Options for employers during the Coronavirus crisis
‘Furlough’ is the word on everybody’s lips at the moment, but it’s not the only option for employers as they navigate through the COVID-19 situation. Let’s find out more.
For some businesses, it’s hard to underestimate the effect the Coronavirus crisis has had. Many will have seen their people forced to stay at home, their demand decimated and their revenue cut off at source. The Government has, as a result, introduced legislative provisions to help employers to safeguard their business, but many will still be wondering what the best steps to take are, or whether there are any other options.
Most employers are choosing to ‘furlough’ their staff, taking advantage of the Government’s Coronavirus Job Retention Scheme.
In this article, we’ll outline the advantages of furloughing, as well as explaining the alternatives.
What is furloughing?
We’ll look at furloughing in more detail in future articles, but in brief, furloughing refers to the Government’s Coronavirus Job Retention Scheme. It aims to safeguard businesses by avoiding the need for immediate dismissals or redundancies while encouraging people to stay at home during the crisis.
Employers can furlough those staff who are on the PAYE scheme as at March 19th 2020. The reason for this is that the scheme will be run through HMRC, and they will have records of those staff who have paid tax through PAYE. The scheme allows for staff to remain at home while the government covers 80% of their wages, capped at £2,500 per month. Employers can choose to pay the remaining 20% themselves, but they do not have to.
Employers will be able to claim the money for wages back from HMRC, as well as some NI and pension contributions, using an online portal which should be up and running by 20 April. It’s hoped that the first payments will be made on 30 April, in time for the next staff payroll, which will be important to many businesses experiencing cash flow problems. The minimum period for furlough is 3 weeks, but claims can be backdated to 1 March. It’s also possible to rotate staff who are furloughed, so there is some flexibility in the process.
It is important, however, that when staff are furloughed that this is a significant change to their contract, and this has to be done by agreement, and in writing. The government has asked that all records of the agreements with staff are kept for 5 years so that they can be checked into the future, primarily as a means to look for any fraudulent claims that may have been made.
It’s a landmark gesture from the Government, which will hopefully significantly reduce redundancies as we lockdown through the crisis, by taking out at least some of the risk for businesses that continue to function.
Traditionally, there are other ways employers can use their staff while economic activity is low, and they may still be more appropriate for your business Here are four alternatives to furloughing.
1 – Lay-off and short-term working
An employer can lay-off members of staff by taking them off work, without pay, for one working day or more. This practice was widespread in the 1970s when demand was volatile, enabling employers to retain staff entirely on their terms, without making them redundant. Short-term working is similar, except the employer gives the employee a reduced workload, and reduced pay to match.
For both practices, there needs to be a specific clause in the employment contract to enable the employer to do this and, just like furlough, if there isn’t any clause it would have to be done by agreement.
In today’s reality, there is little point in laying-off or offering short-term work. The furlough system has superseded it.
2 – Redundancies
This is usually the first option that employers would take when there is a significant reduction in work, and therefore a reduced need for staff. However, the Furlough scheme is specifically designed to avoid making staff redundant right now. This means it’s possible to avoid costly redundancy packages; instead you can keep staff in your company and the Government will pay 80% of their wages. There is no doubt that many businesses will suffer and redundancies may be inevitable in the future, but if things do pick up you will be a in a position to carry on working quickly, without the need for the delay in rehiring of staff.
It’s a good indication of the purpose of the government scheme that they have said, if you made any employees redundant after March 19th as the crisis was unfolding, you are allowed to bring them back and furlough them.
3 – Reduced hours
It is possible to keep your staff working, but at reduced hours. How you do it depends on their employment contract. Some contracts allow for variable hours, which will make it more straightforward, but many will not, so you will need to consult on this.
The primary advantage of this, as opposed to furlough, is that staff can continue to work for your business. Furloughed staff are specifically not allowed to work for their employers, though they can do work for other organisations, and voluntary work.
4 – Carry on as normal
The final option is to carry on as you were before the Coronavirus crisis struck.
Before the lockdown, many companies would have been worried about what the effects would be. They may have taken steps, such as making redundancies, to reduce their risk. However, they have not now seen any adverse effects, or if they have, they were not as dire as predicted.
If you are fortunate enough to be able to operate your business at full capacity, with your staff working from home, it may be better to carry on as usual.
Find out more
There is a lot of information to take in at the moment, and every business is different.
If you have any questions about Employment Law during the COVID-19 crisis, it’s time to talk to Couchman Hanson.
We are currently offering you a free, 30-minute call with a Couchman Hanson employment lawyer, where you can get all your questions answered. It’s peace of mind during these uncertain times.
To find out more, call 01428 722189 or email enquiries@couchmanhanson.co.uk