How Furlough Can You Go?

HIGHBURY 02

One of the really helpful resources for anyone working in HR during this time of being confined to barracks is the CIPD. I have been a member for eight years, when I completed my Masters, and the support the CIPD continues to provide, both on its website and through its various updates, has been invaluable.  Six weeks ago, who would have thought that the majority of us would have been cooped up at home? Without that source of advice, finding out who has what rights in such circumstances would have been as challenging as navigating the upper reaches of the Orinoco armed only with a 1970s ordnance survey map of Budleigh Salterton.

The Coronavirus Job Retention Scheme (CJRS) was an example of the government acting to try to safeguard jobs. And they acted quickly too.  But even though it applauds the principle, the CIPD believe it doesn’t go far enough.  It commissioned a survey of more than a thousand employers recently which revealed that almost half of them had already furloughed staff, with another 10% planning to do so.  However, more than three in four of those employers felt that the scheme wasn’t sufficiently flexible and that some workers ought to be allowed to go on to short time, enabling them to work reduced hours, rather than it being an ‘all or nothing’ scheme.  They also believe that it needs to be extended into the Autumn.  Otherwise, to use the CIPD’s own phrase, the CJRS could just prove to be ‘a waiting room for unemployment.’

There will be an argument that it’d difficult to make those changes.  Perhaps.  But to have rolled out such a complicated scheme within weeks, with HMRC able to deliver salaries into individuals’ bank accounts within days of businesses applying, was the kind of outcome that even someone with the optimism of a Ned Flanders would have turned his nose up at.  In the current circumstances, people are proving that anything is possible.  It does beg the question of why some simple things seem to take an age in ‘normal’ times, but we’ll leave that for another time.

The sort of reduced hours flexibility the CIPD is arguing for would enable hundreds of thousands of people currently furloughed and prevented from working for their employers to be active again, thus helping to support businesses, protect jobs, and be less of a burden on public finances.  The survey suggested that seven in ten of respondents believed their staff could benefit.  That’s quite a potential number.

Let me declare a bit of an interest here.  When I established Highbury Management back in 2013 I did it on the basis that I wanted to be my own boss.  I wanted to pick and choose the clients I worked with and when I worked with them.  To my mind, I ‘went self-employed.’  However, it was only when this whole Coronavirus pandemic crisis began that I learned that, strictly speaking, I wasn’t.  The business was established as a limited company with me as its Director.  I am therefore an employee of the company.  This means that although to all intents and purposes I am self-employed, by the letter of the law I am not eligible for any of the support being offered by Rishi and Co to the 5million-strong army of self-employed workers during this crisis.

I appreciate that the Chancellor is on a bit of a hiding to nothing here.  Damned if he does and all that.  However, although it would have seemed – in my eyes at least – that universal basic income for everyone would have been the best way of ensuring that we are ‘all in this together’ the government chose not to go down that route.  Instead it decided to help via the CJRS and, after a bit of a delay and some behind the scenes nagging, a package to support the self-employed.  The scale of borrowing going on here is as eye-watering as it is praiseworthy.

We were told it was too complicated to be able to deal with limited companies, particularly those who paid dividends.  Too many variables, apparently.  And too much chance of someone wealthy enough not to need any support benefiting as a result of a blanket rule.  Too difficult to try to differentiate.  There was also something of an unsaid, read-between-the-lines knowing wink that such businesses are a little bit cavalier with their tax.  Witness the enthusiasm – until very recently, at least – for IR35, which was set to come in this very month but has been delayed a year.  IR35 is a piece of legislation that allows HMRC to collect additional payments where a contractor is considered an employee of a company in all but name; if a contractor is operating through an intermediary, such as a limited company, and, but for that intermediary, they would be an employee of their client, IR35 kicks in.

I work for several clients on fixed term projects and as an independent, so I am comfortable that IR35 does not affect me.  But the perception is still ‘out there’ that anyone working with a personal service contract via a limited company is somehow on the fiddle.  I have been astonished at how sneery some people have been on social media; where one might reasonably have expected at least a smidgeon of sympathy there has been a fair degree of ‘well you should’ve paid your tax, shouldn’t you?’ schadenfreude around, which surprised me.  All in this together indeed.  It’s also tosh.

The government tells me I can furlough myself.  But that would mean I cannot work at all, other than to carry out any statutory duties as a director.  I would certainly not be allowed to work in the sense that you and I would recognize the word ‘work.’  I have a couple of contracts that can continue, which is great and for which I’m grateful, and although it’s marginal, financially it isn’t worth me furloughing.  Loans are no good to me in the current climate, either.  I don’t think loading small businesses with debt is the answer anyway.

Even though I have a bit of work I can be getting on with I am frustrated that I, and probably several hundred thousand like me, have just been written off and effectively told to fend for ourselves during the crisis.  Just as our clients have their own financial pressures, so that has its knock-on effect and we lose work as a result.  Not all limited company directors make enormous profits which they squirrel away in Caribbean tax havens.  Many of us are set up in this way for other reasons. I did so after receiving very good advice from my accountants, who are excellent (hello Jon, hello Kurt).

The inference that we’re in there with your Gary Barlows or your Jimmy Carrs annoys me.  I do not earn an exorbitant amount.  It is comfortably below the £50k ceiling the government imposed for self-employed workers.   I pay tax on any dividends declared.  I pay tax on PAYE.  I also have to stump up a chunky annual sum for corporation tax even though I do not rent or lease premises or generate sufficient turnover to reach any VAT threshold.  I do not receive any paid holidays.  Or receive any sick pay entitlement.  I also have to pay into my own pension scheme without any third-party support.  There is a trade-off here, surely.  Or so I thought.  And it looks very much, with IR35 and some of the language used at the time the government was questioned about limited company eligibility for support, that some of us are going to get it in the neck financially further down the line with tax increases too.  Wonderful.  Just what you need after a pandemic-led global recession.

There are groups of workers in the UK whose only way of getting through this crisis is to keep ploughing on, rely on good relationships with clients and on the fact that we always work with something in hand, which comes from the experience of knowing that, unlike colleagues in the permanent employed world, the nature of our work is ‘peaks and troughs.’  We also have to make provision for tax.  I am delighted to have such supportive clients at this time.  But just as there should, as CIPD is calling for, be greater flexibility for the CJRS to be a bit more flexible, so there ought to have been more flexibility in considering the groups who have slipped through the safety net.  It’s too black and white, no shades of grey permitted.  And it isn’t fair.

It seems to me that there are a lot of us ordinary folk who are doing ‘whatever it takes,’ rather than the government.

More on another (hopefully less contentious!) issue next time.

PS Looks like the pictures accompanying these musings are going to be books.  I’ll vary them, though…