We live in challenging times. The government is taking steps to keep the economy going during the COVID-19/coronavirus pandemic. Legislation is being enacted in weeks rather than years; guidance is being communicated and updated regularly. The consequences for employment law and practice remain in some circumstances uncertain: none of the new laws, regulations or guidance have yet been tested in the employment tribunal.
If you face employment challenges please take advice from an expert employment lawyer and consult the gov.uk website.
There are numerous gov.uk pages providing guidance. There is also the Treasury’s Direction on the Coronavirus Job Retention Scheme (CJRS) to HMRC dated 15 April.
This newsletter covers:
- Closure of business – who pays your employees
- Business is still open – the new rules
- Self-employed or member of partnership – how to keep going
Closure of business – who pays your employees?
Your restaurant or non-essential shop is closed in accordance with government guidance. Or your plummeting cashflow forces you to close all or part of your business temporarily. There are three alternatives:
- Lay-off if closure is for less than three weeks, or short-time working if you can keep your employees on but for fewer hours. But first check your employment contracts: can you impose ‘lay-off’ or short-time working? Your employees will be entitled to a minimal statutory guarantee payment, and the right to claim a redundancy payment if lay-off or short-time work exceeds a certain number of weeks.
- If you have already closed – or are closing or partially closing – for at least three weeks, and your employees can’t work for you at home, you can put eligible employees on furlough under CJRS and claim a certain proportion of their salary back from HMRC – this is a grant not a loan. A guide to CJRS and furlough is below.
- Redundancy? If your business is closed down temporarily rather than permanently and you make your employees redundant, the employment tribunal might say this is unfair dismissal. Under CJRS you can re-employ certain employees.
The purpose of the scheme is to cover employers’ costs of employment in respect of furloughed employees arising from the health, social and economic emergency in the UK. It is not limited to employees who would otherwise be made redundant, but they must be furloughed for a minimum of three weeks. The duration of the scheme is 1 March to 30 June 2020 (extended from 31 May on 17 April) and may be extended again.
What can you claim? 80% of your eligible employees’ salaries from HMRC up to £2500 a month, backdated to 1 March, plus associated employment costs (see below). The HMRC portal opened 20 April and apparently payments will be made in six working days. Salaries will be subject to tax and other deductions. You can top up your employees’ salaries to 100% if you choose. Your employees must not receive less than the National Minimum Wage.
What is included in your claim to HMRC? Payments you are obliged to make including past overtime, compulsory commission, employer’s National Insurance Contributions, pension contributions up to the level of the minimum automatic enrolment employer pension contribution. But not discretionary payments such as tips, or conditional payments, or non-monetary benefits.
What if your employees’ salaries vary? Base your payment on the same month last year, or the average monthly pay for 2019/2020 – whichever is the higher. But if the employee has been with you less than a year, go by their average monthly earnings.
Who is eligible? You can furlough employees on your PAYE scheme who were employed by you on or before 19 March 2020 (the gov.uk site previously said 28 February) as long as you have notified HMRC through a real time payroll information submission of payment in respect of that employee on or before 19 March 2020. An employee can’t insist on being furloughed.
TUPE Are you a new employer of your employees? On 19 March did they have a former employer whose business you have now taken over? You may have registered your new employees on the HMRC’s real time information for PAYE after 19 March, but if on 19 March your employees were employed by another employer who was registered on HMRC real time information for PAYE they are covered by this scheme.
The scheme is open to all employers. The government expects employers who receive public money for staff costs to pay their employees and not furlough them. But what of charities who receive public funding grants and whose staff cannot be redeployed to assist with the coronavirus response? Unless the public money is given to the charity with the specific intention of paying staff costs this is a grey area.
How to select employees. The government has mentioned two specific categories who are unable to work at present:
- Those with childcare or other caring responsibilities arising from coronavirus
- Those who are ‘shielded’ or who need to stay at home with someone who is shielded – if they cannot work from home. What is shielding? The NHS is sending letters to people with certain underlying health conditions advising them to stay at home.
Make sure you have a documented selection plan with defined criteria. A collective consultation process may be required. Remember that equality and discrimination laws continue to apply. Most employees will be keen to be furloughed as they will feel safer at home. You can provide for employees to take it in turns on the furlough scheme: employees may be furloughed multiple times, but each must be for a minimum of three consecutive weeks.
You can also claim for office holders (including directors), salaried members of LLPs, agency workers (by the agency), and Limb (b) Workers.
Employee on SSP You can furlough employees currently on sick leave, but you can only claim back either furlough payment or statutory sick pay at any one time for any employee. Employees do not qualify for SSP if they are on furlough. The solution to this is for employers to continue to make furlough payments.
If you tell an employee to stop working and they are on SSP – or are entitled to it – the calculation of the minimum period of three weeks doesn’t start until this period of SSP has ended. But if there is a subsequent entitlement to SSP – if your employee becomes sick again, whether or not they receive SSP – this is disregarded for the purposes of totting up the amount of time on furlough.
Employee on sabbatical If an employee is on sabbatical or other unpaid leave, or is due to go on it, their furlough can’t start until this period of unpaid leave is over.
Confirm agreement in writing. It is essential to confirm your and your employees’ agreement for them to “cease all work” in writing – this can be electronic – and to retain it for five years. This vital requirement is in the Treasury Direction to HMRC of 15 April and may leave some employers wondering whether they have sufficient paperwork for employees who are already on furlough. It is to be hoped the Government will provide clarification. Some commentators foresee Judicial Reviews if this is not remedied.
Can you afford to pay until CJRS payments kick in? Consider applying for a Coronavirus Business Interruption Loan. Otherwise, will your employees agree to wait for HMRC to pay?
Your employees don’t agree to go on furlough. If you don’t pay them, they have a claim for unpaid wages. The options are to dismiss them in accordance with their employment contract if you have employed them for less than two years, or to make them redundant. It is thought most employees will prefer to be on furlough as it’s safer at home, and they’re being paid.
Re-employment If you made eligible employees redundant, or they left their job, on or after 28 February 2020, you can re-employ them and put them on furlough, even if you don’t do this until after 19 March 2020.
What can employees do during furlough? They can get another job and receive a salary from another employer as well as their furlough payment – as long as they aren’t prohibited under their employment contract. You can waive this, of course. Certain vital sectors are recruiting, eg fruit pickers, delivery drivers, supermarkets. The government advises employers to encourage their employees to undertake training during furlough. They can also do voluntary work. But they cannot work for your business at all (or any business linked to it) or they will forfeit their entitlement. The exceptions to this rule are certain statutory duties of directors related to filing company accounts or the provision of other information.
Annual leave Furloughed workers can request and take holiday – including bank holidays – and they must be paid in full, but employers can of course claim the 80% grant from HMRC. The government is keeping the policy about holiday pay during furlough under review.
The end of the scheme. Your employees’ contracts of employment continue; they will be returning to work when the scheme ends unless you lawfully terminate their contract by dismissal or redundancy. Grievance and disciplinary procedures, and redundancy consultations, can take place during furlough.
Business is still open – the new rules
The government recommends that employees work at home if at all possible: this is now the first option for all employees where businesses are able to remain partly or fully open.
If because of the nature of your business your employees cannot work from home, and there is work for them to do either in your workplace or elsewhere, you will need to undertake a risk assessment and provide your employees with comprehensive and relevant information on:
(a) the risks to their health and safety identified by the risk assessment, and
(b) the preventative and protective measures
(regulation 10 Management of Health & Safety at Work Regulations 1991)
If your employees are customer facing:
- review your work practices in order to provide a safe system of work for your employees, to protect not only their physical but their mental health
- follow your industry’s recommended safety practices during the pandemic
- provide personal protective equipment if appropriate
Keep an eye on the gov.uk website for updated guidance and ensure you and your employees observe social distancing in accordance with this guidance. Also recommended are regular safety announcements, electronic rather than paper communications, additional handwashing stations, 2 metre floor markings, small teams, regulated entry to premises, plexiglass between workers and customers.
Perform a risk assessment for new/expectant mothers under regulation 16 Management of Health & Safety at Work Regulations 1999 to decide whether or not their working conditions should be altered or if they should be suspended. If your employee is absent from work as a result of her pregnancy in the last six weeks of pregnancy, her maternity leave automatically starts under regulation 6(b) Maternity and Parental Leave Regulations 1999.
What if an employee says they can’t attend the workplace? If they fall within a vulnerable category, for example if they are aged seventy or over, or have an underlying health condition (but have not received, and are not entitled to, an NHS shielding letter) you should look to make reasonable adjustments. Can they work in isolation in the workplace? Is it possible for them to travel to work in isolation? If it’s not appropriate for them to work at home, offer them furlough leave. If they are not coming to work because they are ‘shielded’ or a member of their household is shielded, or they have caring responsibilities arising from coronavirus, and they can’t work at home, offer them furlough leave. As of 16 April, those advised to shield are entitled to SSP.
Can you dismiss an employee in a vulnerable category who doesn’t come to work? s.100 Employment Rights Act 1996 says certain dismissals are automatically unfair, including in circumstances of serious and imminent danger where the employee takes appropriate steps to protect themselves or others.
What if a non-vulnerable employee says they can’t come to work? Is it possible to make reasonable adjustments for them in the workplace? If you formulate a plan to provide them with safety, and they turn it down, and it’s not appropriate for them to work at home, consider offering them furlough leave. Here again, a dismissal might be considered automatically unfair under s.100 Employment Rights Act.
What happens if an employee develops COVID-19/coronavirus? They are entitled to statutory sick pay if they are self-isolating because they, or a member of their household, have coronavirus. They need to produce an isolation note available through 111.nhs.uk. The benefit is payable from the first day, and a maximum of fourteen days are refunded by the government to businesses with fewer than 250 employees. Furlough leave is not designed to cover short term sick leave as it is for a minimum of three weeks.
Employees who are suitably skilled or experienced in health or social care are entitled to unpaid emergency volunteering leave, in blocks of two, three or four weeks in any sixteen-week period. They must give at least three working days’ notice and produce a certificate from an appropriate authority.
Here are some examples of steps employers can take to facilitate working at home:
- A laptop for each employee to use – this might be viewed as an investment as some commentators say disruption to our working patterns may continue for many months
- Basic guidance on how to hold or attend Skype or Zoom meetings
- Regular check ins with you to provide information and answer questions.
Self-employed or member of partnership – how to keep going
The government is offering help for those struggling. But HMRC won’t be in touch until mid-May, and no grant will be paid until June, so if you’re struggling, one option is Universal Credit. The HMRC payment will be a grant, not a loan, and you can continue in your self-employed work, or in employment, or voluntary work.
If you are eligible, HMRC will invite you to apply online for a taxable grant worth eighty percent of your trading profits up to a maximum of £2,500 per month. There is a trading profit ceiling of £50,000 (looking at past tax years) with a stipulation that more than half of income comes from self-employment. Otherwise you are eligible if you have:
- submitted a self-assessment tax return for 2018/2019 – submit it by 23 April 2020 if you have not already done so or you will not be able to claim.
- traded in the 2019/2020 tax year (and are still trading or would be if not for coronavirus)
- intend to trade in the 2020/2019 tax year
- have lost profits because of coronavirus
You will receive a taxable grant based on your trading profit over the last three tax years.
Also look into:
- Deferring payment of your July self-assessment payment on account to January 2021
- Deferring VAT payments
- Coronavirus Business Interruption Loan Scheme
- Business rates relief
- Grants if you pay little or no business rates
Your professional body may be able to provide you with guidance on other financial assistance available. Also check your insurers: are you covered for your losses?
Contact us for free advice on the issues raised in this Newsletter. In this thirty-minute session we will review your situation and how you can achieve your objectives.
The topics covered in this Newsletter are complex and are provided for general guidance only. Therefore if any of the circumstances mentioned in this Newsletter have application to you, seek expert legal advice.