Is furlough possible for organisations in receipt of public funding for staff costs?

When the Coronavirus Job Retention Scheme (CJRS) was first announced, many organisations welcomed it with open arms.

However, as anyone will know who has been closely following its development, there have been various iterations of the CJRS guidance and when it was updated on 9 April 2020 to include commentary on organisations in receipt of public funding, many housing associations were concerned this meant they were prohibited from using the CJRS.

The CJRS Employer Guidance states that public sector organisations can benefit from the CJRS but with the caveat that “where employers receive public funding for staff costs, and that funding is continuing, [the Government] expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them”.

Whilst it is clear that those solely in receipt of public funds are not expected to use the furlough scheme, the position for those in receipt of mixed funding (some public and some private) left housing associations unsure as to whether they can use the CJRS, and as to the precise meaning of “public funding for staff costs”.

The National Housing Federation (NHF) has confirmed that housing associations are able to furlough their staff, as most housing associations do not receive public funding for staff costs. Although their guidance is not binding in law, the NHF have confirmed that their guidance has been shared with the government and that they are confident of its interpretation.

In respect of those organisations that do receive public funding for staff costs, the NHF guidance makes reference to the CJRS Employer Guidance and emphasises that where such public funding is continuing, the guidance from HMRC is clear that it does not expect such employers to furlough such staff.

For many within the sector who are providing frontline care and support services, funding is a mixture of private and public funding. Where local authorities commission care and support services to be provided, such funding is predominantly for staff costs and would therefore amount to public funding to pay staff costs. Does this therefore mean that those organisation operating within care and support cannot seek to furlough staff and use the CJRS?

Like all employers, housing associations in care and support have staff that fall within the shielding category who are following the guidance of Public Health England and staying at home. Due to the nature of their roles within care and support, often it is the case that their jobs are such that they cannot carry out these roles from home.

This means for our clients, they are left with gaps in their workforce which they need to cover in order to continue the delivery of these key services. Given the CJRS Employer Guidance and NHF guidance above, we have been asked by a number of clients whether, notwithstanding the fact that they continue to receive public funding for staff costs, they can furlough such staff. The answer to this issue remains unanswered in terms of the guidance issued in relation to the CJRS.

We are aware that the Department for Education, for example, has issued guidance to education sector employers (including state and independent schools, further education colleges and Higher Education Institutions) which contains more detailed restrictions than in the Government’s general guidance.

This encourages the consideration of alternatives to furlough (redeployment of staff or loans from the Coronavirus Business Interruption Loan Scheme or the COVID-19 Corporate Financing Facility) and indicates that furlough should be limited to staff whose salaries are not funded by public funding, work in areas where services are temporarily not required due to the COVID-19 pandemic and who would be otherwise made redundant or laid off. This will not necessarily apply to staff who are shielding.

Notwithstanding this, the CJRS Employer Guidance is guidance only. The Treasury Direction issued by the Government to HMRC takes precedence over the guidance and there is nothing in the Treasury Direction that legally prevents organisations in receipt of public funding for staff costs from furloughing employees.

However, the risk of doing so is that such organisations could be criticised for what has been referred to as “double dipping” into the Government’s purse and therefore poses the risk for reputational damage. For any organisation that is in receipt of public funding for staff costs and who is considering furloughing shielding staff, you should consider other options first and be able to evidence doing so, in order to seek to objectively justify the decision to furlough. The options that need to be considered first are:

  1. Can you redeploy those staff into other roles temporarily that they can perform from home?
  2. Is there any chance of obtaining additional funding from the local authority commissioning the care and support services? We are aware that a number of clients have done this. This would then pay for the cost of cover of such staff without the need to furlough the original staff who are unable to work.
  3. We understand that CQC has reviewed and amended its guidance as to how many staff are required to work within a home and therefore an organisation can compliantly run a home with a reduced workforce. Does this therefore negate the need to recruit cover for such staff?

Only once you have exhausted the above do we consider that an organisation could then reasonably consider furloughing certain staff in limited circumstances. However, before taking such a decision, we would strongly advise that legal advice is taken first.

For more information in relation to this article or any other employment concern, please contact Katie Maguire.

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