Alternatives to the Coronavirus Job Retention Scheme

Alternatives to the Coronavirus Job Retention Scheme

The Government’s recently launched Coronavirus Job Retention Scheme has been described as an “unprecedented” step to help employers subsidise their staff’s wages.

Covering up to 80 per cent of an employee’s wage costs, capped at £2,500, the scheme is due to go live imminently – with the first payments being made by the end of April.

However, as the Government’s guidance makes clear the Scheme is only available where an employee is not working.

There may also be other reasons why employers and workers are either unable or unwilling to use the Scheme, so it is important that they consider alternative options.

Options available to businesses as an alternative to furloughing employees can be categorised as follows:

Seek agreement from affected staff to reduce pay/ hours/ take unpaid leave

  • Seek agreement to a temporary reduction in:
  • Salary
  • the number of days/hours that they work
  • Seek an agreement to a temporary period of unpaid leave.

In essence these are all fundamental changes to an employee’s terms and conditions of employment.

Such drastic changes to terms and conditions of employment will therefore need to be negotiated and agreed with the affected employees on a one to one basis. Any such agreement should be confirmed in writing by a letter of variation to their contract.

This could be negotiated on the basis that it’s an alternative to redundancy. With the Coronavirus job retention scheme now open to employers though this may not be as an attractive an argument for an employer to try to put forward.

Be warned also that trying to unilaterally impose such significant changes to terms and conditions risks those employees with over two years’ service resigning and bringing a claim for unfair dismissal exposing an employer to financial liability.

An award for unfair dismissal comprises of a basic award, calculated in the same way as statutory redundancy entitlement, together with compensation for loss of earnings of up to one year’s salary capped at a maximum of £88,519 from 6 April.

Unilaterally trying to change an employee’s terms and conditions also exposes an employer to claims of breach of contract and unlawful deduction of wages.

In circumstances where the employee will not agree to such a fundamental change to their working arrangements the alternative route available to an employer is to terminate the targeted employee’s existing contract on notice and offer them a new contract with the reduced contractual entitlements.

Be warned against this though, as it is a high-risk strategy that also exposes an employer to a claim of unfair dismissal in the case of those employees with over two years’ service where they are unwilling to accept the new contract.

Whilst the loss of earnings element of any award will be reduced, being made of the pay differential between the respective salaries, as the employee is under a duty to mitigate their losses, such a route still needs to be handled very carefully.

With regard to employees with less than two years’ service the position is more straightforward. These can be dealt with by terminating their current contract on notice and offering them a new one on the reduced terms without the risk of a claim for unfair dismissal.

That gives an employer more flexibility and agility in terms of this category of workers.

Temporary suspension or withdrawal of bonus schemes

This is another option that would potentially be worth exploring for employers to save costs.

It is worth noting that these performance related schemes cannot be claimed for under the Job Retention Scheme anyway, so even those using the Government’s help should consider withdrawing them.

Where the outline of performance related pay is included within an employee’s contract, you may need to seek a variation to these clauses.

Encourage staff to take annual leave

An employer could encourage staff to take annual leave if the business is struggling.

An employer ought to expressly reserve the right to ask staff to take holiday at a specific time in its contracts.

Under statutory rules the position is it is obliged to provide notice of at least twice the amount of time as the leave you want them to take.

Temporary layoff/ short term working

Employers can temporarily lay off staff, but unless they have specific layoff clauses in their contracts, employees need to be paid their full wages during this time.

Employers with layoff clauses in their contracts would only need to be paid the statutory guarantee pay – currently £29 a day for five days (limited to a maximum of £145 within any three-month period), increasing to £30 a day from 6 April.

The statutory right to temporarily lay off staff is only available if there is a contractual right in the contract of employment.

This is not a common clause seen written into contracts of employment (it may be in future!) so not a route available to many employers.

Offer unpaid sabbaticals

An employer could ask staff to take up the offer of an unpaid sabbatical of a couple of months. They would need to agree this.

Frankly though it’s not a very attractive option to put to staff given the Coronavirus Job Retention Scheme is now available.

Postponing new starters or withdrawing job offers

Regarding new joiners, employers may have to consider postponing their recruitment.

In terms of any job offers already made and accepted, any withdrawal may give rise to a claim of breach of contract to the extent of the relevant individual’s notice entitlement.

Making staff redundant

This should only be seen as a last resort for employers given the alternative options available as outlined above.

Redundancy in essence involves the loss of a job or at the very least a significant reduction in work.

In the event that an employer did decide they wanted to go down this route then good grounds would need to be established for making redundancies and proper procedures followed (involving giving waring of potential redundancy, followed by consultation and then notice) to avoid claims of unfair dismissal for staff with over two years’ salary.

Making staff redundant with over two years’ salary takes time – typically consultation would take at least a couple of weeks and then notice of up to 30 days needs to be given.

Employees with over two years’ service have an entitlement to statutory redundancy pay. This can be calculated by clicking here.

For staff with less than two years’ service they do not have unfair dismissal rights and can simply be terminated on notice. There is no entitlement to statutory redundancy entitlement.

The Coronavirus Job Retention Scheme is specifically intended to avoid businesses in every sector, including the law, going down this route.

Coronavirus (COVID-19) advice for employers and employees

Coronavirus (COVID-19) advice for employers and employees

Coronavirus (COVID-19) for employers and employees

The UK has significantly stepped up its response to Coronavirus.

This had a significant impact on the operations of employers and the lives of individual employees. 

To help you navigate the challenges posed by Coronavirus, whether you are an employer or employee, we have put together this short guide.

Follow Government advice

The Government’s official advice has the potential to change quickly, so to ensure that you are acting according to the latest advice from the Government, it is a good idea to visit the official guidance pages on gov.uk regularly.

Advice for individuals

Guidance for employers and businesses 

Sick pay for individuals in self-isolation

With the increased range of circumstances in which the Government advises that people should self-isolate, there is a greater chance that you will have to deal with self-isolation.

Statutory Sick Pay (SSP)

The legal provisions for those who self-isolate in accordance with public health guidance on Coronavirus to be considered incapable of work, for the purpose of claiming statutory sick pay came into effect on 13 March 2020. 

This definition is a person who is “isolating himself [or herself] from other people in such a manner as to prevent infection or contamination with Coronavirus disease, in accordance with guidance published by Public Health England, NHS National Services Scotland or Public Health Wales …. and [who] by reason of that isolation is unable to work”.

An employee will need a notice to self-isolate or a fit note from their GP or NHS 111 if they are following Public Health England advice to self-isolate.  

The Government has also confirmed that SSP will payable from the first day that an employee is absent from work to self-isolate.  

The Government has also committed to reimbursing businesses with less than 250 employees for the cost of SSP for the first 14 days of self-isolation.

Contractual Sick Pay

It may be necessary to pay additional sick pay in circumstances where this is provided for in a contract of employment, in the employee handbook, or even where it is usual practice to do so. 

If you are unsure as to what to do in specific circumstances, please contact a member of our team.

Pay for individuals you have required to self-isolate

There may be circumstances in which you consider that an employee should self-isolate, even where this is not in accordance with Government advice. In these circumstances, you would have to continue to pay them their basic salary as usual.

Coronavirus Job Retention Scheme

The Chancellor has announced a scheme to reimburse up to 80 per cent of the cost of the wages of ‘furloughed workers’ up to £2,500 per employee per month.

This scheme will initially run for three months from 1 March 2020 and will be backdated. The Scheme will be administered by HMRC and all UK businesses and charities will be eligible.

We have provided more details of this scheme on our COVID-19 Portal by clicking here.

Lay-offs owing to reduced work

It is possible that businesses, especially those in certain sectors, will see a reduced workload as a consequence of Coronavirus.

In these circumstances, and where allowed for in the contract of employment, employees can be laid off temporarily. 

Employees who are laid off must be paid a guarantee payment of up to £29 a day, for five days, in a three-month period up to a maximum of £145. 

After four weeks, employees may be able to request that they are made redundant. 

Use of holiday

Another option that employers might wish to use is to require employees to take annual leave.

Where an employer wishes to do this, they must provide notice of at least twice the length of leave they require the employee to take. A requirement for an employee to take a week’s leave would require two weeks’ notice.

IR35

Please note that the Government has, as part of its Coronavirus response, delayed the introduction of the off-payroll working rules (IR35) until April 2021 and so the responsibility will remain with individual contractors to determine their own tax status.

Additional steps

  • Provide guidance to employees, setting out your approach to Coronavirus.
  • Assess whether any of your employees belong to vulnerable groups and who may need special provisions or employees whose presence is crucial to the functioning of your organisation.
  • Check the steps that can be taken feasibly to reduce the risk to employees If they remain within your business premises.

For further specific advice on dealing with Coronavirus in your workplace, please contact us today.

 

The Government must act now to safeguard UK hospitality and leisure industry, says leading employment lawyer

The Government must act now to safeguard UK hospitality and leisure industry, says leading employment lawyer

As the coronavirus crisis continues to escalate, Julian Cox Head of Employment at iLaw, is calling on the Government to do more to help the embattled hospitality and leisure industry.

More and more restaurants, hotels and attractions are dealing with cashflow difficulties and potential closure as customers grow fearful of exposure to COVID-19, with bookings down considerably at this time of year.

With warnings that the UK may continue to see a slowdown until at least June this year, there are also concerns about the upcoming summer season, which is an important lifeline to so many communities across the country.

In response to this growing crisis, Julian is echoing the recommendations of UK Hospitality, which is calling for:

– Temporary staff redundancies where demand falls substantially with Universal Credit covering wage costs;

– A business rate holiday for all businesses regardless of size;

– All payments to HM Revenue & Customs (HMRC) suspended for three months; and

– Statutory Sick Pay payments to all hospitality businesses.

He said: “It is good that HMRC is already offering payment plans for VAT which falls due at the end of the month and offering improved time to pay, but that isn’t enough for this industry, which is badly affected.

“In these uncertain times, with the hospitality industry so exposed at the vanguard of the crises, we fully support UK Hospitality in their appeal to the Chancellor to do more and would call on Rishi Sunak to announce all payments, not just VAT but National Insurance contributions, ought to be suspended to ensure businesses in the sector survive and jobs are saved.”

Julian, who works with clients from a wide range of industries, including many that support the hospitality and leisure trade, has said he has been inundated with calls from employers regarding their options to reduce staff costs during these difficult times.

“No one wants to be losing staff members, but the reality of the situation is that for businesses to survive this situation they need to be at their fighting weight. Sadly, this may involve needing to cut employee numbers,” Julian added.

He said that businesses in the sector should start reviewing their current payroll to see which members of staff could be laid off with the least disruption.

Julian said that those with the shortest service at a company were most at risk, particularly those with under two years employment at a company, as the legislation makes it easier for them to be removed from their post, as no redundancy payment is usually required and they can be given less notice.

“Businesses need to be pragmatic and unfortunately, those employees with service under two years are most likely going to be the first to see their contract terminated, as employers may only need to give a short notice and may not be required to make redundancy payments,” Julian explained.

“Those who have more than two years’ experience are typically entitled to a redundancy payment, which will be larger the longer a person has worked at a company.”

Julian added that businesses also had the option reduce working hours for hourly paid staff.

Another option and one being employed by airlines is to put staff on holiday. He said: “An employer can require an employee to take holiday. However, they must give notice to the employee that must be a least twice as long as the holiday that is required to be taken. If they want an employee to take a one week holiday, they have to give them two weeks notice.”

If you would like employment advice regarding coronavirus, please speak to Julian Cox.

Chancellor’s Budget commits to sick pay refund for small business, but many still need better contingency plans

Chancellor’s Budget commits to sick pay refund for small business, but many still need better contingency plans

The Chancellor’s has announced that statutory sick pay (SSP) will be refunded to employers to help with the costs and disruption of coronavirus.

This is welcome news for many employers, according to London legal firm iLaw, but it warns that employers still must consider their staff contingencies for delivering continuity of business to customers.

During his speech, Rishi Sunak announced the cost incurred by businesses, who have someone off work for up to 14 days, will be refunded and that £2 billion will be allocated to help firms that lose income due to statutory sick pay.

This funding will be available to all firms that employ fewer than 250 staff members, meaning that the majority of the UK’s small and medium-sized businesses will be eligible.

Julian Cox, Head of Employment at iLaw, said: “Many employers may be breathing a sigh of relief following the Chancellor’s Budget today and it is good to see that the Government is taking a pragmatic approach by refunding the costs of SSP for staff for up to 14 days.

“This will hopefully allow most businesses to shoulder the cost better while relieving the pressure on employees to come to work when they may need to self-isolate.”

The latest move comes after the Government extended the period of SSP from the first day that a person reports an illness last week. SSP is to be paid by employers to all workers, including those working through an agency.

To be eligible for SSP a person has to be earning at least £118 a week and will be paid a minimum of £94.25 a week.

“While this measure should be welcomed it is worth noting that many large businesses will not benefit from this refund,” added Julian.

“Even those that do receive a refund are likely to see their business affected if they can’t offer continuity of service or supply to their customers.

“This is why they must have contingencies in place to ensure that their business can remain open and operational.”

Julian explained that this could include helping staff to work remotely from home or speaking with customers to make them aware of delays and focussing on essential work.

Leap year and the impact on employment

Leap year and the impact on employment

As the world gets ready to mark a leap year, it is worth considering the potential impact that it may have on pay and your holiday entitlement.

Typically, most people have 253 working weekday days each year, but the edition of the 29th February (despite it falling on the weekend), means that this average is now 254 working weekdays.

For most this will mean an additional day’s work with no reward, but for some, it could mean additional pay and more holiday time.

Salaried Workers

For most of those working full time on an annual salary, they will not receive any additional pay for their extra day of work, as it will have already been factored into your salary.

This is because monthly pay is calculated as a twelfth of an individual’s pay packet, regardless of the number of days in each month. Those working pro-rate part-time for an annual salary will also not receive any additional pay.

The only exception to this rule is if your contract has a specific clause about extra pay on leap years, in which case you receive pay for the additional day you work.

Those on a very low salary should check whether the additional day tips them below the national minimum wage, as they may need to notify their employer if this is the case, as they would otherwise be underpaying and could be subject to a fine.

Hourly/Weekly Paid Workers 

Those paid by the hour or by the day can be asked to work the extra time, but they must be paid for it.

Unfortunately, if you are paid on a weekly rate then you only get paid for each full week you complete, meaning the extra day won’t mean more pay.

Shift workers or those on a zero-hours contract who work an extra day should also get additional time towards their holiday accrual.

If you are unsure of the rules surrounding leap years and employment rights, why not speak to our team today.