EMPLOYMENT LAW BLOG: Understanding latest Covid-19 Employment Measures
On 17 March 2020, Rishi Sunak, the Chancellor of the Exchequer, announced a package of £330bn in loan guarantees and a £20bn fiscal intervention including further business rate relief for companies to support businesses affected by the novel coronavirus COVID-19.
These measures, which are unprecedented in scale, includes, for example:
- the new temporary Coronavirus Business Interruption Loan Scheme (“CBILS”) for small and medium-sized businesses;
- a Coronavirus Job Retention Scheme;
- deferring VAT and Income Tax payments;
- a Statutory Sick Pay relief package for SMEs;
- 100% rates relief for retail, hospitality and leisure businesses in Scotland;
- small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief;
- grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £18,000 and £51,000;
- the HMRC Time To Pay Scheme.
The following is to provide guidance if you are not aware of the above schemes or are not sure how to access them.
IF YOU ARE A BUSINESS:
Coronavirus Business Interruption Loan Scheme (CBILS)
The CBILS will initially support up to £1.2bn of lending by associated lenders, including Lloyds Bank, HSBC, Barclays, Santander, etc. A list of the lenders associated with the CBILS is found here:
It will replace the existing Enterprise Finance Guarantee (”EFG”) to facilitate the provision of business finance to smaller businesses affected by COVID-19. It will do this by, for example:
- providing a participating lender with a government-backed 80% guarantee against outstanding facility balances of between £1,000 and £5m (the original announcement suggested a maximum value of £1.2m); and
- covering the first 12 months of interest payments on CBILS-backed loans (the original announcement suggested a maximum interest free term of 6 months).
CBILS supports a wide range of business finance facilities, including:
- Term loans
- Asset finance
- Invoice finance
As stated above, it provides businesses with a loan that is 80% guaranteed by the government. As with any loan the long-term liability remains 100% with the borrower. To access this finance go to the partners directly via link above.
Statutory Sick Pay Relief
HM Government intends to bring forward legislation to allow SMEs and employers to reclaim Statutory Sick Pay paid for absences related to COVID-19, whether actual sickness absence or absence related to self-isolating in accordance with HM Government’s guidance.
The Statutory Sick Pay refund will cover up to 2 weeks’ Statutory Sick Pay per eligible employee who has been off work because of COVID-19. The framework for the scheme will be as follows:
- employers will be able to reclaim expenditure for any employee who has claimed Statutory Sick Pay under the new eligibility criteria as a result of COVID-19;
- employers will be required to maintain records of staff absences and payments of Statutory Sick Pay, but employees will not need to provide a GP fit note; and
- the eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to those staying at home comes into force
Please note that the relief applies to Statutory Sick Pay only and not to contractual sick pay. Accordingly, some companies may therefore be liable for the full contractual Statutory Sick Pay without being able to access the relief prior to the employee moving onto Statutory Sick Pay when the relief would be expected to be available.
Only employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020
Tax breaks - deferring VAT & Income Tax Payments
The VAT deferral applies to the next quarter of VAT payments due from 20 March to 30 June 2020. It applies to ALL businesses across the UK and will occur automatically. Businesses will have until 5 April 2021 to pay the deferred VAT.
You do not need to inform HMRC if you wish to defer payment. You can opt in to the deferral simply by not making VAT payments due in this period. If you pay by Direct Debit you should cancel this with your bank. You should do so in sufficient time so that HMRC does not attempt to automatically collect on receipt of their VAT return.
Should you wish, you can continue to make payments as normal during the deferral period. HMRC will also continue to pay repayment claims as normal. You must continue to submit VAT returns as normal.
Similarly, any income tax self-assessment due to be paid by 31 July 2020 has been deferred until 31 January 2021. This is also automatic. It is likely that if your main source of income is already taxed through employment and other smaller sources of income are declared then you may have already paid your tax bill in January. In which case this will not affect you.
In both cases no interest or penalties will be applied.
Business Rates Relief
In Scotland, there will be a 100% rates relief offered for retail, hospitality and leisure industries.
All other non-domestic properties will get a 1.6% rates relief. This relief effectively reverses the change in poundage for 2020-21. You do not need to apply for this relief and it will be applied to your bill by your local council. These reliefs will apply from 1 April 2020 until 31 March 2021.
Small Business Grant Funding of £10,000
In Scotland, a one-off grant of £10,000 will also be available to small businesses who currently also get Small Business Bonus Scheme Relief or Rural Relief. This is to be applied for through the council – at time of writing the process for dealing with these applications across local authorities across Scotland was still being implemented.
Retail, hospitality and leisure grant funding of £25,000
In Scotland, retail, hospitality and leisure businesses with a rateable value between £18,000 and up to and including £51,000 will be able to apply for a one-off grant of £25,000. The funding will not be accessible, however, until April 2020.
You can only apply for one grant even if you own multiple properties.
HMRC Time to Pay Scheme
A scale up of HMRC’s existing scheme, this scheme allows businesses and those that are self-employed to defer tax payments.
If you are self-employed and concerned about paying your tax due to coronavirus then you can apply for a ‘Time to Pay Arrangement’. It is not automatic, it requires you to contact HMS and agree a pre-arranged time period to pay what you already owe. HMRC have promised to waive late payment penalties and interest where a business experiences administrative difficulty contacting HMRC or paying taxes due to coronavirus. Call the HMRC’s dedicated helpline: 0800 0159 559 to arrange payment period.
Other loan facilities
RBS (now NatWest Group) are allowing their business customers not to pay back the capital on loans for the next three months. This means any RBS business customer will only be required to pay the interest during this time.
IF YOU ARE AN EMPLOYER:
Further to the business measures mentioned above, a crucial addition to the proposals announced was the provision of funding towards employee’s wages. Details of this scheme and how you access it are below:
Coronavirus Job Retention Scheme
The introduction of a new Coronavirus Job Retention Scheme (furlough leave) was announced by the government on 20 March 2020.
Under the scheme, all UK employers, regardless of size or sector, can claim a grant from HMRC to cover 80% of the wages costs of employees who are not working but kept on the payroll ("furloughed"), of up to £2,500 a calendar month for each employee. Employers can choose to top up the remaining 20% if they wish/can.
The scheme will be backdated to 1 March 2020, be open for at least three months and will be extended if necessary. HMRC are urgently working to set up the new system of reimbursement, but the government hopes that the first grants should be before the end of April at the latest.
Who is eligible?
The scheme applies to all employees on PAYE, including those on zero-hours contracts. By definition this includes those also technically classified as ‘workers’ on payroll.
It applies regardless of the size of the business they work for and it also includes charities and non-profit organisations.
It is intended to apply only to employers who cannot cover staff costs due to Covid-19. The option is also there for employers to make up the remaining 20% so that the employees are still earning the same as they were prior to pandemic. It is not clear currently whether HMRC will require evidence that the employer cannot meet staff costs.
How to ‘Furlough’ your employees
To furlough an employee means that you are in essence changing their status from employee to furloughed worker. This means that employment rules apply and there are procedures which need to be followed in order to do this correctly. To legally furlough workers employers will need to:
- Decide which employees to designate as furloughed employees.
- Notify those employees of the intended change.
- Consider whether you need to consult with employee representatives or trade unions. For example, where the employer intends to vary the contracts of 20 or more employees, and it intends to dismiss employees who do not consent to the change in their terms, for the purposes of section 188of TULRCA, those employees will be classed as dismissed by reason of redundancy.
- The employer will therefore have a duty to inform and consult appropriate employee representatives and to notify the Secretary of State for Business Energy and Industrial Strategy (BEIS) if the process affects more than 20 employees – this is done using a Form HR1 available here https://www.gov.uk/government/publications/redundancy-payments-form-hr1-advance-notification-of-redundancies.
- Agree the change with the furloughed employees - if the employees do not agree to be furloughed then employers can dismiss by reason of redundancy if the redundancy definitions are met and the proper process is followed.
- Confirm the employee’s new status in writing – employers may wish to put employees on furlough leave for an initial period subject to review, as it is difficult in the current climate to put a timeframe on required leave.
- Finally, the information regarding agreed furlough of employees and their earnings should then be submitted to HMRC through their new online portal.
IF YOU ARE AN EMPLOYEE:
Coronavirus Job Retention Scheme
As above, your employer maybe in a position to put you onto ‘furloughed leave’ for a number of weeks rather than make you redundant/lay you off.
Alternatives to Redundancy
By law your employer should offer you alternatives to redundancy before furthering a redundancy process. The risk that is run by not offering alternative employment is that if the employee is made redundant they may have grounds to claim that this redundancy amounted to an unfair dismissal.
Alternatives which may be offered include:
- Unpaid leave (which is now covered by the Coronavirus Job Retention Scheme);
- Notice to take paid holiday – whilst this doesn’t save employers money in the short term it ensures they have a full work force when the business reopens;
- Reduced hours - Employees' working hours are usually viewed as a condition of the employment arrangements which can only be changed with an employee's agreement. However, if the business still has some work to do and the alternative is redundancy it is worth considering this option in the short term.
- Salary Sacrifices – again has to be by agreement but if offered is something to consider.
Whilst none of these options are ideal, they are worth considering if the short-term loss potentially means long term gain e.g. you have a job when we come out of the other side of this.
Statutory Sick Pay
You are now entitled to SSP from day 1. It will also be applied retrospectively from March 13th however the legislation to authorise this has yet to be passed. It includes time off for self-isolation.
IF YOU ARE SELF-EMPLOYED
As of 26 March 2020 further amendments were made to the emergency Coronavirus business measures to help make provisions for self-employed across the UK.
The Self-Employed Income Support Scheme announced by Chancellor Rishi Sunak, offers support to self-employed people who have been adversely affected by the Coronavirus. It is a taxable grant worth 80% of your average monthly profits over the last three years, up to a limit of £2,500 per month. The scheme is open to anyone with income based on profits up to £50,000 per annum as per the last tax year where the majority of their earnings comes from being self-employed.
If you became self-employed since 31st January 2019 you will not be eligible for this scheme.
The scheme requires tax filings for the tax year 2018/19 as submitted at the end of January 2019. Your monthly grant income will then be based on an average of your profits recorded in that last tax assessment.
If you are eligible HMRC will contact you directly.
The scheme is proposed to run for at least three months and will be reviewed after this time. It has been suggested however that self-employed people eligible for this scheme may not receive any money until the end of June.
If the following apply you may wish to consider if you are eligible for Universal Credit:
- You’re on a low income or out of work
- You’re 18 or over (with some exceptions for 16 and 17 year olds – please check gov.uk website for details)
- You’re under State Pension age (or your partner is)
- You and your partner have £16,000 or less of savings between you
- You live in the UK
If you live with your partner then their income and savings are considered even if they are not eligible for Universal Credit.
If you are concerned about your finances between now and then please also consider some of the options in the ‘If you are worried about your finances in general’ section.
IF YOU ARE WORRIED ABOUT YOUR FINANCES IN GENERAL
Some ways to make your money go further in the coming months if you have been affected by any of the above.
Take a mortgage holiday – three-month payment holidays are now available if you are concerned about cash flow in the coming month or months. Contact your lender ASAP to get this arranged. It will at least buy you some time.
Take a rent holiday – as with mortgages landlords are being asked to allow their tenants a three-month rent holiday if they are struggling due to the Covid-19 outbreak. This may be added on to your lease at the end but it allows you a window of time to get to grips with the financial burdens you may now be facing. Landlords will NOT be able to evict tenants during this period.
Take a loan payment holiday – many banks are offering a break on loan payments. It is lender dependent but if you have a bank loan contact your lender immediately to discuss this option.
Credit Cards Repayment holiday – different credit card companies are offering different things so contact yours directly or look at their websites. Many are also offering repayment holidays
Overdraft Facilities – almost all providers had or are moving to 40% APR. This is unlikely to change. IF you are in the position of having an overdraft you need to seriously consider all of the above options in order to try and get out of it. Banks may on an individual basis decide to offer a ‘buffer’ but it is unlikely to be significant.
Written by Victoria Silver
Victoria will shortly qualify as a trainee solicitor. She works (now from home in Stornoway) for Rooney Nimmo - an Edinburgh based law firm who offer corporate and employment services. If you are a company looking to for advice on significant restructuring they offer a comprehensive service and will be happy to advise.
d law firm who offer corporate and employment services. If you are a company looking to for advice on significant restructuring they offer a comprehensive service and will be happy to advise.