Furlough Fraud? Not a phrase you have heard of much? This is the latest scam being carried out by businesses where they send their workers home to be “furloughed” but expect them to carry out a full day’s work and then claim 80% of their salaries back from the Government’s new furloughed worker scheme…..and it is almost the perfect fraud for the employer as long as the employee keeps their mouth shut, because it is almost perfectly invisible.
Many retail shops have put all of their staff on furlough, because the government has forced them to close; however these same retailers have started to look at creating online businesses using the very same staff.
This is particularly prevalent in small businesses who already had an online presence and a retail outlet, because it is impossible for the HMRC to identify whether the retail staff (who often ran the online outlets from the shop). In some cases, the retailer has simply sent workers home and told them to start promoting the online business and others have been told to carry out work selling online, but if anyone asks to say that they’re not working and on furlough. In some cases there is already an online promotion bonus available so by being furloughed, the employee will earn more than normal, as the bonus will be paid after furlough ceases.
So how does the fraud work? Why isn’t it detectable?
The loopholes have become apparent because there are no checks on the firm’s turnover. If turnover drops dramatically in order to qualify for the scheme then the the furlough scheme works, but because the Government failed to properly plan for a pandemic and had to rush in measures, this was not properly considered. Instead the Government has tried to focus the public on the possibility of self-employed fraud.
Other businesses which operate from offices using mobile phones and email have moved workers to work from home, with no major impact to the business but have then woken up to the furlough scheme and officially told their workers that to avoid redundancy (which wouldn’t happen in fact) that they have been furloughed. They’ve then been told that they need to keep servicing their clients whilst at home. Cleverer companies have said that you only get paid 80% of your salary unless you fully service your clients (i.e. no change to work, except that you’re working from home) when you keep your full salary. To the outside, the company looks as if it is being nice to workers by paying them their full salary- but in fact, they’re only paying them 20% of the normal salary and yet the company isn’t suffering at all.
Send your staff home. Get 80% of the salary. Then get them to work online where the sales are hardly affected …..and boom….your profits increase dramatically, because your wage bill has dropped from £500,000 per month to £100,000 per month. OK, even if you suffer a 10% fall in purchases, you are still many thousands of pounds better off. ….all paid for by the taxpayer.