What are the legal implications as furlough comes to an end?

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Authored by ARAG

It may be difficult to remember, but it isn’t much more than a year ago that very few of us had even heard the word “furlough” outside, perhaps, of an old Hollywood war movie. Now, a little less than 14 months but more than £50 billion later, over 11 million employees have benefited from the furlough scheme in some way.

The current arrangement will not come to an end until September 30 and there is no doubt that it will have saved a lot of jobs in the year and half that it has been available. However, many lay-offs may simply have been postponed and the government will be watching redundancy data very carefully, at least until the end of the year.

The Coronavirus Job Retention Scheme, has been refined slightly from the blunt tool that was hastily picked up and wielded, by Rishi Sunak last March. Support will now taper, over the summer, reducing from the current 80% of employees’ pay that the government funds.

From July, employers have to pay 10% to top up the 70% that the government will pay for those hours that employees are furloughed. In August and September, businesses will have to find 20%, as the government contribution reduces to 60%.

No sooner had the word “furlough” passed quickly into common parlance, last March, than we all learned about the accompanying concept of furlough fraud. There hasn’t been quite as much discussion about such criminality recently, but it would be wrong to infer that HMRC has forgotten about it.

In March this year, the Chancellor launched a “taxpayer protection taskforce” with a £100 million budget, to “…crack down on COVID fraudsters who have exploited government support schemes.”

For businesses found to have committed such fraud, the penalties could include fines, compensation and confiscation orders, director disqualification, serious crime prevention orders and even imprisonment.

There are apparently tens of thousands of possible cases that could potentially lead to the treasury recovering billions of the £100 billion or more total that has been spent on keeping businesses afloat through the pandemic.

The lesson for businesses is clear. Records of furlough claims and any other business support funds that a company may have received need to be meticulous and up to date.

Organisations that have behaved honestly should have nothing to fear and being able to demonstrate that quickly and clearly will make any investigation much less disruptive.

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About ARAG

ARAG UK is a specialist legal insurance provider and is part of the internationally recognised ARAG Group which serves 14 countries worldwide.

Providing several emergency assistance insurance products and an innovative range of Before-the-Event and After-the-Event legal insurance products and services, ARAG UK prides itself on its client-focused approach. This has been recognised by the industry following the results of the Insurance 360 Legal Expenses Insurers Study in which ARAG UK was voted 'best legal insurance provider'. youTalk-insurance sharing ARAG UK insurance news. 

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