Employers and Employees and COVID-19
EMPLOYERS AND EMPLOYEES
As you will all be aware the government has announced a series of measures to assist businesses and this has been covered in earlier notes. One of the measures is to assist businesses in paying staff who are furloughed, that is staff at home unable to work. The idea is to subsidise the payroll of businesses that would otherwise have to make staff redundant with a promise to pay 80% of the staff payroll up to £2,500 per month for 3 months and possibly longer if the crisis warrants. New information came out over night on Thursday to clarify what this meant and I have summarised the interesting points below I have also added the link below to HMRC’s website which is very well written and does explain the position.
The Chancellor’s statement and the initial information online referred to ‘workers’. The Guidance now only refers to ‘employees’ but makes clear that this includes those who are employed by an agency, as well as those on flexible and zero hours contracts. The Government has recently published the arrangements for the self employed – these will be covered in my next newsletter.
Employers will be expected to ensure that they keep information to show what they have done with individual employees and that they are genuinely furloughed. They should also be able to show that they could not afford to employ them if they had to continue to pay their full wages and the likely effect of the current lock-down would have been redundancy for those employees had it not been for the help.
PLEASE NOTE there is no way to make these claims at present the system has not been set up so I cannot tell you what it will look like but it is likely to be an online portal through which claims can be made by providing certain information once the portal is open the information required will be apparent but it is likely to be the usual information to show who the employer is who the employee is and what is being claimed.
There will be one claim per every 3 weeks at the time the employer runs the payroll if you have an employee made redundant recently because of COVID-19 you can rehire them and put them on the scheme.
You do not have to worry about the National Minimum wage legislation for the furloughed worker (not other workers) if the 80% is paid to the worker and not the top up and they slip below the National minimum wage level this will not cause the employer a problem. The employer does not have to pay the additional 20% not being paid by the government. However if you are not going to pay the 20% top up you should make sure the employee is aware and negotiations take place to obtain the employees approval – any contract changes need to be considered even if they are temporary. In addition to the 80% the government will pay the employer NIC’s and minimum statutory pension contributions.
PLEASE NOTE a furloughed worker cannot do any work or generate any income for the employer they can however continue to do training provided by the employer or paid by them.
WHAT TO DO TO INFORM YOUR EMPLOYEES
The Guidance states that employers should discuss with their staff and make any changes to the employment contract by agreement. Unfortunately this is not completely clear, but this is likely to be directed at the vast majority of employers who do not have contractual lay off clauses in their contracts of employment. If you have more then 20 employees you may be advised to consult collectively to save time and standardise the position for all the staff.
Staff off sick can be furloughed after they come off sick but continue to receive sick pay until then.
WHAT TO DO NOW
1. If you are carrying on as usual paying the same pay you will not have to do anything except implement point 2.
2. Get sorted out with a Furlough agreement – I will be looking at options for this and we will be organising one for our clients shortly and I will send a link with my next newsletter.
3. Look at your employment contracts – it is highly unlikely they will mention furloughed as this is an American concept but you could add a letter to set out what staff will be pad and what their new terms and conditions are. Remember it is important to get your staff on board with this we have had a couple of reports of staff getting employment lawyers involved already!
SOLE TRADER DIRECTORS
The most common question I am asked is I am a sole trade director can I claim 80% of my pay. There is a problem with this that stood out from the beginning how can a sole trader director prove that they are furloughed because it is ONLY furloughed workers who can get the relief. It may be obvious that you are furloughed because you cannot get to the offices of the contractor where you are doing your work but if you are at home doing your bookkeeping and sorting out invoices you are not furloughed. Using the JRS would mean having to furlough yourself; in effect shutting down operations completely.
As many sole trader directors are aware they are not usually paid via wages but often a combination of wages and dividends and the dividends are certainly not covered by the compensation legislation. So as pay is usually kept quite low the compensation will be, if it is paid, correspondingly a small part of the overall amount taken out of the company.
The government is aware of this and has stated that sole trader directors will not be included in the payments arrangements going to sole traders. The only comment I have seen re this is from HMRC: “If you’re a director of your own company and paid through PAYE you may be able to get support using the Job Retention Scheme.” At this moment in time the government position is unclear but I am expecting that sole trader directors will be able to use the JRS I am just not sure what level of proof of furlough will be required. As of now I would advise you to wait and see and if I have any news on this I will be writing another newsletter.
PAYE AND NI PAYMENTS OVERDUE?
HMRC has set up a dedicated COVID-19 helplines 0800 024 1222 or 0800 0159 559 to help those in need to discuss and agree a bespoke Time to Pay