pay element is defined as a bonus and this is part of the reason why there has been much debate about reimbursements only being made on the NMW element of the pay.

Some Umbrella providers may have their contracts worded slightly differently which has led to some saying they can interpret advice differently to the majority of other providers. In reality, they are prepared to take greater financial and legislative risks.

Government Guidance

Which brings us onto the various bits of government guidance over the last couple of months.

The Coronavirus Job Retention Scheme guidance was never going to be perfect for such a massive new project in such a short space of time and especially when there are warnings that conditional/bonus payments should be excluded from furlough claims:

You cannot take into account payments that are “conditional” on any matter or which vary based on - (a) the performance of any part of any business of the employer or any business of a person connected with the employer,(b) the contribution made by the employee to the performance of, or any part of any business, (c) the performance by the employee of any duties of the employment, or (d) any similar considerations or otherwise payable at the discretion of the employer or any other person (such as a gratuity).

What this means - If an Umbrella company was to claim for 80% of the workers Gross pay and paid the workers, but only got paid out the on NMW amount from government; the Umbrella company would likely go bust. Likewise, if it did claim on the Gross amount and got it paid out, then when HMRC inevitably come out to check the company furlough records it could deem that too much furlough pay was claimed and demand the ‘over-claim’ part back. Either option puts the Umbrella company at a high financial risk and unable to operate. It also throws up the question - if HMRC did demand some monies returned that had already been paid out to workers, would it be o.k. to approach the workers and demand they pay it back?.....Thought not.

As we have communicated over the last few weeks, the leading Umbrella trade representative, FCSA, has constantly tried to lobby government for more clarity on the unique arrangements that apply to Umbrella workers. They have been supported by other bodies like Professional Passport, REC and TEAM. Sadly, at this stage, it looks like there will not be any further changes from government on the CJRS.