There is a lot of confusion regarding the rights and status of employees and the self-employed in relation to employment changes as a result of the impact of coronavirus (COVID-19). While this is understandable, and new information is being released on an almost daily basis, one thing remains constant. Employees and employers remain subject to employment law. To help cut through some of the uncertainty, Redundancy Aid has put together a quick guide to some of the key points.
The guide will be particularly useful for employees who want to talk to their employers about how to manage changes in employment. In our discussions with businesses, we’ve already discovered that many are not clear about what help is available, and this may influence the decisions they make about their workers. When employees approach their employers with knowledge about the provisions, they often find that it helps them to reach a solution that works for everyone. The coronavirus outbreak is a crisis for everyone. Working together now will give everyone the best chance for a positive outcome in the long-term, for employees this could help your company avoid having to make redundancies or becoming insolvent.
The Two-Year Rule
When we talk about being ‘subject to employment law’ it’s worth remembering that employees have to work continuously for 2 years before acquiring full employment rights. There are some circumstances when you can, as an employee, make a claim for unfair dismissal within the first 2 years of employment. However, this is only true in a limited number of situations, in general you need to have met the two-year rule.
1. The position for employees
If you were or are working for an employer at the start of the coronavirus pandemic there are a number of situations you may now find yourself in.
- You are still working ‘normally’
If you are an NHS worker, or work in any of the other roles designated as ‘essential’ you will still be working in your normal job. In these cases your employer should be ensuring that you have the appropriate Personal Protective Equipment (PPE) available, and that social distancing measures are being followed. Alternatively you may now be working from home.
- Your job has been ‘furloughed’
If the company you work for has been forced to close, or business has been drastically reduced, your job may have been furloughed, that is you are still employed but are no longer required to go to work. See below for full details about furloughing.
- You have been made redundant
If you have been made redundant, whether or not this is as a direct result of coronavirus, your employer is still required to follow the usual redundancy process. The coronavirus pandemic is not an excuse for companies to ignore current employment law. Full details of the redundancy process can be found here.
- You have been laid off
When an employer lays an employee off, they tell them to remain at home on unpaid leave. Alternatively, they may put an employee on short-time working, i.e. reduce their hours. However, this can’t happen unless your contract allows it or if there is clear evidence that this has been common practice in the organisation you work for. Your employer may also ask you to agree a change in your contract to allow laying off. Laying off is sometimes done to try and avoid making redundancies. If you have been laid off or asked to agree to being laid off it’s worth having a conversation with your employer around furloughing your job. Your job can be furloughed even if you have already agreed to be laid off (see below).
- A new job has fallen through because of the impact of coronavirus
This is the position that many seasonal workers now find themselves in. If you were expecting to start a job and that employment is now not going ahead you will have little protection. To be eligible to have your job furloughed you will need to have been on the company’s payroll by 28 February 2020. In addition, as a new worker you are not protected under the two-year rule.
- Your contract has been terminated and you have worked for your employer for less than 2 years
As an employee with less than 2 years service, your employment rights are not protected in the same way as employees who have worked for the same employer for more than 2 years. It may then be easier for your employer to terminate your contract. However, if you were on the company’s payroll on 28 February 2020, talk to your employer about the possibility of being put on furlough.
2. Options for employees & employers
The government has introduced a number of measures to support employers and their employees
The Coronavirus Job Retention Scheme & furloughing
You’ll have heard a lot of furloughing since the launch of the Coronavirus Job Retention Scheme. This is a temporary scheme, designed to help any business that operates a PAYE payroll scheme. Under the scheme employees are placed on ‘furlough’ – with the government covering 80% of their wages through a grant paid to the employer.
- What is furloughing?
With furloughing your job is essentially put on hold. You are still employed, and you still retain your rights as an employee, but you will not carry out any work for your employer. Once the situation improves, your job can be restarted and your normal works resumes.
- Can anyone be furloughed?
In order to be eligible to be put on furlough, you must have been on your employer’s payroll on 28 February 2020. Your employer needs to be a UK employer with a UK bank account. It doesn’t matter what type of contract you were on. Employees on zero-hours or temporary contracts are eligible for furloughing.
- Excellent! So I can apply to the scheme to be furloughed?
No. Employees cannot apply to the Coronavirus Job Retention Scheme, applications are made by employers. However, you can talk to your employer about being put on furlough. No employee can be put on furlough without having agreed it with their employer as being put on furlough requires a change to your contract. Once you have reached an agreement, your employer will write to you to confirm you have been furloughed. You employer has to write to you in order to claim.
- How will my employer decide who to put on furlough?
For some companies the decision will be relatively straightforward, in essence they will seek to put on furlough those employees who work in areas where there is little or no work to do. Other companies may want to put on furlough only a proportion of staff who basically carry out the same roles, for example because demand for their goods and services has declined but not ceased completely. Whatever the situation for the employer, it is recommended that they can demonstrate that they have used a fair and reasonable process to come to the decision of who to furlough. It is envisaged that for most this will involve initially asking for volunteers.
- How long can I be put on furlough for?
The minimum period you can be put on furlough for is 3 weeks. At the moment the maximum time you can be furloughed for is 3 months. This will be reviewed.
- So, I’ll only get 80% of my pay
Possibly. The grant your employer receives will cover 80% of the wages of any furloughed employee, up to a maximum of £2,500 pcm. However, there is nothing preventing employers from paying employees in full. In fact, many larger employees have already committed to do this.
- I’m sick or self-isolating due to coronavirus. Can I be furloughed?
No. anyone who is off sick or self-isolating should be paid statutory sick pay (SSP), or enhanced sick pay provided by the employer. However once your period of sickness or self-isolation ends, you can be furloughed.
- I’m ‘shielding’ as advised by Public Health England, can I be furloughed?
Yes. Any employee who is shielding due to pre-existing health conditions can be placed on furlough.
- I was made redundant after 28 February 2020, can I be furloughed?
Yes. For example, some people had their employment terminated after 28 February but before the Coronavirus Job Retention Scheme was announced as employers thought they would not be able to keep them on the payroll. Whatever the reason for your company making redundancies, if you were on the payroll on 28th February, it’s worth approaching your former employer and see if they will re-hire you and place you on furlough instead. This includes if you left a job voluntarily after the 28th February, but would now like to be reinstated.
- If I’m put on furlough, can I do any work for my employer?
No. If you are put on furlough you can’t engage in any activity that either makes money or provides services for your employer. You are allowed to take part in volunteer work or training during this time. If you are required to complete training during the furlough period, you must be paid at least the NLW/NMW – even if this takes you over 80% of your wage.
- I’ve been furloughed. Can I get another job?
As a furloughed employee you are still under contract to your current employer. If you did decide to look for another job, maybe to cover a shortfall in your earnings, you would need to talk to your current employer to ensure that you would not be in breach of contract. Bear in mind that if you have asked to be put on furlough because, for example, you have caring responsibilities, your employer may wonder how you have time to take another job.
- I have 2 jobs. Can I be put on furlough by only 1 employer?
Yes. If you already work for more than 1 employer, then presumably there are no restrictions within either of your employment contracts that prevent this. In a case like this, you can be put on furlough by 1 employer, and continue to work for the other.
- Can I refuse to be furloughed?
You can refuse to be furloughed; however this may place you at risk of your employment being terminated, or of redundancy.
3. What else is available to help employers?
In addition to the Coronavirus Job Retention Scheme, the government has introduced a series of other measures designed to help protect business from the economic impact of the outbreak.
Whether you are an employer or an employee, understanding what assistance is out there can help all parties to make an informed decision about how to approach proposed changes in employment contracts.
- Business rates holiday
A 12 months business rate holiday is available to eligible businesses for the year 2020/2021. Eligible businesses include all businesses in the retail, leisure and hospitality sectors, as well as childcare providers where premises are ‘wholly or mainly’ used for the provision of the Early Years Foundation Stage. There is no rateable value limit on this relief. (As rates are a devolved matter this scheme applies to England only. Although the devolved governments have introduced similar schemes)
- Small Business Grant Fund
Small businesses that are in receipt of small business rate relief (SBRR), rural rate relief (RRR) or tapered relief will be eligible for a one-off grant of £10,000 to help meet ongoing business costs. (As rates are a devolved matter this scheme applies to England only.)
- Retail, Hospitality and Leisure Grant
In addition to a business rates holiday, retail, hospitality and leisure businesses with a property with a rateable value of less than £51,000 may also be eligible for a cash grant. The amount of the grant is set at £10,000 for businesses with a property with a rateable value of up to £15,000, while those with a property with a rateable value of over £15,000 but under £51,000 will be eligible for a grant of £25,000. Responsibility for the payment of these grants rests with Local Authorities. (As rates are a devolved matter this scheme applies to England only.)
- Help with paying Statutory Sick Pay (SSP)
Small- and medium-sized enterprises (SMEs) will be able to claim a refund for up to 2 weeks SSP per eligible employee. The employee needs to have been absent because of coronavirus. For the purposes of this support, an SME is defined as a company that has fewer than 250 employees on their payroll on 28 February 2020.
- Deferral of VAT payments
Any UK VAT registered business that has a VAT payment due between 20 March 2020 and 30 June 2020 has the option to defer payment until a later date. You still need to submit your VAT returns, but you do not need to tell HMRC you are deferring payment. You must pay any deferred VAT by 31 March 2021. You can of course pay the VAT due as normal.
- Deferral of Self-Assessment payments
If you are due to pay a self-assessment payment on account by 31 July 2020, you will have the option to defer this payment until January 2021. You do not have to apply for this scheme. If you prefer to pay the amount due by 31 July, you can go ahead and do so.
- Coronavirus Business Interruption Loan Scheme
SMEs will also be eligible to apply for loans under the Coronavirus Business Interruption Loan Scheme. These loans are available through 40 accredited lenders including the major banks. The loan scheme is open to any SME with a turnover of up to £45 million per year. Loans are designed to address cashflow issues, and, as with all loans, the borrower will remain liable for full repayment.
4. Redundancy during the coronavirus epidemic
The expectation is that the longer the coronavirus epidemic, and the restrictions around it, last, the more companies will begin to struggle financially. We are already seeing companies going into administration, although some of these had problems that pre-date the current crisis. As more companies are affected, some may start to look at making redundancies in order to weather the storm.
We can’t restate this too often, but companies must follow the usual redundancy process. The role or roles of any employee threatened with redundancy must not exist after the redundancy process has been completed, i.e. your employer cannot just rehire someone into the same role shortly after you have been made redundant.
The process for selecting those to be made redundant should be fair and reasonable. While you can be made redundant when you are furloughed, the fact that your job has been furloughed should not in itself be the reason that you have been selected.
Your employer should engage in a consultation exercise in line with number of redundancies the company is intending to make. Collective consultation is only required if your company is making 20 or more redundancies but some companies engage in a consultation anyway, as this reduces the risk of being accused of unfair dismissal.
What if the company I work with goes into administration or liquidation?
If the company you work for goes into administration or goes into liquidation then they are unlikely to be able to follow the usual consultation and selection processes, however this doesn’t mean that there will be no help available to you.
The main difference between administration and liquidation is that if a company goes into administration then efforts will be made to avoid the company becoming insolvent by repaying debts. With liquidation, company assets are sole and then the company is dissolved. Company administration may ultimately end up in liquidation.
When a company goes into administration, the administrators will take over control of the business to see if it can be rescued. In these circumstances, your company may well continue trading, and you should continue to get paid. In general, if you are employed by the administrator for more than two weeks then your employment rights have been adopted. If the business is sold on these rights may be transferred at the same time. This is known as Transfer of Undertakings (Protection of Employment) or TUPE.
If you are made redundant you should still receive the rate of redundancy pay stipulated in your contract, for most employees this is the statutory rate of redundancy. You must have been working for your employer for at least 2 years in order to qualify for redundancy pay.
If the company you worked for is insolvent and the funds are not available to pay your redundancy pay, you can claim this from the Insolvency Office. This can be claimed online.
5. Help & support for the self-employed during the coronavirus (COVID-19) outbreak
The type of support available to you if you are self-employed is dependent on how you have structured your self-employment. The position for sole traders and partners appears to be more straightforward than for those who operate their self-employment via a limited company. However, as with all of the support available, the position is constantly shifting and there is a lack of clarity in some areas.
Sole traders & partners
The primary mechanism for providing support to sole traders and members of partnerships is through the coronavirus (COVID-19) Self-employment Income Support Scheme (SEISS).
If you are self employed, or a member of a partnership, you can claim a taxable grant worth 80% of your trading profits. The grant is capped at £2,500 per month and at the moment is available for a period of 3 months, although this may be extended on review.
The application process should be up and running by June 2020. HMRC will contact you if you are eligible to apply for the grant, together with details of how to do so online. You don’t need to do anything until then.
Eligibility to apply
You will be eligible to apply for the grant if you fulfil the following criteria.
- You have submitted your 2018-19 Self Assessment tax return. This should have been submitted by 31 January 2020, however if you submit this by 23 April 2020 you will still be considered for a grant.
- You traded in the 2019-20 tax year
- You were still trading when you apply, or you would still have been trading if it wasn’t for
the impact of coronavirus
- You have lost trading/partnership trading profits as a result of coronavirus
You also need to fulfil at least one of the following sets of conditions
- Your trading profits/ partnership trading profits were less than £50,000 in the 2018-19 tax year and constituted more than half of your total taxable income
- You had average trading profits/ partnership trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and those profits constituted more than half of your total taxable income
Amount of the grant
The taxable grant you receive will be 80% of the average profits from the tax years in 2016-17, 2017-18, and 2018-19 (where applicable).
HMRCS will add together the total trading profit for these 3 tax years (where applicable) divide by 3 (where applicable) then calculate the monthly amount from this figure.
As a reminder, you can receive a maximum of £2,500 per month.
If you are a director of your own limited company and you are paid via PAYE then you will not be considered as self-employed for the purposes of the SEISS. However, you may be eligible for support through the Coronavirus Job Retention Scheme.
In order to take advantage of this scheme you will essentially have to furlough yourself. A
conditioning of furloughing an employee is that the employee does not carry out any work that either makes money or provides services for the employer. As a company director this may present you with particular challenges. These conditions seem to imply that you will not be able to, for example, set up work for when coronavirus restrictions are lifted as this would constitute providing a service. While the treasury has clarified that directors will be able to carry out their statutory directorial duties, the conditions attached to furloughing may mean that company directors who are being paid via PAYE will have to decide whether furlough to themselves, and effectively reduce trading to zero, or continue to work and hope they can find enough work to see them through the epidemic. However, this is such a grey area that the exact position may well not become clear if or when the regulations for company directors are tested in court.
Company directors, along with other self-employed people, may however be able to take advantage of a number of other government schemes – already covered in the options for employers. These include:
- Deferral of Self-Assessment payments
- Coronavirus Business Interruption Loan Scheme
- Small Business Grant Fund
- Deferral of VAT payments