Covid-19: an employer’s charter

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As the government sails the country’s ship through unchartered waters, businesses are tentatively sailing their boats behind wondering what they should do if their boats start leaking water or eventually sink.

Businesses are already facing uncertain times, with clients and customers being advised, or forced, to change their buying habits. This has had a dramatic impact on the aviation industry, to name but one sector, and all those businesses that are directly and indirectly connected to that sector.

Employers are looking at alternative ways of working, with home working at the top of the list. Some employers have taken the decision to move all employees to home working. Other employers don’t have this luxury and are taking or considering taking more drastic measures to keep their businesses solvent.

Yesterday, the government announced that it was closing schools from 20 March 2020, which has put more pressure on businesses, with some employers forced to make difficult decisions over those employees with childcare responsibilities.

There has been much guidance provided on what employees should be doing if they have or might have the coronavirus, and the steps they and their employers should take. The government has thankfully stepped in to provide a helping hand by extending statutory sick pay to a “day 1” entitlement.

We are also aware that the government has a Covid-19 “war chest” of £39 billion to tackle the impact of coronavirus and will give a £500 million hardship fund to local authorities to help those who cannot work. The government is also setting up a Coronavirus Business Interruption Loan Scheme (CBILS) and a dedicated HMRC helpline for those who need a deferral period on their tax liabilities for SMEs affected by Covid-19.

Capability and productivity

Unfortunately, for some employers it is too late, and they will be forced to close with resulting job losses. Other employers are treading water and must make difficult decisions to protect their businesses in the short, medium and long-term, irrespective of the package of measures available, which includes:

  • a statutory sick pay relief package for SMEs
  • a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
  • small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
  • grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
  • the CBILS offering loans of up to £5 million for SMEs through the British Business Bank
  • a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
  • the HMRC Time To Pay Scheme.

Saving the business

Possibly measures for employers to take to manage the impact of the coronavirus on their businesses include:

Lay-offs and short-time working

In the absence of any statutory provision or government guidance to the contrary, where a business closes on an intermittent or temporary basis for a period of time, this would effectively be a redundancy situation as the requirement to perform work of a particular kind has diminished (section 139 of the Employment Rights Act 1996).  Employers are under an obligation to avoid redundancies where possible.  To that end, lay-offs and short time working is a useful way of handling temporary work shortages without having to resort to redundancy.  However, employers can only lawfully take this action to avoid potential unlawful deductions from wages claims (section 13 of the Employment Rights Act 1996) or breach of contract claims, where employees agree to being laid off or kept on short-time working, or it there are provisions in their employment contracts.  In the absence of a contractual provision, employers will need to consult with their employees to seek their agreement on short-term work and lay-offs.  If there is no agreement, then redundancy may be the only option.  Even if employees agree to being laid off or short time working, they can still claim a statutory redundancy payment by giving notice to the employer (section 148 of the Employment Rights Act 1996).

Employees are entitled to guaranteed pay during lay off or short time working (section 28 of the Employment Rights Act 1996). The maximum amount is £29 a day for 5 days (i.e. a maximum of £145) in any 3-month period.  If an employee usually earns less than £29 a day, they will get paid their normal daily rate.  If an employee, works part-time their entitlement is worked out proportionally.

Compulsory holiday

As an aside, employers can stipulate when employees take their holiday (regulation 15 of the Working Time Regulations 1998).  Therefore, employers could use this as a method of paying employees for time off, knowing that they will not need to pay them at a later date should the employees’ employment end by reason of redundancy or otherwise.

School closures

Employees have the right to a reasonable amount of unpaid time off work because (amongst other reasons) of the unexpected disruption or termination of arrangements for the care of a dependant (section 57A of the Employment Rights Act 1996). This statutory provision may apply where employees have children and they need to arrange childcare because their child’s school is closed, or to arrange care for a dependant if they’re sick or need to go into isolation.  However, the statutory regime does not apply to planned time off to care for dependants, as school closures are now known, it may only apply to the first couple of days of a school closure, whilst longer-term childcare arrangements are put in place. Also, the statutory right is to a “reasonable” amount of time off only, so it may not extend to a 14-day self-isolation period, or longer period of school closure.

Eligible employees can take unpaid parental leave of up to 4 weeks in a rolling 12-month period (regulation 13 of the Maternity and Parental Leave (etc) Regulations 1999).

Benefits

Employers can seek by agreement a freeze on contractual benefits. There is no obligation for an employee to agree to this but if the alternative is lay-off or short time working this may be acceptable to employees. If a benefit is discretionary then this would be something that an employer could cease on a temporary basis with no notice.

Pension

You cannot advise an employee to opt-out of auto-enrolment pension. But in these unprecedented times you can advise them of the stock market crash and the impact on pensions and that for personal reasons an employee may wish to opt-out of auto-enrolment for the time being. Therefore, employers would save costs in not having to make employer’s pension contributions.

The material contained in this blog is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken

Speak to our specialist employment solicitors

It is a difficult time for businesses and individuals alike. If you have concerns about your business or your obligations and responsibilities as an employer at this time, we can advise you. Do not hesitate to contact our employment team on 03456 381381,or email employment@ibblaw.co.uk