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Will my umbrella company furlough me?

Do umbrella workers qualify for the Job Retention Scheme?

Q. I work via an umbrella company but, due to COVID-19, my contract has been terminated. I’ve read a few contrasting reports in the past few weeks with regards to whether my umbrella can or will place me on furlough – as my ‘employer’ – meaning I gain access to the Government’s Job Retention Scheme. As an umbrella contractor, am I eligible for this scheme? And if so, will this cover everything I earn or at least, 80% up to £2,500 per month? 

A. Umbrella companies can take advantage of the Coronavirus Job Retention Scheme meaning, just like an employee, you are eligible to receive 80% of your salary up to £2,500 per month. 

However, this isn’t compulsory. In other words, an umbrella firm, just like a ‘normal’ employer is under no obligation furlough its workers. And, given umbrella companies are finding themselves out of pocket – because the Government won’t cover the costs of the apprenticeship levy and holiday pay – some umbrellas have refused to place their workers on furlough. Unfortunately, this is a decision they are well within their rights to make. 

That said, the backlash from umbrella workers has seen a number of firms change their stance in recent weeks. To an extent, the pressure has paid off and judging by reports, many umbrellas have now chosen to furlough their workers. You can check to see how an umbrella is handling COVID-19, here.

Initially, there was concern that these workers – who are often paid a minimum wage which is then topped up with a discretionary ‘commission’ or ‘bonus’ – would only be eligible to claim minimum wage, given this is the PAYE part of their income. This would have seen umbrella workers fall between the cracks of the COVID-19 support, much like limited company contractors. Fortunately, it was recently confirmed that this ‘commission’ is included in the Coronavirus Job Retention Scheme, much to everyone’s relief.

So to recap, working off the assumption that your contract was cut short due to COVID-19 and the umbrella you are engaged by has taken the decision to furlough its workers, you should, in theory, be able to claim via the Job Retention Scheme.

This answer was provided by IR35 specialist, Qdos Contractor.

By Contractor Doctor

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