GOVERNMENT FINANCIAL SUPPORT FOR EMPLOYERS DURING COVID-19: AN OVERVIEW

Rosie Kight provides an overview of the government plans for financial support for employers.

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On 20 March 2020, amid grave concerns from businesses with cash-flow difficulties and reports of immediate lay-offs and redundancies resulting from Government measures to #flattenthecurve and control the spread of COVID-19, the Chancellor announced a range of temporary financial support for businesses.

Measures that relate to staff

Of those measures there are two which directly relate to staff

 

  • a Coronavirus Job Retention Scheme; and

 

  • a Statutory Sick Pay relief package for SMEs

Coronavirus Job Retention Scheme

 

Why is it needed?

 

Few employees have a contractual right to be provided with work.  However, those on zero hours contracts aside, in the main provided an employee is ready, willing and able to work, employers are not entitled to simply stop paying them if there is no work for them to do.  To do so would amount to:

 

  • a breach of contract (an implied term that an employer must continue to pay an employee in such circumstances); and

 

  • an unlawful deduction from wages;

 

and could result in a constructive dismissal were employees to resign in response to such actions or if for a sustained period a dismissal on the grounds of redundancy.  Employees with 2 or more years’ continuous service could also claim unfair dismissal.

 

A complicated statutory scheme dealing with lay off and short-time working already exists (Chapter 3 of Part XI of the Employment Right Act 1996), but is limited to cases where the employer already has a contractual right (whether express, implied or by way of incorporation) to withhold pay if there is no work.

 

Employers without this right who can no longer provide work to their workforce and cannot afford to pay them therefore face having to dismiss them, but this also costs money – notice pay and payment in respect of accrued but untaken holiday for all employees and a statutory redundancy payment for any employee with 2 or more years’ continuous service.

 

The aim of this scheme is to enable employers to retain their workforce during the pandemic even if they are unable to provide employees with work because their business has had to close temporarily.

 

Who is eligible?

 

All UK businesses are eligible for the scheme.  There is no limit on turnover or staff numbers.

 

However, one would expect that employers in the leisure and hospitality, non-essential retail and manufacturing sectors are most likely to be amongst the hardest hit by the Government closure measures (think gyms, hairdressers, pubs, restaurant chains, hotels, travel agents, airlines, bookshops, car-production plants).  Those workplaces where employees cannot realistically work from home.

 

What is the support?

 

HMRC will reimburse 80% of the wage costs of “furloughed workers”, up to a cap of £2,500 per month.

 

Presumably the figure of £2,500 is the gross figure, rather than earnings net of ordinary PAYE deductions, but this should become clear once legislation is passed.

 

It is not currently known how long HMRC will provide this reimbursement for, but it is envisaged to apply for 3 months from 1 March 2020 and thereafter may be extended if required.

 

What is a “furloughed worker”?

 

An uncommon term in employment law in England and Wales, but more prevalent in the United States, a “furlough” is a temporary period of absence due to special needs of a company or employer.  It may be due to economic conditions at the specific employer or in the economy as a whole.

 

A “furloughed worker” is therefore an individual who is absent from work in these circumstances.  The scheme does not cover a situation where an employee can do some, albeit limited, work from home for their employer (i.e. continue to work but on reduced hours).

 

It is also not yet clear whether the Government scheme intends to apply solely to employees or to the wider category of workers to which a range of basic employment rights apply (such as entitlement to the National Minimum Wage holiday pay under the Working Time Regulations and Statutory Sick Pay).

 

It seems that employers who need to take advantage of this scheme and in particular are unable to meet the payroll costs associated with the remaining 20% of salary which it may otherwise be responsible for, are going to need to consult with the affected employees and/or their recognised trade union, about the situation.  Employees’ whose salary is reduced as a consequence may be eligible for welfare support including universal credit.

 

How to apply for it?

 

We are told that HMRC are working urgently to set up a system for reimbursement as existing systems are not set up to facilitate these payments to employers.

 

Employers will need to:

 

  1. designate affected employees as ‘furloughed workers,’
  2. notify their employees of this change – this may require consultation (individual and/or collective) and agreement;
  3. submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC intend to provide further details on the information required)

 

Statutory sick pay relief package for SME’s

Why is it needed?

 

Up until the introduction of this measure, all businesses were required to pay Statutory Sick Pay (SSP) to employees off sick from the fourth day of their absence.  However, given the nature of COVID-19 it is envisaged that large swathes of the working population will contract the disease. In order to slow its spread, those presenting with the symptoms or who have a positive test result, along with their families and others who have come into close contact with positive COVID-19 test results, are required to self-isolate for a period of up to 14 days.

 

As such, the Chancellor announced that employees who are self-isolating as a result of COVID-19 will be entitled to receive SSP from day 1 of their absence and they will not be required to provide the usual GP fit note after 7 days absence.  Instead, if their employer requires evidence of the reasons for their absence, employees will be able to obtain an Isolation Note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website.

 

What is the support?

 

SME’s will be entitled to reclaim SSP paid for the sickness absence of eligible employees due to COVID-19 for a period of up to 2 weeks.

 

Who is eligible?

 

Employers which are UK-based and with fewer than 250 employees as at 28 February 2020.

 

The eligibility period for the rebate scheme will be from the day after the regulations on the extension of SSP to those staying at home comes into force.

 

The extension of SSP to cover absence from day 1 due being sick with COVID-19 will be back-dated to 13 March 2020.

 

How will it work?

 

A rebate scheme and repayment mechanism is being developed and legislation being brought forward to implement the scheme.

 

Employers will need to maintain records of staff absences and payments of SSP made, which they can then provide in order to reclaim their expenditure on SSP for up to 2 weeks.

 

 

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