Contractor umbrella companies ask Sunak to see ‘blind spots’ of Coronavirus Job Retention Scheme

A government update on umbrella company contractors’ eligibility for the Coronavirus Job Retention Scheme falls short of giving as many as five industry bodies the clarity that they want.

On Friday, HM Revenue & Customs added a section into its online guidance around the CJRS, entitled ‘Past Overtime, Fees, Commissions, Bonuses and Non-Cash Payments.’

The five bodies had hoped the update would ease fears that CJRS can only reimburse furloughed umbrella workers with 80% of the NMW, instead of 80% of average earnings.

'Receive support'

But despite a second addition to the HMRC guidance, which says PAYE contractors can be furloughed to “receive [CJRS] support”, neither of the updates say what the pay should comprise.

A day before the updates, the five bodies wrote to the chancellor appealing for clarity on the pay component, as some umbrella companies have already started paying out to their furloughed staff.   

Yet one of the signatories to the letter to Rishi Sunak -- the Freelancer & Contractor Services Association, said last night that the chancellor still needed to act to clarify the situation.

'Open to interpretation'

“The difficulty is that the government's guidance issued to date is open to interpretation and there are differing legal opinions on the detail,” says FCSA’s chief executive Julia Kermode

She also told ContractorUK: “As it currently stands, we are facing the possibility of businesses making decisions without all of the necessary information.

“This could have extremely significant financial consequences for both the business concerned and ultimately the workers engaged by that business.”

'Suggests only NMW'

Contracting compliance outfit Professional Passport also signed the letter to Mr Sunak, alongside the staffing and recruitment bodies APSCo, TEAM and the REC.

“The question still remains as to what pay can be included,” said Professional Passport’s boss Crawford Temple, reflecting after the updates to CJRS, which opens online on April 20th.

Confirming the pay issue as ‘unresolved’, he added on LinkedIn: “The fact that discretionary bonus is specifically excluded suggests that umbrellas can still only pay on NMW.”

At the Independent Health Professionals Association, legal head Stephen Mhirbidi says he hopes -- and expects, the issue to be “sorted soon”.

'Grateful contractors'

Partly though, only thanks to Mr Sunak being written to directly by the five.

“My concerns… [will be eased once] we start to see the big accredited umbrellas starting to furlough and pay their employees; their contractors,” Mr Mhirbidi says.

“[For now, we ought to] thank those umbrellas that have already taken the decision to furlough and pay despite the financial risks they face. They say they took advice and that their main concern was for the welfare of their employees.Contractors are grateful for this.”

'Doing everything in our power'

In their letter to the chancellor, the five bodies ask for certainty on another issue – whether umbrella (and agency PAYE) contractors stop accruing holiday allowance while on furlough due to coronavirus.

“Accruing holiday will significantly reduce the ability of agencies and umbrella companies to protect temps at this time,” the FCSA says.

“We want to avoid this…which is why we’re doing everything in our power [such as working with the four other bodies], to get the answers and the certainty that we all need.”

'Blind spots'

But there’s even more issues for Mr Sunak to clarify if umbrella companies and umbrella contractors are going to grasp the CJRS fully, and compliantly, indicates Liberty Bishop.

“Whether or not a furlough [scheduled to run for the full three weeks] for any given worker can be switched on and off again depending on the availability of assignments,” exampled the umbrella company’s manager Stuart Marquis.

He added: “The government has had to put this scheme together very, very quickly. So there are always going to be a few blind spots and areas that will need clarification. [But] we do desperately need government to give us clarity”.

Asked for some practical advice for umbrella company contractors who want to receive the government’s 80% salary grant, a spokesman for HMRC said: “The CJRS is for anyone operating a PAYE scheme so people in umbrella schemes, getting paid through PAYE, can be furloughed.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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