Furlough fraud figures are likely to be the tip of the iceberg

The number of cases of furlough fraud being reported could be the tip of the iceberg, with many more disgruntled employees likely to report their employer if they are made redundant.

Almost 2,000 claims of furlough fraud have been made against employers since the Coronavirus Job Retention Scheme (CJRS) was introduced in March.

But Alison Loveday, employment law specialist and partner, believes the number of reports could spike dramatically when the scheme comes to an end, with disgruntled employees looking to get their own back.

Alison says: “There are undoubtedly employers out there that will have seen the scheme as a way of getting the government to pay their employees’ salaries while also getting them to work at the same time. While many employees may feel scared to report their employer right now, if they were to be made redundant that may well change. They would probably be more willing to dish the dirt.

“The figures of those reporting furlough fraud are likely to be the tip of the iceberg and I would expect to see a spike in reports after the CJRS finishes and redundancies start. This could be a mixture of genuine claims of fraud and spurious ones with employees creating mischief in an attempt to get their own back.

“While some employers may have been exploiting the scheme, I have seen some who have refused, as a matter of principle, to take government money from the CJRS, so the response from employers has been varied.”

Alison says some employers may have made genuine mistakes, so it would be advisable for all businesses to make sure they have been claiming correctly.

“The scheme has evolved over time and there have been several changes through its short life,” Alison says. “As a result, it will have been easy to make genuine mistakes. Employers need to take advice from their accountants or lawyers and make sure they have put in the correct claims.

“Employers should also try to be open and transparent with their employees if they may need to make people redundant. In my experience the best way of handling these situations is to try to take your staff with you and let them know what is going on. That way if redundancies happen then it will be less of a shock. It is much better to have this approach than to suddenly call your employees ‘out of the blue’ to advise them that redundancies are imminent.”

Alison says that employees who have misused the CJRS should not be surprised if they are investigated by HMRC.

“HMRC put up the portal for claims very quickly and didn’t have time to check everything,” she says. “They said at the time that they had the power to investigate later. They also urged employees who were not happy to report their employer. Consequently, employers who have been misusing the scheme should not be surprised if the HMRC comes knocking at their door. Ignorance is no excuse, and with HMRC warning that individual directors will be ‘jointly and severally’ liable, it is essential that businesses make sure they have been claiming correctly.”