Further advice relating to Coronavirus - Issue 2 - 15/04/2020

Employment Law Considerations - Farleys solicitors 

Now

Furlough leave is an entirely new concept to employment law in the UK and a measure to help businesses ride out the economic crisis created by Covid-19.

The Coronavirus Job Retention Scheme recently introduced by the Government to provide grants to cover 80% of the salary of PAYE employees who would otherwise have been laid off during this current Covid-19 crisis.

A key feature of the scheme is that employees must be on “furlough leave” rather than dismissed by the employer.  To be classed as on furlough leave, an employee must be sent home by an employer, it is not available where the employee continues to work.  

To claim under the scheme employers will therefore need to firstly select and designate affected employees as ‘furloughed workers’, and notify employees of this change. Changing the status of an employee remains subject to existing employment law and, depending on the employment contract, may be subject to consent and/or negotiation.

Our quick summary of steps an employer must take:

1. Decide which employees to designate as furloughed – there must be a fair and lawful selection to avoid the risk of grievances and/or employment claims.
2. Notify those employees of the intended change – be careful with the wording!
3. Consider whether it’s necessary to consult with employees - either individually or in some cases employee representatives or trade.
4. Agree the change with the furloughed employees - most employment contracts will not permit an employer to reduce an employees pay, provide them with no work and change their employment status without agreement and consultation.   Consent may therefore be required which is something we can assist with.
5. Confirm the employees’ new status in writing - employers may wish to put employees on furlough leave for an initial period, subject to review.
6. Submit information to HMRC - about the employees that have been furloughed and their earnings through the new online portal via HMRC.
7. Ensure that the employees do not carry out any further work  - whilst they are furloughed.

Down the track

From an employer perspective, after this crisis there is likely to be an increased focus and desire to update contracts of employment and staff handbooks.  This may include introducing express furlough leave clauses and related conditions to pay and benefits, such as holiday accrual and pay.  They may also wish to introduce or beef up express lay off, short time working clauses, by way of example.

Home working policies are also an option to consider in terms of making them more robust.

Unfortunately we are seeing redundancies as a result of coronavirus and we expect these to continue, alongside restructuring.   For any advice on employment matters in relation to COVID-19, if you encounter difficulties with employees in this situation, please contact us on 0845 287 0939 or email us.

A payroll perspective on furloughing Staff - Pierce Payroll team

The job retention scheme is currently open for a three month period from 1st March 2020, however may be extended. Its aim is to provide support to employers that would have to make redundancies because their operations have been affected by coronavirus.

A section on our website explains more about the scheme https://www.pierce.co.uk/solutions/employee-employer-payment-support

Let`s get to those burning questions:

Can apprentices be furloughed?

Yes, however whilst furloughed apprentices or those on training contracts must be paid the current minimum wage when studying.

Employees you can claim for:

Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Employees must have been on your payroll on or before 19 March 2020. They will accept those employees who were added onto March payroll but with a February start date.

When on furlough, an employee cannot carry out any work for your business.  This includes providing services or generating revenue.

Company Directors

Company directors are eligible to be furloughed. This should be agreed by the board, noted in the company records and communicated in writing to the director(s) concerned.

Whilst furloughed directors can carry out duties to fulfil their statutory obligation. They should not do work to generate commercial revenue or provide services to or on behalf of their company.

Directors can claim back on their salary submitted through PAYE only, not the dividends

If you made employees redundant or they stopped working for you after 28 February

You can re-employ them, put them on furlough and claim for their wages through the scheme.

What can you claim?

You can apply for 80% of an employee`s usual gross pay, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage (3%).

 You can choose to top up your employees pay to 100% however there is no obligation to do so under the scheme.

How to calculate an employee`s pay? 

Claim for the 80% of the employee’s salary, as in their last pay period prior to 19 March 2020.

If, based on previous guidance, you have calculated your claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) you can choose to still use this calculation for your first claim.

For employees whose wages varies you are able to claim:

• Same period earnings from the previous year
• Average earnings for the 2019/20 tax year
   

If an employee has not been employed for a full year use the number of periods they have been employed for. 

Regular payment such as overtime, compulsory commission, Fees, bonuses and non-cash payments can be included in the gross calculation.

Those discretionary bonus payments should be excluded

Salary Exchange

Salary exchange payments should not be used when calculating an employee`s regular pay.

HMRC have agreed that COVID-19 counts as a life event that could warrant changes to sacrifice arrangements if needed.

Working for a different employer

Employees are permitted to work for another employer whilst you have placed them on furlough.

For any employer that takes on a new employee, the new employer should ensure they complete the starter form correctly and apply the correct tax code  

Can you rotate staff? 

Yes, however the minimum furlough period is three weeks.

This scheme along with other grants will count towards state aid and as such this may affect your position on claiming the employment allowance.

Should you have any further questions or would like assistance in the calculation of furlough pay and in fact making a claim please contact Lisa Kennery on 01254 688100 or email l.kennery@pierce.co.uk

Business Continuity - Pareto Financial Planners 

Business Continuity Planning (BCP) is the process a company undergoes for mitigating disruption to business continuity from potential threats such as natural disasters or cyber-attacks.

Business protection refers to strategies for mitigating disruption to business continuity; this could be the death or incapacity of a key employee or the foreclosure of a business loan; succession planning with regards to the redistribution of shares following the death or incapacity of a partner or director. Business protection is essential for businesses of all sizes but it could be argued that smaller firms are typically more vulnerable because they tend to rely on the skills and input of a relatively small number of key individuals, in some cases just one individual.

Many businesses across the UK take the time to consider employment benefits, pension schemes or staff protection, yet the business itself can be overlooked. However, the business is pivotal to everything else. Typically the focus of a business will be on other types of insurance to ensure business continuity; Public liability insurance, professional indemnity insurance, credit risk insurance or cyber insurance. These are all needed, and with many a requirement to trade, whereas business protection is an optional extra many ignore or are simply not aware of.  According to the Department for Business, Energy & Industrial Strategy, in 2018 there were 5.5 million private sector businesses in the UK, with 95.6% having fewer than 10 employees.

Ensuring continuity of the business covers many different solutions, not forgetting of course Business Wills and Business Lasting Power of Attorneys (LPAs). We are available to discuss any questions you may have, be this for either existing or new clients, and discuss the range of business protection strategies a business can consider.