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Furlough: Ground truth – what has been happening?

Covid-19 and its effects have impacted upon society (and societies globally) to an extent usually only seen in all-out conflict, or overwhelming natural disasters. As history has previously shown, in such times, governments can do extraordinary things, as long as (in democracies) they have the support of the governed.

As a former civil servant I can say that I have been pleasantly surprised by the response in the UK. Leaving aside any political considerations or views, the Treasury has responded in attempts to ameliorate this disaster and have continued to seek to attenuate harm. One may disagree with targets, spending levels and policy, but there is no doubt that spending taps have been turned on to an extent not seen since World War 2.

There will need to be a reckoning in recoupment, but for now the emphasis is on expenditure in times of crisis. Unfortunately, history is also repeating itself in terms of the less attractive forms of human behaviour. There are reports of fraudulent furlough claims amounting up to £3.5 billion pounds. HMRC have received 8,000 calls reporting alleged fraud, and have 27,000 cases pending investigation. At the inception of the scheme, HM Treasury estimated that between 5% – 10% claims would be fraudulent and, alas, it looks as though they may be right.

HMRC are keen to state that they will not pursue genuine errors, and will seek to deal constructively with such cases. However, there is ample evidence of widespread fraud. Most commonly, this has taken the form of having furloughed employees continue working, or simply transferring funds directly to other purposes. There have also been cases of bogus companies employing ghost employees, a fraud traceable back to the padding of payrolls in the Roman Army to before the time of Christ.

What should an employee do if they suspect fraud? In some cases, behaviour has been so blatant as to remove any doubt. But if there is ambiguity? Employees should not cast aspersions widely, and have a duty to their employer. However, in the first instance, the question should be put to the employer. The provisions of the Public Interest Disclosure Act – PIDA (‘Whistleblowing’) provide protection in such cases and, in the absence of a satisfactory response, allow disclosure to certain relevant individuals and authorities. However, the provisions and procedures of the PIDA are complex and to avail oneself of its protection one needs to rely upon expert advice. As always, take advice before taking action.

There are few certainties in commercial life at the moment. It is not even certain that the Furlough Scheme will end in April. Notwithstanding the emergency schemes introduced, the law as it was has not changed, and there are no short cuts to be had in Employment Law now (as ever), if one is to avoid the costs of litigation.

Aidan Loy is our legal expert in Employment & HR law.

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