COVID-19: Lockdown Life Support for Business

An Employment Lawyer's Perspective

07 May 2020

Author: Orlagh O'Neill
Practice Area: COVID-19 , Employment Law

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When an American client asked me in Mid-March, how they could “furlough” their employees here, I had to Google the term. Almost two months later, the government’s CJRS Scheme is familiar to everyone with nearly a quarter of workers here in the UK furloughed at a cost to the Treasury of almost £8 billion.

The scheme, with its relatively low threshold for accessing grants, has been a lifeline to companies across Northern Ireland and avoided redundancies on a massive scale.

Initial anxiety about eligibility was quickly addressed by HMRC guidance that CJRS is designed to help employers whose “operations have been severely affected by coronavirus to retain their employees and protect the UK economy however all employers are eligible to claim under the Scheme and the Government recognises different businesses will face different impacts from coronavirus.”

Key features of the scheme include:

  • An HMRC grant covering 80% of employees’ usual monthly wage costs - up to £2,500 per month, associated employer National Insurance contributions and 3% employer pension contributions on the furloughed wage.
  • Employers are not required to top up wages.
  • Eligibility covers employees, casual workers and those on zero-hours - provided they were employed on or before 19th March 2020 and notified to HMRC on the employers RTI payroll by this date.
  • Employers must obtain agreement from their employees to both being furloughed and to any reduction of their salary to within the scheme limits.

The first weeks following the scheme’s announcement were frenetic as employers and employment lawyers grappled with a completely new process with no precedents or templates to guide them. The confusion was not helped by the fact that HMRC issued five iterations of guidance in the first four weeks. The aim of the guidance was to plug some of the gaps in the scheme but rather unhelpfully, previously clarifications were often completely reversed which only served to heighten anxiety and confusion at an already uncertain time for employers and employees. As I write this article, the fifth and latest guidance from HMRC issued on 17th April 2020 has clarified a number of important issues such as annual leave being able to taken during furlough and that the rate of pay for this leave should be normal pay and not the reduced furlough rate. However, questions remain about the employer’s statutory right to require employees to take annual leave during furlough. A key issue for employers concerned that employees will return from furlough when the scheme ends on 30th June 2020 with large amounts of unused annual leave and may seek to take this at a time when everyone is needed at work in order to meet the operational needs of the business in its recovery phase.

In addition, inconsistency continues between HMRC Guidance and UK Treasury guidelines on the matter of employee consent to furlough terms - a real concern for employers seeking to avoid the risks of legal claims for unlawful deduction from wages/breach of contract when the scheme ends. This will be a time when businesses need to be focussing on long term recovery and stability rather than the distraction and costs of employment litigation.

Whilst the process of furloughing staff and applying to HMRC for grant payments have been herculean tasks in the midst of a global human health and economic crisis, they were only two items on a long employer to-do list. Many businesses have been able to furlough only part of their workforce. The scheme does not permit a reduced working week or partial furloughing; and some businesses have needed to retain key skills such as finance, HR and IT - but working from home (WFH). Other businesses have furloughed only a few workers with the majority of staff moving to a WFH model.

Ensuring maximum WFH in the initial phase of lockdown was a massive logistical challenge. Moving into the fourth week of lockdown, it is becoming clear that returning to normal working is likely to take many weeks if not months. The speed and extent of change to almost every working day has been immensely stressful and this is becoming more evident. Add to this the isolation of lockdown and associated restrictions; the need to care for and home-school children; the demands of a partner’s home working and the ongoing concern for vulnerable family members.

Employers continue to have a duty of care towards all employees whether they are in work or WFH. This means taking all reasonable steps to ensure their health, safety and wellbeing. Some practical tips include: providing advice to staff on completing basic workstation assessments; setting realistic targets for work and ensuring staff don’t feel they have to work longer hours at home to prove themselves; encouraging good and effective communication both at team and individual levels; encouraging switch-off for breaks; introducing engagement / wellbeing initiatives that encourage healthy eating and exercise; and keeping staff informed on changes affecting work and colleagues.

Essentially, as everyone awaits the Government’s lockdown exit strategy, employers must continue to do virtually, as many of the things they did in the normal workplace. The aim? During lockdown: to reduce the chances of staff feeling disengaged and forgotten. After lockdown: to help smooth the transition back to work for employees, the resumption of normal working life and the refocusing of businesses on long-term recovery.

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