Contractors' Questions: Can I be rehired and furloughed despite being made redundant?

Contractor’s Question: I’ve plumped for contracting but aren’t having a tremendous amount of luck. But my question is; if I was made redundant just two days before the furlough scheme was announced – making me an early victim of the covid crisis, what are my options?

Currently I’ve got nothing from covid-19 income support schemes, but a friend suggests I should approach my old employer for help. I haven’t got a new job other than a part-time freelance contract to tide me over, so I am a bit financially desperate.

I fear my old employer won’t want to help me due to their own cash constraints. And I fear a fraud case, because if my old employer rehires me just to put me on the furlough scheme and get some cash from the state, isn’t that abusive?

Expert’s Answer: One of the government’s key aims of the Coronavirus Job Retention Scheme (‘the furlough scheme’), is job retention and the government is therefore keen for employers to not make staff redundant. 

The government has said that companies can re-employ staff that were made redundant on or after February 28th 2020 and those employees can then be furloughed -- even if the re-employment was after March 19th 2020. The employee must have been on the February payroll and RTI submission, however.

Cash constraints, really?

Potentially fortunate for you, if the employee was made redundant after March 19th 2020, they can still be re-employed and furloughed.

In terms of cash constraints, the government's measures mean that they (the employer) can pay you 80% of your salary under furlough and reclaim this amount from the government (until the end of June 2020, when new furlough measures are coming into force). 

The employer will therefore not be out of pocket as they are receiving the 80% back from the government that they are paying you (the employer’s claim will be made inclusive of any employment taxes). The government has stated that the maximum claim for an employee is £2,500 per month.

Bear in mind though, there is currently a 6-working-day turnaround from the submission from the employer to the payment received by the employer. But there is no reason for an employer to be out of pocket as long as they make the claims at the appropriate time.

Not obliged, but no fraud risk either

However, be aware that the employer is under no statutory obligation to re-employ the individual and likewise, they can still make the employee redundant at the end of the furlough period.

As to your query concerning fraud, the above ‘re-hiring’ is firmly within the government’s rules. Indeed, they set this scheme up with the intention being job retention. The government will be hoping that employers choose not to make staff member redundant later down the line, but have left the option open.

Finally, it may be worth pointing out that if an employee has more than one employment, they can be furloughed from multiple employments. The CJRS looks at things ‘per employment.’ Equally, having freelance income outside of your employment does not change your entitlement to being furloughed or re-employed. Interestingly, if you had always been employed and self-employed at the same time, you may have qualified for the SEISS also. Good luck!

The expert was Daniel Mepham, managing director of contractor accountants SG Accounting.

Tuesday 9th Jun 2020
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Written by Daniel Mepham

Daniel Mepham, Managing Director of The Affinity Group, has been working with contractors and small businesses for over 15 years. He is a Chartered Certified Accountant with a passion for the contractor market.
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