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Furloughing Directors?

Coronavirus Job Retention Scheme Furlough for Directors

There has been much discussion as to whether directors can avail of the Government’s Coronavirus Job Retention Scheme. This scheme supports permanent employees on the PAYE scheme as of 19th March 2020.

If an executive director of a company is a contracted permanent employee of a company, they will qualify. Likewise as non-executive directors are not permanent employees, they will not qualify. However, there is some doubt as to whether company directors of micro and small businesses, who may not be actual employees on the PAYE scheme, will qualify. In addition, directors who are paid a nominal salary but receiving the bulk of their reward through dividends will only receive 80% of their nominal salary (if they qualify).

If a director does qualify and is furloughed, it means that they must not provide any further “commercial” service to the employer (company), however the Government has indicated that a director can furlough and continue with their statutory duties. The extent of this is still not entirely clear however beyond for example, making statutory filings and whether this will extend to acting to save the company whilst furloughed is still not entirely clear. There is also the question of whether directors will actively want to furlough given that the ongoing success of the company and its ability to navigate the uncertainties that surround the coronavirus, will require the active input of directors into the running of the business rather than taking a back seat as furloughing requires. It is particularly difficult to see how sole directors can furlough themselves because of the requirement not to generate “commercial” revenue or provide services to or on behalf of the company. This would in practice leave many of these businesses (which will often have no other employees) with no one to run them and carry out any work.

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