Can directors be furloughed?

I just wanted to follow up from my previous posts to provide some clarity on directors who wish to apply for the employee retention scheme.

 

Can directors be furloughed?

The answer to this question in my opinion is yes, they can.

 

Why?

Directors are office holders who are responsible for the direction and overall behavior of a company, while an employee is responsible for day to day tasks involved in the operations of that company. It is possible for a director to not be an employee and possible for an employee to not be a director, or they can be both.

 

It’s therefore possible for a director to be able to stay in their role while stepping back as an employee. This is likely where the operations of a business are on hold, but there are still background activities going on for a business or even when people are coming up to retirement.

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What’s the evidence?

The only source I trust in this case is directly from the government, the link below about the self-employed measures contains the following statement:

“Those who pay themselves a salary and dividends through their own company are not covered by the (self-employed) scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

 

https://www.gov.uk/government/news/chancellor-gives-support-to-millions-of-self-employed-individuals

 

Another government release indicates it’s possible:

 

“If you’re a director of your own company and paid through PAYE you may be able to get support using the Job Retention Scheme.”

 

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

 

The employee retention scheme

This scheme will pay 80% of your directors’ salary for 3 months. Although it’s less generous for directors as they earn most of their income as dividends which aren’t covered, it will at least provide between £575 and £800 per month in most cases. My interpretation is that, while you can’t conduct operational tasks if you’re a furloughed director, you can still work on things that relate to the strategy and background maintenance of your business.

 

What do I need to do?

Your company needs to write to you to inform you that you’ve been furloughed. It’s unlikely the government will ever ask to see this letter, but I must provide the official guidance.

The second step is to wait until the government finish their website for these claims, which could take a couple of months. To save you from asking me every week, I’ll promise to notify you within 24 hours of this website being launched. Unfortunately, this will not be a quick solution to your cash flow issues.

All claims will be backdated to the point you started your furlough and if your hours of work and income drop below a certain level, then you may also be eligible for universal credit and should check the website to find out: https://www.gov.uk/universal-credit

Please get in touch if you need any advice.

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