AS we adapt to the 'new normal', with the furlough scheme winding down and social distancing guidelines to accommodate, businesses are facing difficult decisions to protect their futures.

The UK is in recession and the economy is unlikely to return to its pre-pandemic position until the end of 2021. Three-quarters of a million jobs have already been lost, and this figure is expected to rise substantially, with recent surveys suggesting around two in five businesses will have to make some or all furloughed staff redundant.

Redundancies are sadly inevitable for many employers and must be carefully managed to ensure they comply with the law. Employers need to ensure they commence planning any restructures and resulting redundancies as soon as possible to avoid claims from disgruntled employees.

The furlough scheme will reportedly cost the Treasury up to £100bn. It is therefore not surprising that as the scheme winds down, HMRC has begun investigating whether employers’ claims were genuine and compliant with the rules.

HMRC is expected to take a tough stance on furlough fraud. Actions such as furloughing staff whilst asking them to work; furloughing staff but not telling them (and keeping the furlough grant); claiming furlough for former or fake employees; and using the furlough grant for non-business purposes, are not only likely to result in a requirement to repay monies already paid, but could lead to prosecutions, huge fines, criminal records, and prison time for directors.

Recent surveys revealed 63 per cent of furloughed employees had spent time working for their employer, with 4,500 furlough fraud reports by employees so far. Furlough fraud is being treated very seriously by HMRC and investigations are set to soar. HMRC has indicated that it is not trying to catch employers out, suggesting inadvertent breaches are not a priority. However employers should audit their use of the Furlough Scheme, to identify any mistakes made and address them proactively.

Contact Alexandria Evans, senior associate in employment, on 01904 561444 or if you require assistance with any of the topics raised in this article.