Can a Company director be furloughed?
Many small companies are run by just one or two directors and have no other employees. A common question that is asked is: “Can a Company director be furloughed?
A director is an employee for PAYE purposes and it is therefore possible for a company to furlough a director under the COVID-19 Job Retention Scheme.
However, there are potential issues for small companies to consider.
To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on
behalf, of the company. This includes providing services or generating revenue.
However, it is accepted that where furloughed directors need to carry out duties to fulfil their statutory obligations, they may do so provided they do no more than would reasonably be judged necessary for that purpose. For instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provide services to or on behalf of their company.
Most companies will need to have someone on hand, to handle on-going administration such
as post, bookkeeping, tax filings and banking. These kinds of duties can be performed by
a furloughed director in his statutory capacity.
In the case of a single director, it is accepted you may furlough yourself , but in all cases you
must be unfurloughed if you start working to generate revenue.
It is important to note that where a company decides to furlough a director, the following
actions are taken:
it is formally adopted as a decision of the company and noted in the company records by way of board minute.
It is communicated in writing to the director being furloughed who must agree to what the ongoing pay will be during the furlough period.