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One in four workers is on furlough right now, supported by the Government as businesses struggle to survive with the impacts of coronavirus. Recently there have been a lot of queries particularly about agency workers and those employed by an umbrella company, whether they are eligible for the Coronavirus Job Retention Scheme (CJRS), and if so, why are a lot of agencies reluctant to furlough them.
The guidance given is that all employers who operate on a PAYE scheme will be able to make a claim. In the latest Government advice it clearly states that agency workers, including those employed by umbrella companies, are eligible to be furloughed. So why are many agencies not doing so?
An agency worker is someone who has a contract with an agency and works temporarily for different businesses. While you are working for a business your work and duties are monitored by them, not the agency. You’re on the payroll of the agency and not the organisation you’ve been working for. This means furlough arrangements need to be agreed between the worker and the agency.
People commonly classed as agency workers include supply teachers, event hospitality staff, or administrative staff.
If you are classified as self-employed rather than an agency worker, then you are not eligible for furlough but may be able to apply for the Self-Employment Income Support Scheme.
An umbrella company acts as an employer to agency contractors, often through a recruitment agency. The client will pay the umbrella company, who deduct their fees, and then pay the worker.
If the umbrella company has requested for you to work through your own limited company then unfortunately they are not your employer, and cannot furlough you.
For most, the short answer to this question is yes. The Government website has updated their information to say:
“Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies. Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.”
There is no reason why an agency worker, working full-time, part-time, or on a zero-hour contract can’t be furloughed. The Job Retention Scheme covers all these circumstances.
Despite being eligible for the CJRS, people have been struggling to get their agencies to furlough them, or even get a clear answer from them about their circumstances.
Unfortunately, it is a difficult situation to navigate. The employer is under no legal obligation to place an employee on furlough. Technically, your umbrella company can refuse to furlough – just as many employers have done.
Employers have to show the consequences of the coronavirus crisis on the business and the need to furlough employees. Some agencies reluctant to furlough their employees argue that the current lack of jobs and assignments to place staff is not directly related to the impact of coronavirus
Guidance issued from Cabinet Office says: “Where agency workers were in a live assignment that was curtailed because of coronavirus, they should continue to be paid 80% of their salary for the remainder of their assignment by the public body (with all agency accruals/margins remaining payable on top). This is separate to the Job Retention Scheme.”
There’s a lot of pressure on employers to use furloughing in a wide range of circumstances on the basis that it is cost-neutral to them. The problem agencies face is that they have additional administrative costs a normal employer wouldn’t have. So, they’re still losing money if they furlough you (unlike non-agency businesses).
Generally, an agency or umbrella company has no other income apart from the fees paid to them by clients. So, if there are no jobs or assignments, agencies have no income. The problem this poses is whether they have enough cash flow to meet costs and obligations that occur when furloughing staff.
There are a number of costs to furloughing someone, including holiday pay, National Insurance, and apprenticeship levy costs. Holiday pay accrues during the furlough period. Employers pay the full amount – not just the 80%. The extra 20% makes it costly for lots of agencies.
Employers’ National Insurance contributions is paid on topped-up holiday pay as these are not covered by the scheme either. The agency doesn’t usually have to pay such costs. Normally, the agency’s fee paid by clients covers these costs. The administrative burden of claiming furlough is another unexpected cost for an agency.
Agencies wouldn’t normally have to pay agency workers and those on zero-hour contracts when their employees aren’t on assignment. So, although the Government is covering the costs of furloughed pay, the additional administrative costs and obligations may mean they actually end up losing money, which is why many agencies are hesitant to furlough large numbers of employees.
Over 300,000 UK workers are paid by umbrella companies – and still don’t know if furlough is possible.
Umbrella companies pay ‘bonus’ rates to create salaries. The CJRS includes standard contracted rates – not bonuses. That means a lot of agency workers face receiving 80% of National Minimum Wage – not their usual pay.
It affects the companies, too. If they get things wrong, they may end up paying out more than they can get back, or worse, not be able to get anything back at all.
The Government haven’t clarified the rules yet. It’s a waiting game! However, the Freelance and Contractor Services Association is seeking to ensure that all agency workers, including umbrella workers, receive furloughed pay.
As your agency employer has no legal obligation to furlough you it is hard to know what your options are.
If you belong to a union, it’s a good idea to raise the query with them. They’ll have plenty of advice to help, too.
Also, keep contacting your agency employer. The more you apply (polite!) pressure for a solution, the more chance you’ll hopefully have of getting a result.
If you have changed jobs recently, can a previous employer furlough you instead? Can a previous employer furlough you instead? There’s no requirement for you to have been on assignment on March 19th 2020, simply that you were on the payroll.
Stay on the books at your current agency as there may be potential for furlough later down the line. Continue to look for other work: there are jobs out there if you know where to look.
If you can’t find other work and are receiving no support from the CJRS, seek welfare assistance. Start with Universal Credit as this entitles you to housing help, too.