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Recruitment agencies and furloughing FAQ'S

Gateley Legal

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In this insight we look at our most frequently asked questions on furlough in the recruitment sector.

Your questions answered 

  1. Who can furlough agency workers?

    Where agency workers are paid through PAYE, they are eligible to be furloughed, including where they are employed by umbrella companies.

    Furlough should be agreed between the agency or umbrella company, as the deemed employer, and the worker.
     
  2. Should the agency worker be on a live assignment at the point they are furloughed?

    There is no express provision in the Government guidance that this is a requirement, however the purpose of the Scheme is to retain people in employment and as such we would anticipate that in the agency context this is most likely to be appropriate where an assignment has been unexpectedly interrupted or ‘but for’ the Scheme would be brought to an end for a reason linked to COVID-19. 
     
  3. Do you need the permission of the client?

    It would be advisable for agencies and/or umbrella companies to discuss the need to furlough with the end client and they may wish to get written confirmation that they cannot maintain their current workforce requirements because their operations have been severely affected by COVID19, to ensure that the furlough properly falls within the scope of the Scheme.
     
  4. Who makes the claim under the Job Retention Scheme and who pays the agency worker?

    The agency or umbrella company who usually operates payroll and is the deemed employer would be the organisation who makes the claim and pays the agency worker. The Government do not make payments direct to workers/employees so it is still the obligation of the employer to operate payroll in accordance with the terms of the contract. Agents who are authorised to act for PAYE purposes can potentially make claims under the Scheme on behalf of employers.
     
  5. Can pay to the agency workers be deferred until the grant is received from the Government?

    This is possible if the contract of employment allows for this which would only usually be the case if there has been an agreed variation as part of the furlough agreement.
     
  6. What happens about accruing annual leave during furlough? What do you do about holiday pay?

    The Government guidance for employees states “whilst furloughed you will continue to accrue leave as per your employment contract”. In the agency context, there has been some confusion about this issue, because often contracts will be worked in such a way that no formal contractual arrangements exist when no work in being done between the end of an assignment and the start of the next assignment.

    Under the Working Time Regulations 1998 holiday accrues when a contract with a worker/employee is “live”, regardless of whether work is being undertaken.

    A contract must be in place during a period of furlough leave for a claim to be possible under the Scheme, so the best analysis is that holiday is accruing during furlough periods.

    To further complicate matters, agency workers often opt to receive “rolled-up” holiday pay in addition to their daily or hourly rate which will not be recoverable under the Scheme and may not be recoverable from the end user client during times of furlough. As such continued payment of the same is likely to cause cash flow problems for those responsible for pay.

    Agencies/umbrellas will ned to think very carefully about the possible holiday pay liability they could be storing up by furloughing workers.
  7. What wage costs can be recovered under the Job Retention Scheme and what is taken into account when calculating agency workers’ pay?

    The Scheme provides a grant that covers 80% of usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay.

    When assessing what would be covered in “wage costs” the Government has now clarified that the claim can cover any regular payments you are obliged to pay, this includes wages, past overtime, fees and “compulsory” commission payments. However, discretionary bonus/commission payments and non-cash payments are excluded.

    Consideration will need to be taken of the exact wording of the contractual arrangements to assess whether any payments due are considered “compulsory” as it is often the case that agency workers receive a basic pay plus commission, which is a sum calculated after employment costs and margins have been accounted for. 

  8. What about PSC (Personal Service Company) contractors?

    Salaried individuals who are directors of their own personal service company may be eligible to furlough themselves but this would be a decision and claim made by the PSC and not an agency/umbrella company that might work with them.

  9. Can agency workers work for another client whilst furloughed?

    If permitted by the contractual arrangements, furloughed employees are permitted to work for another employer but not on behalf of the organisation that has furloughed them or a linked or associated organisation.  

    In the agency context it is important to remember that if it is the agency that has placed the individual on furlough the agency worker should not be placed with another end user client of the agency, or otherwise work for a client of the agency whilst furloughed.

  10. What can furloughed recruiters do or not do whilst furloughed?

    Whilst on furlough recruiters cannot undertake ‘work’, provide services to, or generate revenue for, their recruitment agency employer. There is no detailed guidance on what amounts to ‘work’. It is clear that one can engage in training during furlough and recruiters may wish to focus on their personal development. Some employees may choose of their own volition to stay in touch with work related contacts and candidates using their personal social media accounts, emails or mobile phones and this would seem possible without breaching the terms of the Scheme.

More information

For more information regarding recruitment agencies and furloughing contact our expert below and find out how we help recruitment businesses.

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