Covid-19 : Business Support 25.03.20 – Update 6
As businesses await the finer detail of how the Coronavirus Job Retention Scheme will operate and who will be eligible, they are being forced to wind down operations with no funds to pay wages. Given these unprecedented demands employers are facing, we thought it would be beneficial to provide some high level guidance and approaches that could be implemented by our clients in the current situation.
Within the attached document we have provided a “Covid-19: Support” guidance for employers, which consists of the following sections:
- Statutory Sick Pay
- Employee Circumstances
- Coronavirus Job Retention Fund :
- What has been released to date
- Will there be an additional cost to the employer?
- Furloughed employees: legal status
- Coronavirus Job Retention Fund: Practical Guidance
- Redundancies and notice pay
Below is a quick synopsis of the key items covered:
Statutory Sick Pay
The guidance provides an overview of the new emergency statutory sick pay legislation, which provides for:
- the government funding 2 weeks employers SSP, for UK based businesses with less than 250 employees at 28th February;
- an easing of the requirement to certify absences; and
- the requirement for SSP relating to Covid-19 to be paid from day 1, instead of day 4.
The guidance sets out what employees are entitled to in the following situations:
- employees who do not want to attend work due to concerns
- employee who is displaying symptoms / in a vulnerable group / returned from high risk country / in contact with confirmed case or someone displaying symptoms
- employees with care responsibilities
- employees working from home
Coronavirus Job Retention Scheme – overview
The Scheme is designed to contribute towards employee wages in the event that they will be laid off due to the Coronavirus crisis. There has been no further detail released in relation to the Scheme, which leaves employers with a number of unanswered questions. We sought to address some of the frequent queries including:
- what is a furloughed worker? The Scheme only applies to workers who have been designed furloughed. A furloughed worker is an employee who continues to be employed by their employer but does not undertake work for the employer while they are furloughed. Therefore it will be unlikely that furloughed employees will be able to carry out minor tasks such as answering calls or emails.
- what is actually paid? To date it is unclear whether the government’s 80% contribution will be paid on gross salary costs or net salary costs, or cover employers NIC, employers pension contribution, other benefits etc. Furthermore it is unclear whether the grant will be paid based on contracted hours and/or average hours/salary over a specific number of weeks/months.
- Does the employer need to make a contribution? Employers can top up salaries, however they are not obliged to do so.
- Is there any additional cost to the employer? It is not clear whether the employer will need to fund the employer NIC or employers pension contribution. If so then this is a real cost to the company that will need to be considered ( discussed in further detail in the attached/below).
- What period can be claimed? The scheme will be back dated to 1st March 2020 and open for at least 3 months but will be extended if required.
- When will the grant be received by employers? The first grants should be paid out before the end of April. Businesses may need to fund the gap between payment of wages and receipt of the grant – if your business needs short term cash flow support, you may be eligible for the Coronavirus Business Interruption Loan Fund.
- Can employees claim other benefits? If employees’ salaries are reduced as a result of these changes, they may be eligible for support through the welfare system, including Universal Credit.
- What businesses are eligible? All UK employers no matter the sector, size or business
Coronavirus Job Retention Scheme – unknown cost of the scheme
The term “furloughed” is not defined in UK employment legislation, and it is unclear whether the grant will be processed as “pay” and therefore be subject to PAYE, including employers NIC and pension contribution. Given the lack of clarity surrounding the treatment of the grant it would be advisable for employers to consider how much they will have to contribute towards the Scheme in the event that employers NIC, pension contribution and other benefits are payable. Employers may wish to compare:
- their cost estimates if employers NIC and/or pension contributions will need to honoured for the grant;
- the estimated cost of making employees redundant and paying their notice pay.
If you would like assistance with this comparison analysis please contact your ASM client manager by email.
Coronavirus Job Retention Scheme – the legal status of furloughed employees
Laying off employees can generally only be done if an appropriate clause is incorporated into employees’ contracts. If the employer does not have the contractual right, the employer may face claims for breach of contract, unlawful deductions and constructive unfair dismissal if there is any attempt to impose lay-offs without consent. In some cases a subsequent agreement authorising lay-offs may be concluded between the employer and employees.
In terms of furloughing workers, the government has been clear that the Scheme does not create a legal right to place employees on furlough leave, and that an employee’s status will be subject to employment law, and what is set out in their contract of employment. To ensure there are no future issues, it is advisable for employer to obtain employees’ agreement to becoming a “furlough” employee until the Covid-19 crisis is resolved, especially if there is no provision for unpaid lay-offs in their employment contracts.
If you wish to avail of one of our template letters we have developed in conjunction with our own technical advisors please send an email to your ASM client manager. However, we note that each employer should take their own independent legal advice to ensure that any correspondence with their employees takes full account of their own specific company circumstances
Coronavirus Job Retention Scheme – Practical steps to consider
In the attached we have set out a three stage step by step guide to implement the new Coronavirus Job Retention Scheme including:
- Stage one : Consideration & Affordability
- Stage two: communication with employees
- Stage three: implement changes to payroll and prepared application to HMRC
Despite the introduction of the Coronavirus Retention Job Scheme, some employers may have no option but to consider redundancies, in the attached we have set out an overview of the redundancy process and the notice pay obligations.
Please note: We have provided the detail contained within this email/attachment for guidance, before you make any decisions or take any actions we strongly recommend that you seek specific legal advice on your individual circumstances. Furthermore, please note that this is a very fluid situation with new support measures and clarifications being released daily, so be mindful that the above overview may be superseded in the near future.