What is Furlough Fraud?

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There has been an overwhelming wave of complaints about the UK furlough scheme, as employees experience furlough fraud. The HMRC has received around 800 reports as of the end of May. As it closed its hotline due to employees unable to access work phone from their homes, complainants are going to whistleblowers to give attention to the issue and to be helped hopefully. 

Since its launch in March, the Coronavirus Job Retention Scheme has helped businesses and employees sustain their income through furlough pay. Under this furlough scheme, the HMRC gives 80% of a furloughed worker’s compensation, from time of claim until October. If a business applied for its employees’ furlough when it was opened in April, its employees should have been receiving around two months’ worth of 80% of their usual salary. 

WhistleblowersUK co-chair Baroness Kramer said in a statement to Telegraph UK that “at a time like this when we as taxpayers are stepping forward to give people a lifeline, this abuse seems even more outrageous than it might under normal circumstances. Taxpayers are feeling the pain.” 

The furlough scheme has been rolling out pay for 6.3 million people at the cost of £8 billion. However, people are enraged to find out that employers are taking advantage of the scheme towards profiteering. At such a time when the nation is in distress, and the government is at its maximum trying to extend help to everyone, news like this is plain disheartening. 

Employees who logged complaints say that they were threatened to lose their jobs if they do not do what their employers asked them to. Technically, furloughed employees are not allowed at all to work – not even check their emails and carry out a quick task. However, some employers expect and demand their employees to work from home “voluntarily”. This kind of fraud has caused workers to live day by day torn between cooperating with their employer so that they get to keep their job, and reporting the fraud so that they are not criminally charged. 

Three Kinds of Furlough Fraud 

  • Employers claim furlough for staff but insist that furloughed employees continue to work. Most complaints are like this, as employers blackmail their talent by saying that they will lose their position if they refuse to work or report to the government. Migrant workers whose visas are connected to their employers are in a tight spot, as both are going against their employer and going against the government risk their visa status. 
  • Employers claim furlough pay for inexistent employees. One tactic that emerged is that some businesses have “ghost” employees – people who they hired and then dismissed, just so that they can claim furlough. 
  • Employers furlough staff without telling them. Employees end up working while furloughed and then receive only 80% of their pay, which is actually from the government and not from the employer. 

Protect Your Employees and Yourself 

The first thing you need to do if you intend to furlough staff is to get it all in writing. You and your employee should sign a document that clearly states the furlough arrangement, which is that employees are relieved of any tasks, including “voluntary” work that they might only be doing out of fear of job loss. Remember that companies that encourage employees to undertake voluntary work are not eligible to claim furlough money, and can be charged for fraud. 

Complaints may be lodged online through this website: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/report-fraud-to-hmrc

If you want to learn more about the discussion of furlough fraud, you can get in touch with Annette & Co. for FREE business advice. Better yet, you can tune in to my Podcast  – where I talk about the latest updates on UK Businesses every workday at 11 in the morning. 

For more information about this matter, be sure to check out Episode 135. If you’ve missed the LIVE broadcast, you can always revisit the episode here on our website, Annette & Co.

About the Author

Annette Ferguson 

Owner of Annette & Co. - Chartered Accountants & Certified Profit First Professionals. Helping online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.