The short answer is, yes!
The Coronavirus pandemic has rocked many industries and we’re often asked whether umbrella employees are treated any differently to regular employees regarding the Job Retention Scheme, which has been a valuable source of support when work for contractors has slowed up or stopped altogether due to the pandemic.
As umbrella companies employ contractors on a PAYE system, any contractor using the payroll umbrella company and those paid before 30th October 2020 can be furloughed and receive support from the scheme. Currently extended to the 30th April 2021, the Government will pay the employer (payroll umbrella company) 80% up to a maximum of £2,500 per month of the employee’s usual wages for the furlough period. This payment will, in turn, be passed on to the employee with the required tax and national insurance deductions, along with any pension contributions. Pension contributions will continue to be deducted at the agreed percentage, although at the lower-income rate.
Often or not, many contractors are paid on a variable basis, which means furlough pay becomes a little more confusing! If you have been employed for 12 months or more by the payroll umbrella company, your salary whilst furloughed will be based on earnings from the same period last year or average earnings from the 2019/20 tax year. However, if you have been employed for less than 12 months, your salary will be your average earnings since you started working for the payroll umbrella company.
The decision to furlough a contractor isn’t one that should be made lightly, and this should be discussed between the end client, the agency (if there is one in the chain), the payroll umbrella company (as the deemed employer) and the worker. As with fixed contract employees, a contractor or agency worker should perform no work for, through or on behalf of the end client or the payroll umbrella company and any other end clients during the furlough period.