More than a third of furloughed employees have been asked to carry out work by their bosses, in direct contravention of the rules, according to a new survey.
Employers can only claim cash from the Â£60bn scheme if staff cannot work during the pandemic.
But the study by Crossland Employment Solicitors suggests that 34% of employees have been asked to return to work, either doing their usual job or taking on more administrative tasks.
One in five has been asked to either cover someone else’s job or to work for a company linked to their employer while on furlough.
The furlough scheme is one of the biggest single up-front costs to the Treasury and breaking the rules is fraud.
The government has recently announced plans to give employers 30 days to confess any furlough fraud, following concerns the system was being abused.
Legislation is also set to be introduced giving powers to impose penalties and to pursue directors of insolvent companies personally.
Beverley Sunderland, managing director of Crossland, which carried out the survey, said: “Like any fraud, this is a serious offence and an exploitation of employees.
“As it is fraud on the Treasury then an employer could be imposed with a hefty fine, asked to pay past payments back, have any future payments withheld or even potentially face prison.”
The research also found the split between small and medium enterprises (SMEs) and larger companies breaking the rules was fairly equal, from the 2,000 employees surveyed in manufacturing, construction, accounting, IT, marketing and PR.
Ms Sunderland added: “Since the coronavirus job retention scheme was launched eight weeks ago, we’ve received an avalanche of calls to our office from worried employees, all unrelated to our own clients and many with the same story, ‘I’ve been furloughed but my employer has asked me to keep working.'”
The furlough scheme was introduced to avoid wide-scale unemployment as businesses shut under the lockdown and covers 80% of staff salaries up to Â£2,500 each.
Earlier this week Treasury figures revealed that Â£20.8 billion had been claimed covering 9.1 million jobs, and Office for Budget Responsibility (OBR) forecasts predict the entire scheme will cost Â£60bn.
The furlough rules change from next month, with bosses able to bring back employees on a flexible basis whilst still claiming the grants for the hours not required.
In August employers must start covering pension contributions to employees, September will see the contribution from the Treasury fall from 80% to 70% and in October this reduces to 60%.
Companies must make up the shortfall and furloughed employees will still be entitled to the 80% level until the end of October.
A spokesman for HMRC, which is running the scheme, said it has received 3,079 reports from the public as of 14 June, and urged any employee who thinks their company is abusing the system to contact them.
They added: “This is taxpayer’s money and fraudulent claims limit our ability to support people and deprive public services of essential funding.
“Claims are checked and payments may be withheld or need to be repaid if the claim is based on dishonest or inaccurate information. We won’t hesitate to take criminal action against the most serious cases.”