Normal service is temporarily suspended

Government schemes to prevent wholescale redundancies have been well received – not by all of the contingent workforce, however. Colin Cottell looks at the situation, especially for those in the public sector

With around 6m staff across the UK already furloughed, the government’s Coronavirus Job Retention Scheme (CJRS), designed to avoid large-scale redundancies, is widely regarded as a success. Under the scheme employers can receive a grant from the government allowing them to pay up to 80% of an employee’s regular salary.

However, all is not well with the scheme when it comes to temporary workers. With many contingent workers unable to work because of Covid-19, the CJRS is letting them down, leaving them with only reduced income or no income at all.

A case in point: A locum radiographer no longer working because of reduced demand for his skills during the pandemic told Recruiter that two umbrellas firms aren’t paying him anything at all currently, while another is only paying him 80% of the National Minimum Wage.

Public sector problems

Many recruiters and umbrella companies agree that there are myriad problems with the furloughing scheme. However, it is in the public sector – where two separate schemes designed to ensure that temporary workers, who are unable to work because of the virus, continue to receive an income – where recruiters and umbrellas say the problems are greatest.

“We very much welcomed the spirit of the job retention scheme, but the rules are ambiguous and very much open to interpretation,” says Victoria Short, managing director of Randstad Public Services.

It is a sentiment shared by many across the temporary worker sector, who say that while they support the principle of supporting workers during the crisis, the scheme fails to take into account the unique characteristics of the sector.  

Julia Kermode, CEO of the FCSA (Freelancer & Contractor Services Association), acknowledges that some furloughed temporary agency workers and contractors are receiving far less than their usual income. She says that as many umbrellas structure their contracts so that payment is made up of the National Minimum Wage (NMW) plus a discretionary bonus, her members’ hands are tied.

Government guidance specifically excludes any discretionary element when calculating claims under the furlough scheme, so umbrellas must restrict their payments to 80% of the NMW, and not 80% of a worker’s usual salary, she explains.

Structuring contracts this way allows the worker to have continuity of employment and work on different pay rates for different employers but under the same umbrella, she says. This in turn gives them full statutory benefits and rights, such as sick pay.

Kermode says the risks to umbrellas of paying 80% of full taxable pay are too great. “They might not get it back from the government, or if they do get it from the government, they might have to repay it,” she says.

And Kermode rejects the idea of retrospectively amending the contract with the contractor by removing the term ‘discretionary bonus’, allowing the umbrella to increase the size of payments. “That would probably be viewed as fraud by HMRC because it would be seen as an attempt to get more furlough pay,” she says.

Under your umbrella

Graham Fisher, Orange Genie’s group managing director, says the reason why many umbrellas structure their payments in this way is primarily historical. “It enabled us to get the contractor tax relief on their expenses,” he said, “and second, if the end customer or agency failed to pay a contractor, we would pay out of our funds.”

Terry Hillier, CEO at payroll services and workforce management company People Group Services, reckons that more than nine out of 10 umbrellas base their payments on the NMW. According to his calculations, the difference in pay between a teacher, whose furloughed pay is based on their full pay, and a teacher paid on the basis of the NMW, is £240 a week (£576 compared to £336).  

Having removed the discretionary bonus in 2018, his company was able to increase payments by topping up the NMW with a compulsory guaranteed bonus in line with revised guidance issued in early April. Other umbrellas such as NumberMill are also paying out on 80% of gross pay. “I think it is what the government meant in its guidance, and I think it is the right thing to do,” says CEO Louise Rayner.

The issue of NMW is not the only problem with the furloughing scheme. According to Fisher, umbrellas are also faced with a number of costs which they are unable to claim back from the government, and therefore risk their own financial health. These include the Apprenticeship Levy, holiday pay as well as administration costs associated with making furloughed payments.

Guidance notes based on information published by the Cabinet Office in April advises schools to pay supply teachers on assignment 80% of the contracted hourly rate at the point schools closed, instead of furloughing staff”

Mixed education messages

However, beyond these problems with the CJRS scheme that are being experienced right across the economy, those operating in the public sector say the situation is even more difficult, with education and supply teachers hit particularly hard.  

As a result of additional guidance on paying contingent workers during Covid-19 issued by Department for Education (DfE), “there is an added layer of complexity”, says Randstad’s Short. Although the guidance notes based on information published by the Cabinet Office in April advises schools to pay supply teachers on assignment 80% of the contracted hourly rate at the point schools closed, instead of furloughing staff, Short says in some cases this is not happening: “Some schools, and many temp workers, are not aware of this guidance and some are citing funding issues for not being in a position to follow the scheme.”

Hillier says he believes only seven or eight of the supply teachers on his books are getting paid through the Contingent Worker scheme. “For the scheme to work, the most important thing is that the school pays the agency; however, because many of the staff in schools that would normally administer the payments are off work, this is not happening,” he explains.

Both the Association of Professional Staffing Companies (APSCo) and the Recruitment & Employment Confederation (REC) agree that the scheme is not working as it should, with schools asking recruiters to furlough supply teachers, which is contrary to government guidance that the public sector should not furlough contingent workers.

“It is important that all public sector bodies follow the Cabinet Office’s guidance. It is a scheme designed to support agency workers and suppliers at this difficult time, says Tom Hadley, the REC’s director of policy and campaigns. “Yet many agencies have said that there has been a reluctance from some schools and NHS Trusts to use the scheme.

“While the Cabinet Office’s guidance isn’t mandated to the entire public sector, Whitehall is strongly encouraging all public sector bodies to adopt it,” Hadley continues. “The reason this guidance was issued was two-fold – to support contingent workers in the public sector and to protect supplier revenue at this difficult time.”

The right scheme?

Short says having that explored the DfE’s Contingent Workers Scheme for all workers contracted to schools on a regular or long-term basis, she believe this option is potentially financially more rewarding for Randstad’s teachers in comparison to the average payment they would receive via furlough.

“In light of the skills shortages, especially within STEM, we strongly believe that a school is in a stronger position to retain their supply talent when they reopen if they follow the DfE guidance,” she adds.

Short suggests that the furlough option should only be explored where head teachers decline to participate in the DfE scheme. “This has unfortunately had an impact on the time lag for some workers being considered for furlough status,” she says.

At the time of commenting, less than 10% of Randstad’s teachers had either not been furloughed or were not on the DfE’s contingent scheme, and Short says that Randstad “was working round the clock to verify outstanding cases”.

Roland Sheehan, client relationship director at TFS Healthcare, says problems with the Contingent Worker scheme are not confined to supply teachers. Despite his efforts to encourage take-up of the Cabinet Office guidance among NHS Trusts, so that that agency nurses who are off sick or must self-isolate can continue to get paid, there continue to be problems, he says. Not only are the guidelines not mandatory, says Sheehan, “it is hard to get engagement from NHS Trusts”. 

The two schemes

Coronavirus Job Retention Scheme (CJRS)

  • Employers can claim up to 80% of an employee’s regular salary up to £2.5k a month.
  • Discretionary bonuses not to be included.
  • Continuing uncertainty over whether holiday pay should be included in amount claimed.
  • Apprenticeship Levy and administrative costs not included in grant amount.
  • Employers have the choice whether or not to participate.

Contingent Workers Scheme (based on guidance published by the Cabinet Office in April 2020)

  • Applies to central government departments, with other public sector bodies “encouraged to apply the approach”.
  • Designed “to protect the contingent labour supply chains, ensuring suitable skilled and experienced workers are available not just at this critical time of need, but also into the future”.
  • The agency invoices the hirer – 80% of their gross pay up to a limit of £2.5k a month.
  • Recruiter continues to get their margin.
  • Continues up to natural end of the worker’s assignment.
  • Includes workers who are sick or in isolation so worker does not need to apply for SSP (Statutory Sick Pay).
  • Can be applied to PAYE, Umbrella workers, and workers with their own PSCs.

Image credit | iStock

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