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When discretionary payments become non-discretionary; HMRC issues clarity

Martin Lewis 2

On 14 May 2020, the Government issued clarification about the much disputed ‘discretionary’ payments issue that has been the contractual stumbling block for the Freelancer and Contractor Service Association (FCSA) and its umbrella members.

The new guidance states: ‘When variable payments are specified in a contract and those payments are always made, then those payments may become non-discretionary. If that is the case, they should be included when calculating 80% of your employees’ wages.’

The changes mirror an agreed publishable, attributable written quote obtained by Martin Lewis from a HMRC spokesperson back on 24 April: ‘Payments the employer is obliged to make to the employee should be included in the reference salary. Variable payments that are specified in a contract and are always paid in reality, can be included within the reference salary.’

You would have thought the FCSA would have been all over this glimmer of hope for the countless families struggling to survive since the start of lockdown. After all, Julia Kermode the Chief Executive of the FCSA had been demanding, ‘We need clarity and we need it NOW,’ in a post published on 21 April, just 3 days before Martin published his HMRC quote.

Instead, the FCSA published a post on 30 April warning against misleading “expert” advice and threatening members with expulsion.

Google snippet of FCSA post warning against misleading advice.

That post has now been deleted from the FCSA website but it did contain the following paragraph: ‘If the government does indeed intend that the quoted “HMRC” view should be followed, then it is supremely simple for them to confirm this for umbrella workers on the relevant contract structure, in the regularly updated guidance.’

Well, that day arrived on 14 May and guess what, no mention of any update on the FCSA website; no news, no blog post from Julia Kermode, no tweets, nothing!

No update comp-20.05.20
20 May 2020 – 6 days after HMRC published latest Covid-19 furlough guidance no mention on Julia Kermode’s blog or News & Insights page on FCSA website.

Among all the confusion that has surrounded this issue, one thing is abundantly clear – the FCSA has failed monumentally to look after innocent contractors forced to use umbrella companies. Its focus has always been to protect umbrella companies at whatever cost.

Right from the start, when it produced the absurd template letter for contractors to lobby MPs to fix the mess created entirely by the umbrella industry through to dismissing help from credible sources to the ubiquitous, inexact and derelict use of the word ‘discretionary’ in out of date, irrelevant and not fit for purpose contracts while all the time professing to promote, ‘services, advice and employment to the highest level of professional and ethical standards in the UK.’ The simple truth is, there is nothing ethical about abandoning human lives to the misery of poverty.

Now that HMRC has finally provided the much needed clarity required, the hope is the umbrella industry will embrace the new guidance and furlough contractors on 80% take home pay.

My fear is this will not happen. The FCSA has failed to update its website promoting the new guidance is indication enough of the negligent attitude towards contractors that permeates the very DNA of the industry. I am hearing worrying reports about umbrella companies introducing their own eligibility guidelines that deliberately exclude contractors who qualify to be furloughed under HMRC rules. Others report of having simply been made redundant.

What can you do if your umbrella company fails to furlough you?

  1. Record your case in the comments below to help compile a central resource that can be useful for 2 below.
  2. Contact your local Member of Parliament and ask them to support Richard Fuller MP who has agreed to refer the matter to the Business Select Committee to follow up with an enquiry about how umbrella companies reacted to the COVID-19 crisis.
  3. Contact your local Member of Parliament and ask them to support an Early Day Motion – Supporting supply teachers during covid-19

If you can suggest any other help or action that may be useful, get in touch and I’ll be add  it to this post.

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Published in Coronavirus Covid-19 ethics pandemic Teaching

One Comment

  1. Interesting read Rob. Do you know if anyone has followed up on this with your suggestions above?

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