As you may have read or seen on the news over the weekend, the Government has introduced the Coronavirus Job Retention Scheme which takes effect immediately. We have summarised the information available to us below:
What does ‘furlough leave’ mean?
Furlough leave is a term which already exists in US labour law and is where an employee is granted a leave of absence, in our case due to an inability for the employee’s company to provide work to them temporarily.
Which businesses are eligible?
All UK businesses are eligible regardless of size.
How does it work?
Employers can place employees on leave, meaning there is no requirement for the employees to perform work as well as presumably requiring employees not to attend the place of work. The Government will reimburse 80% of the wage cost of furloughed workers up to a cap of £2,500 per employee per month. Employers can, but are not obliged to, make up the 20% difference.
When does the scheme take effect from?
It can be retrospectively applied back to 1 March 2020 and is currently likely to remain in effect until 31 May 2020, although this may be extended depending on circumstances in the future. As the employer, you can implement furlough leave immediately.
Is employee’s consent required given, that they won’t be working and should the employer decide not to top up their salary after the Government contribution, resulting in a 20% pay cut?
Where possible, it is advised that you obtain the employee’s written consent to a variation of their contract which includes a 20% pay cut. Given the current situation, some employers may have no alternative to implement furlough leave which brings with it its inherent pay cut. This would naturally be a decision made by the employer and without consent from the employee. The business’ financial position may dictate this.
To encourage consent, employers might point out that the only other alternative is immediate redundancy. This is not a particularly comfortable position for employers to take (as it could result in a drawn out employment tribunal), it is arguably a “least worst case” scenario if it encourages the employee to accept furlough leave.
Could this lead to constructive dismissal claims?
In theory, yes. Ordinarily, a unilateral decision to reduce the worker’s pay, with a statement that entitlement to redundancy pay being delayed is likely to be a constructive dismissal. The Government’s furlough leave guidance makes it clear that employees remain subject to existing employment law and that implementation of furlough leave may be “subject to negotiation”. However, to claim constructive dismissal the employee has to resign. The question would be why would they resign and have no job, as opposed to a job that they can return to when allowed, and 80% of salary? Furthermore, the prospect of a return to full salary in the not too distant future will hopefully be enough to persuade them not to pursue this route.
Who makes the decision to go on furlough leave?
You as the employer.
You are also able to specify which employees the leave is applied to, although this in itself opens up the debate around office politics!
If Kirkwood Wilson completes your payroll for you, then you must ensure you make us aware of the employees that you have furloughed.
Can a furloughed employee perform some work from home?
At this point in time, we expect this to be no. We hope to have some clearer guidance around this over the coming days.
When can the business expect the reimbursement from the Government?
It’s expected the reimbursement portal will be live over the next 2 to 3 weeks, at which time applications will be possible. There is expected to be some delay before the reimbursement takes place, so our best guess at this time is by the end of April.
If the employer pays the 80% of salary and do not top up the additional 20%, could employees have a claim against you for unlawful deductions from wages? And will higher paid employees have a claim for salary in excess of £2,500 per month?
Without a furlough agreement then they could. However, given the load the crisis is likely to have on the tribunal system, any claim made is likely to take several months to conclude. It is hoped that in the meantime employees can recognise the moral imperative of accepting furlough leave given the current crisis.
Does a lack of work not just mean the employee is redundant?
Under normal circumstances a reduction in work or closure of workplace would result in redundancy. Right now, this an unattractive route for most employers to take. Presumably most employers want staff to stay on with reduced pay so that they are in post when things start to return to normality. This appears a more appealing option for the employer than redundancy now and then having to incur the cost of recruiting new staff when business picks up again.
What if the employee insists they are redundant?
This answer is similar to the answer given above in relation to constructive dismissal. The employee would have to leave, bring an employment tribunal claim and then wait for a year for that claim to come to a full hearing. In the meantime they would have no job and no income, making it a very unattractive option for employees. The consideration is that taking a pay cut even for highly paid employees, for a few months is likely to be a better outcome for most employees.
What if we made an employee redundant in March? Can we reinstate them and furlough them?
This would appear to be ok. If payment of notice and statutory redundancy pay was made, the employer would presumably ask for this to be reimbursed before entering into the furlough leave arrangement.
If redundancy is the only option, do the normal rules apply?
Yes. Redundancy is only payable after 24 months’ service. Over this length of service could in theory result in legal action and a claim for unfair dismissal. It is therefore recommended that you use 23 months’ service as the barometer as notice periods can mean employees cross over the 2 years’ service line.
The information contained above is designed to give you some guidance with the new scheme. The information is generic and advice should be taken in each individual situation. There are a great number of uncertainties and assumptions included in the information above and Kirkwood Wilson accepts no liability for any action or inaction taken on the basis of this information alone.
It is important to remember that we, as your accountant, still have many questions surrounding the implementation of the help provided by the Government. As the information is released, we will digest it and pass it on to you, our client. At this time we suggest you keep an eye out for an email from ourselves, as well as following us on Facebook.
Please also remember that during this difficult time, we are here for you. Our staff are on hand to answer any of your questions, so please get in touch if anything is worrying you.
We’re in this together.
Caroline & Dan.
Support for businesses who are paying sick pay to employees:
The Government will pass legislation shortly to allow small and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:
- This refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
- 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
- Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
- Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note
- 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.
We will keep you fully informed of any developments on when the repayment mechanism for employers will be finalised.
Support for businesses that pay business rates
There will be a business rates retail holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year.
Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.
A £25,000 grant will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.
Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority. Guidance for local authorities on the business rates holiday will be published by 20 March.
We will keep you informed of these developments as and when they happen.
Support for businesses that pay little or no business rates
Additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBRR) has been announced by the Government. This will provide a one-off grant of £10,000 to businesses currently eligible for SBRR or rural rate relief, to help meet their ongoing business costs.
If your business is eligible for SBRR or rural rate relief, you will be contacted by your local authority – you do not need to apply.
Funding for the scheme will be provided to local authorities by government in early April. Guidance for local authorities on the scheme will be provided shortly.
We will keep you up to date with the latest news.
Support for businesses through the Coronavirus Business Interruption Loan Scheme
A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch shortly to support businesses to access bank lending and overdrafts. The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value. Businesses can access the first 6 months of that finance interest free, as government will cover the first 6 months of interest payments.
Details will follow and we will support any clients needing assistance with obtaining this support.
Support for businesses paying tax
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time to Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559. Please contact us if you want our help here.
As a family run business, the wellbeing of our team is and has always been paramount. Our priority right now is making sure that our team is safe and that we are able to service all of our clients as usual. We understand that this is an incredibly worrying time, and we wanted to take a moment to assure you that we’re following the advice from the Government, NHS, and World Health Organisation. Things are changing daily and weekly, but here’s a little update from us.
All our team were sent home on Tuesday and by lunchtime, we were all set up and working from home.
We are still taking phone calls as usual on our normal number and Ashleigh is able to help just the same as before. The only difference at the moment is that the person that you need to speak to will have to call you back, which in most cases is straight away.
Emails and all cloud based platforms are still working as usual, so, for example, the process of uploading receipts to ReceiptBank is working as usual. Access to Xero has not been affected.
It has been fantastic to see just how resilient we are as a team, and it really does prove that as a team we can do anything. We are using Teams and WhatsApp to communicate throughout the day as well as scheduling in a team catch up every few days by video call.
Updates to help your business
At the moment, we are all obviously waiting for the daily 5pm update from the Government, and we will try to get something out as soon as possible when the updates are there. These will be posted on our social channels (Facebook, Instagram, and LinkedIn). In between updates, we are of course here to help guide you through this minefield as best as we can.
We hope that whilst everyone’s situation is different, you are able to focus on the positives, no matter how small, and know that this will come to an end.
Stay safe and look after one another.
Caroline and Dan.
Given the recent situation that has arisen with COVID-19, we thought it would be helpful to provide you with our first update following the Government announcements.
SSP is now payable to employees from day one if they are absent due to COVID-19 (rather than having to wait and not receive anything for the first 3 days).
Companies can reclaim SSP payments to employees for up to 2 weeks. Anything over that period will NOT be reclaimable.
We aren’t 100% sure, but we anticipate that the SSP will be reclaimed by receiving a credit against your PAYE liabilities. i.e. there’ll be no immediate cash flow benefit to this, but when PAYE becomes due, the amount payable for a period will be reduced by the SSP refund credited to your PAYE account.
Business Interruption Loans
These loans are available up to £5m.
These will be available from next week and businesses must apply through their high street bank and not with the government.
The loan is basically guaranteed by the government up to 80%. We think this will only be available to businesses who will be able to prove they have experienced losses. You won’t just be able to get a nice cheap loan!
The loan has no interest on it for the first 6 months.
All businesses in the retail, hospitality, and leisure sector will pay NO business rates for the next 12 months. The local authority will deal with these over the next few weeks.
This grant is available to ANY business that is eligible for small business rate relief (SBRR). The business must either rent a property or own a property.
You are eligible for SBRR if your business:
– Has a property with a rateable value of less than £15,000
– And, your business has only one property (generally – in some instances it is still available if you have more than one property).
You can find the business’ rateable value on the rates statement for the year.
Anyone eligible for this grant needs to do nothing; the local authority will contact the business in the coming weeks.
This grant is available for businesses in the retail, hospitality, and leisure sectors that have rateable values between £15,001 and £51,000.
Guidance on this will be provided to the local authority by 20th March so clients can contact them from next week for more information.
Information is coming out daily and we will share as much as possible as soon as it becomes available. Until then, if you have any questions, please don’t hesitate to contact us and we will help wherever we can.
Xero is described as ‘Beautiful Accounting Software’ and we couldn’t agree more with this statement. One of the most beautiful aspects of Xero is that whether your office is your living room, a dedicated office space, or your local coffee shop, Xero Accounting Software really is the right fit for everyone.
Eighteen months ago Kirkwood Wilson had one client using Xero software to produce management information. At that time, most of our clients used a server based bookkeeping system and we were fed up of the unreliability of the software, the need to back up and restore data and the constant updating of software. So, how have we gone from one client using Xero to becoming a Xero Gold Partner?