23 March 2020
As Friday saw the Government asking pubs, clubs and restaurants to close and yesterday saw the Government putting out increasingly urgent calls to everyone to stay at home and stressing that “life shouldn’t feel normal right now”, we appreciate now is likely be a very unsettling and questioning time for our business/employer clients and contacts.
In order to help highlight certain key issues for our business/employer clients and contacts, we have considered:
- What the Government support offered includes?
- What are an employers key legal obligations/rights?
- What other contract issues might business/employer clients need to be aware of?
The Chancellor has set out a package of “temporary, timely and targeted” measures to support public services, people and businesses through this period of disruption. The measures include:
- a Coronavirus Job Retention Scheme - Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
- deferring VAT and Income Tax payments - Businesses may defer Valued Added Tax (VAT) payments for this 3 month quarter until the end of the tax year.
- a Statutory Sick Pay relief package for SMEs - Emergency legislation is being bought in to allow small-and medium-sized businesses and employers to reclaim Statutory Sick Pay for sickness absence due to Coronavirus.
- the Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank - The Government has announced a Coronavirus Business Interruption Loan Scheme (launching this week), to support businesses to access bank lending and overdrafts
What are an employer’s key legal obligations/rights?
If an employer is staying open for business, they are likely to need to:
- Encourage their employees to work at home, wherever possible. Where homeworking is possible, employers should continue pay the employee as usual, keep in regular contact and check on the employee’s health and wellbeing.
- Be aware that, if an employee is sick of self-isolating because of coronavirus, they will be able to get Statutory Sick Pay (SSP) from the first day they are off work. The weekly rate for SSP is £94.25, payable for up to 28 weeks.
- Be mindful of any “working from home” and “own device” policies they have in place from time-to-time and send a copy of all such policies to the relevant employee(s) for their reference. Data protection policies must be considered; if employees are dealing with personal data and confidential information, they must continue to comply with data protection legislation while out of the workplace.
If an employer, however, has to close they face are likely to different considerations:
- Employers can temporarily lay off staff, but unless they have specific layoff clauses in their contracts, employees need to be paid their full wages during this time.
- Losses incurred in this respect could be reduced by employers relying upon the right to require employees and workers to take holiday when directed if they need to. For example, they can decide to shut for a week and everyone has to use their holiday entitlement
- Redundancies should be considered as a last resort and employers may need to consider all options available to help them to manage workforce costs and avoid redundancies. The Corona Virus Job Retention Scheme (see below) is aimed at stopping employers from making redundancies and instead sending home employees on up to 80% of their salary. Therefore, whilst the position is currently unlikely, there are likely to be restrictions on employers making people redundant, without having first exhausted the entitlements under the Scheme (for the 3 months available).
The Coronavirus Job Retention Scheme will cover 80% of workers’ wages, up to £2,500 pounds, for at least three months, backdating to March 1, in an unprecedented effort to get companies to keep workers on their payrolls, rather than laying them off en masse.
Government guidance is that, in order to be eligible, employers will need to:
- designate affected employees as ‘furloughed workers,’ and notify your employees of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)
It appears that the Job Retention Scheme currently only applies to employees and not to workers. The Job Retention Scheme will also not apply to those who have already agreed to reduce their hours or their salaries. There is also uncertainty about how those currently off sick with coronavirus or self-isolating or caring for those in their households with the virus will be dealt with.
What Contracts should you consider?
Employers/business may also be wise to consider various contractual issues in order to see if the costs of temporary closure may be reduced/negated in other ways. Examples of contractual arraignments that business may way to consider:
- Supplier contracts – in order to consider terms in respect of suspension or temporary cessation of business;
- Customer/client contracts – in order to consider what liabilities/losses may be incurred if in breach of any key terms;
- Property lease obligations – including obligations in respect of keeping premises sage and secure;
- Equipment or company car lease arrangements – in order to establish if the equipment can be temporarily retuned or if reduced payment rate can be agreed, bearing in mind that the equipment (e.g. office photocopies/printer); and
- Finance/lending facilities and banking arrangements – in order to explore if there any by provisions in respect of payment holidays or reduced interest rates that can be applied.
We suggest employers and employees read the guidance published by ACAS, accessible here: https://www.acas.org.uk/coronavirus
and the guidance issued by the Government, accessible here: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19.
We want to offer our support wherever possible to clients in this turbulent time and we have put in place measures so that all of our team can work normally from home.
If you have any questions or queries, please contact Caroline Adams on firstname.lastname@example.org or 0330 2000140.