Can I Furlough Contractors?
Can I Furlough My Contractors?
"Hi Jeni, I have a team of 4 contractors working on a project that we have decided to shelf for the foreseeable future. My question is what are my options around furloughing for contractors?"
“‘Furlough’ refers (generally) to the use of the Government’s Coronavirus Job Retention Scheme which allows employers and employees to agree a temporary layoff period, a minimum of 3 weeks up to a maximum of 3 months (from 1st March). By using the scheme the employer can reclaim up to 80% of the employees pay (up to a maximum of £2,500 per month) as well as employers national insurance and pension contribution. The details of the scheme mean that contractors are included – but there are some considerations.
Only the organisation paying the individual can decide to furlough the worker so this means for clients they need to engage with the agency and there may well be a further party in the chain such as payroll provider, umbrella company or limited company. Furloughing contractors is possible and the Government have made clear they expect the scheme to be used for agency workers as well as permanent members of staff and it makes sense that companies will want to keep those valuable contractors engaged as well as supporting them through this challenging time. The key is to make contact with your agency as soon as possible, they should have the expertise to guide you through this.”
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Furloughing IT Contractors: Is There an Alternative?
Just today [April 15th 2020] Lloyds Banking Group announced their plans to restrict its IT contractor workforce to a three-day billable week, as part of a plan to mitigate coronavirus’s impact on its profits.
The bank was due to unveil the enforced contractor downtime before Easter but instead had to scale back, shelve or stop projects, says a source facing the covid-19-inspired furlough.
Their decision to move to ‘Short Working’ and not to furlough contractors is an approach many companies are taking in an effort to retain their skilled contingent workforce.
There are several reasons a company may want to extend the contract of their contractors and reduce the billable days they work.
Allows you to retain project progress while reducing overheads
Retains vital talent and won’t leave you scrambling for talent when lockdown is lifting and normal working practices resume
Gives Contractors time to look for and bid for other projects
Gives Contractors piece of mind
Generally, tech contractors are better placed than other types of workers, and better placed than those in other sectors, given their greater propensity and ease at seamlessly working from home.
Don’t rush into furlough options for contractors without considering the long term. The potential savings you might make by ending contractor relationships may not outweigh the damage you may cause by putting yourself at a talent shortage come normal working practice is resumed.
About Jeni, Head of Compliance
Jeni is Evolution’s Head of Compliance. She helps both Clients & Candidates in understanding, preparing for, and dealing with the consequences of new and updated legislation.
Her deep understanding of all the laws, regulations, contractual requirements and industry practice that affects recruitment, labour supply and employment make her an invaluable point of contact for anyone operating in the ever-changing landscape of the working world.
For Clients, Contractor Groups and the wider business group she provides audit services to assess risk and legislative requirements, develop innovative solutions and execute a commercially sound, legally robust action plan.
Jeni has experience as a Compliance Manager & Data Protection Officer with additional qualifications as a Lead Auditor, Project Manager, Risk Assessor and Health and Safety Professional in addition to her reading of the law.