Third of employees asked to commit furlough fraud

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New research suggests that about a third of employees have been asked to commit furlough fraud during the Covid-19 lockdown with staff experiencing pay cuts and deportation threats in addition to being furloughed.

According to a survey by Crossland Employment Solicitors, 34% of employees have been asked by their bosses to work while being furloughed by their company. At one manufacturing firm, staff received a 20% pay cut as well as being expected to continue working while furloughed. And some employees working for firms with a sponsor licence had been threatened with deportation unless they agreed to the furlough fraud.

A third of furloughed employees were asked to carry on doing their usual jobs, while 29% were told to undertake more administrative tasks. One in five have been asked to either cover someone else’s job or to work for a company linked to their employer while on furlough.

The government earlier this week announced plans to give employers a 30-day window of opportunity to confess to furlough fraud and is rushing through legislation giving powers to impose penalties and to pursue directors of insolvent companies personally. This will become law in early July.

Meanwhile, the HMRC has announced it has had 3,000 complaints so far from furloughed employees concerning fraud. At the end of May the figure was 1,900.

Furlough rules under the Coronavirus Job Retention Scheme stipulate that employers mustn’t ask staff to provide any services or generate an income for their employers when on furlough.

Crossland’s survey of 2,000 employees found that an equal number of SMEs and large companies were breaking the rules of the CJRS across manufacturing, construction, accounting, IT, marketing and PR.

Beverley Sunderland, managing director of Crossland, said: “Until 1 July employers are only allowed to ask furloughed employees to undertake training, yet a third of the employees surveyed were asked to work, potentially making the company money and so increasing their profits and the government will pick up 80% of the employee’s wage and could potentially foot a bill of billions in fraudulent furlough wage claims.

“Like any fraud, this is a serious offence and an exploitation of employees. As it is fraud on the Treasury then an employer could be imposed with a hefty fine and potentially face imprisonment.”

She added: “Since the Coronavirus Job Retention Scheme was launched [on 20 March], we’ve received an avalanche of calls to our office from worried employees, all unrelated to our own clients and many with the same story; ‘I’ve been furloughed but my employer has asked me to keep working’.

“In one case in the manufacturing sector the employer had not only asked the furloughed employee to work but had also imposed a 20% pay cut, so their workforce was costing them nothing. We heard from employees in the graphic design industry, some had been asked to continue working one day a week so they could be paid 100% of their salary.

“We’ve had cases of employees working on a work permit [sponsorship licence] in the professional services industry told they must continue working when furloughed or face being dismissed and asked to leave the country; furloughed employees in the appliance-fitting business asked to carry out orders to justify the ‘money’ they were being paid; and investment companies trying to use the scheme as an alternative to performance management – if an employee isn’t hitting target, they were furloughed or threatened with furlough.”

She also said many people were carrying on working without knowing they had been furloughed with the government’s money going straight to the employer. People don’t necessarily know through their wage slips what their situation is.

Sunderland said some employers seemed to be targeting those they felt were less likely to complain, such as those on work visas; with a larger proportion of women saying that although they had been asked to work their also furloughed male colleague wasn’t.

She advised employees in such positions to first complain to their employers. This was best done in writing for evidence. Following this, they should be reported, on an anonymous basis, for fraud directly to HMRC. However, she added: “Very few employees want to go down either of these routes for fear of loss of their job.”

She told the BBC’s Jeremy Vine show today that potential whistleblowers would be worried about losing their job in the context of a coming recession and perhaps would be persuaded to go along with the situation in the knowledge that there is a huge backlog of cases at employment tribunals.

Sunderland added that with the rules changing from 1 July there was likely to be less exploitation of the system, because employers could bring previously furloughed employees back to work for varying amounts of time, while still under the CJRS. However, she pointed out, this would not stop employers saying that the employee only worked one day when in fact they worked four.