Can organisations in receipt of public funding use the Job Retention Scheme?

 

While many publicly funded organisations are likely to be even more stretched than usual during this period, they may also need to consider reviewing their staffing strictures and cost base. This may be driven by the ability to generate income or the nature and extent of service delivery e.g. the inability to conduct face to face support may drive virtual support and online resource.

The job retention scheme provides grants to employers to cover staff costs during the COVID-19 pandemic. Ultimately helping organisations (commercial and charitable) to respond quickly to the current situation in a way which protects jobs longer term, without the Job Retention Scheme the other alternative may have been redundancy.

Updated government guidance indicates that the nature of funding could restrict and the entitlement to furlough staff. The guidance says:

“Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs. Organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff. In a small number of cases, for example where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff.”

There isn’t a clear definition of “public funding” and while some cases are clear e.g. services commissioned by a local authority or a Clinical Commissioning Group, others are less clear e.g. National Lottery funding and this may also be caught by the exclusion.

Where an organisation is commissioned to provide care, and the care is continuing during the pandemic, it’s clear that the scheme can’t be used to furlough delivery staff. It’s less clear if employees in support roles in such organisations can be furloughed. This is easier for some organisations than others and depends on the extent of public funding v’s other earned or voluntary income. For example, a Hospice charity with retail operations which are essentially closed due to COVID-19 can demonstrate a clear link between that retail income and the associated staff cost such that those roles are clearly not publicly funded. Another organisation which is 75% publicly funded delivery service contracts and services private individuals for the balance of income may struggle to demonstrate that support staff can be furloughed as they are not publicly funded.

Another potential issue could lie within indirect funding, where an organisation is commissioned to provide a service by an organisation which has been publicly funded to commission that work. Certainly, if that commissioning remains funded it would seem contrary to the guidance that staff could be furloughed simply due to a subcontracting arrangement.

HMRC will audit employers receiving funding under the scheme. If an organisation continues to claim public funding and claims furlough grants, they will have essentially been paid twice for the same thing – inadvertently committing fraud!

It is important when you are looking at staff to furlough that you have considered exactly how that role has been funded and that you can demonstrate there is no public funding involved. The decision-making process should be clearly applied and documented so that it would stand up to HMRC scrutiny in the case of a subsequent audit.

Contact Laura Masheder, Partner, lmasheder@garbutt-ellott.co.uk or Sarah Ashton, Partner, sashton@garbutt-elliott.co.uk for more information.