Covd-19 update from weekend (updated 30.3.20)

Job Retention Scheme

Both the CBI and the ICAEW have held conversations with senior HMRC executives, following the guidance issued late Thursday.

Our quick summary of the scheme:

• Businesses can claim 80% of employees’ wage who is placed on furlough, up to a maximum of £2,500 per month, plus (this was a new bit) the associated Employer NICS and minimum auto-enrolment employer pension contributions on that wage. That in effect raises the cap that the government has set to a maximum ceiling of £2,804 of total grant per employee;
• The government have also clarified the interaction between the scheme and the National Living and Minimum Wage. The guidance from government is that furloughed workers are to be paid 80%, or a maximum of £2,500 of their salary (based on their usual working hours), even if this would be below the National Living or Minimum Wage.
• Those in full-time and part-time contracts qualify, as do employees on agency contracts or on flexible contracts, including those on zero-hour contracts.

Our summary of the issued guidance

Company directors qualifying for the job retention scheme?

One of the unclear areas of the scheme is whether it applied to company directors or not.

HMRC confirmed following questions raised yesterday, that a director can be furloughed provided they were paid via PAYE as at 28 February 2020.  The only work the director is allowed to undertake while on furlough, is their statutory director duties, no revenue generation or provision of services.  A quick guide to director duties can be found at Companies House 

One of the most important director duties, is to act in a way that the director considers in good faith, would be most likely to promote the success of the company for the benefit of its shareholders.

If you are the shareholders and directors are one in the same, and you have seen your business close, or likely to in due course and there is no way to generate any sales, or provide your services, then you would be eligible for the furlough scheme.  We would advise that you document/minute the point and follow the same procedures required for employees.

It may be possible as the business slows down the number of directors required to operate the business can be reduced, for example in a husband and wife shareholder/director business, one director can take furlough, while the other continues to operate and run the business.

If your company has other shareholders, other than directors, for example you have received investment, then you should consult with those shareholders regarding any action you take, again documenting the decision.

We would emphasis the point that the scheme is for those who are unable to work and would be laid off as a result of the COVID-19 crisis, which must apply to the director’s situation.  HMRC have advised there will be stringent anti-fraud measures and we have previously warned all business owners that in the event of abuse of the system, they should expect heavy penalties and public naming and shaming for what will be, after all, a form of illegal profiteering from a national crisis.

Please note that you are only able to claim 80% of your salary, HMRC have confirmed that dividends will not be treated as salary.

In these difficulty times, you need to weigh up the opportunity to take furlough and claim the grant, versus endeavouring to operate during the crisis.

Duration of furlough

As an employee can’t work while on furlough, many have asked for what period can an employee be put on furlough.  The current scheme is for three months (although this could be extended, the decision to extend will be taken May). 

The minimum period you can furlough an employee is three weeks after which they can come back to work if you require or you can extend. After coming back to work if the business situation changes,  you can place them on furlough again, provided the scheme is still operational.

We continue to emphasise the point that you need to discuss the situation with employees, and you will need to make changes to their employment contract by agreement.  It is unlikely there is anything in their current contract of employment to cover this new concept, however clearly employees who otherwise face the option of no pay if you did lay them off are likely to agree.  However, you don’t want a clever employment lawyer coming back after the crisis, with an action for not dealing with the matter correctly. 

We strongly recommend you take legal advice before seeking consent.

You are allowed under the scheme to select some employees to furlough but not others, but you will need to ensure that you use a fair selection process, and we would advise documenting the process, as the Government has flagged that equality and discrimination laws would apply in the usual way.

Here is an example of a letter notifying an employee of furlough leave, a letter is a requirement of the scheme – letter template HERE

Business help with emergencies & Covid-19

Make no question about it, these are extremely testing times. In virtually all of our lifetimes, there has never been a worldwide pandemic or emergency that is so far-reaching. Bill Gates did a TED Talk in 2014 about the potential of a worldwide decease bring us to our knees. This has proven to be somewhat accurate. The concerning thing is that in terms of the current death rate figures of less than 5%, this could be so much worse. Yet, here we are with broken economies all around the world and businesses that have literally been frozen overnight.

Support for Small Businesses

We have already shared a lot of information on our Facebook page regarding the current state of affairs when it comes to support from the government. As I type this, the most recent being the self-employed assistance and also confirmation that directors are included with the Job Retention Scheme.

Business Continuity Planning

We have gone to great lengths to help our clients and even others around the UK when it comes to making sure your business can do everything it can to survive the current meteor shower we are living through. The video below will hopefully provide you with something to take away and implement personally or for your business today.

Checklist for your Business Continuity Plan

Even if you do not watch the video (I admit it is a bit long!). Please at least access our business planning checklist from the link below and take action for yourself, your family, your team and your business TODAY.

DOWNLOAD YOUR ACTION PLAN NOW