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The True Cost of Furlough
Paul Malley | Managing Director
Thursday 11th Jun, 2020
As the world starts to adjust to what the ‘new normal’ will look like, our sector is no different. The Government is keen to get the economy restarted and we all know how important the flexible workforce is in rebuilding a strong economy.
At PayStream we have worked hard during these unprecedented and unusual times to ensure we maintained our usual high standards of service to continue to support all our contractors and clients as best we could, with the information and guidance we had.
It has been well documented that the umbrella sector had its fair share of difficulties when it came to introducing furlough pay for umbrella workers. However it’s important to note that none of the financial support measures implemented by Government were mandatory. Schemes such as the CJRS were optional and came with a lot of complexity, risk and cost to implement, particularly for our sector and the unique way in which we work.
We never believed it was the Government’s intention to treat umbrella workers differently, which is why we worked hard with trade bodies and also reached out individually to HMRC to get the clarification we needed to pay furlough on gross pay, not just basic pay.
Ensuring our umbrella workers got the full financial benefit
Since then we have continued our conversations with HMRC in order to ensure our umbrella workers are treated fairly by:
Including as many affected umbrella workers as possible within the Scheme guidelines, even though the cost and risk of doing so is substantial
Including Commission in the calculation so the basis of pay now includes all elements of gross pay
Ensuring our calculation is based on when someone worked rather than when paid. In doing so we have ensured that those paid on less frequent pay intervals have not been penalised.
We made the decision early on to use our own funds to pay furlough payments, and not claim the grant until as late as possible. This is because HMRC made it clear that once you make a claim, you cannot go back and adjust a payment made for that period. By using our own funds we have been able to go back and top up contractors pay when we have had further clarification on including commission and basing the calculation on hours worked, not paid.
We have also added in additional furlough pay cycles to ensure as many umbrella workers as possible are paid promptly, rather than having to wait for the following month. Again all of which comes with additional operational costs.
The true cost of furlough
As mentioned earlier, implementing furlough was optional, we could have taken the easy business decision, as some have, not to do it at all, however that’s not what PayStream is about. Our brand is built on a promise of support, which is why we made the decision to implement a furlough scheme, even though it has come at significant cost to us:
We have paid Apprentice Levy on all furlough payments, none of which is recoverable under the CJRS
We have utilised between 30 and 40 of our team, who would have otherwise been furloughed themselves, to implement and operate a furlough scheme and also ensure our high service standards didn’t slip.
As you know we would normally have a margin, but had no intention of doing so in regards to our furlough payments. So we have processed thousands of payments at our own cost, at a time when business volumes are depressed.
What will the future hold?
Government have already announced their plans to bring furlough to a close as they are keen to get the economy restarted. This inevitably starts to shift the cost of the Scheme from Government to the employer from August. Further guidance is due in this regard, and we will review as and when this is available, as these costs are significant for us.
What our contractors have to say
Our staff have worked tirelessly not only to implement a brand new scheme in a matter of weeks but also to ensure the contractors who have been fortunate enough to continue to work as normal, continue to be paid as normal.
That is why it is always so nice to hear that our hard work and efforts during this difficult time have been appreciated.
"I just wanted to drop a very quick note back to say a huge THANK YOU to PayStream, and everyone working there to ensure that us contractors could receive fair furlough. I wasn’t expecting anything else so this is a great surprise that you have been working to get this extra pay included. PayStream didn’t have to furlough us, and didn’t have to work so hard to make sure we could have all elements of our pay included. I think the work that PayStream has done here is fantastic, I am so, so grateful to you."- E. Stevenson, Umbrella Contractor
“Thank you so much and thank you for the help and communication through this strange time, it’s much appreciated.”- K. Tait, Umbrella Contractor
“Can I just take this opportunity to thank you all at PayStream for your unrivalled support to us umbrella workers during this bizarre period.”- R. Jasper, Umbrella Contractor
“First of all I want to thank you very much for all the help and hard work you guys have put in to get my furlough pay, it has been a really stressful time and you have remained professional keeping me updated with the progress when there were other parties involved. I am so appreciative of this and you have thrown me a life line.”- V. Rose, Umbrella Contractor
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