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Workforce Flexibility and Government Incentives in times of Covid-19 - United Kingdom

Short-term State Aid

Covid-19 Questionnaire

Are there any regulations in place providing an employer with possibility for flexible workforce planning such as part-time work/temporary leave which are triggered in a situation similar to a pandemic outbreak as Covid-19?

No

No.

Whilst there are no regulations in place regarding workforce planning, there are options for employers to consider around this issue:

  • Consulting with employees and trade unions or other representative bodies to try to agree a temporary reduction in pay and benefits for the duration of the crisis. Under normal circumstances, employees and their representatives would be unlikely to agree to such measures. However, an employer may be able to offer an incentive to reach agreement (such as guaranteed minimum pay or a one off payment) or, if the alternative is closure and/or job losses, there may be an appetite from employees/their representatives to reach an agreement.
  • Considering lay-off/short-term working, if the employer has the contractual right to take that approach. Laying off employees means that the employer provides employees with no work (and no pay) for a period while retaining them as employees; short-time working means providing employees with less work (and less pay) for a period while retaining them as employees. If the employer does not have the contractual right to lay-off then it may either take the risk in doing so in breach of contract or try to obtain consent to do so. Lay-off may need to be considered where there is a downturn in work due to the effect of Covid-19 on suppliers and customers meaning that fewer employees are required on a temporary basis and/or a temporary closure of the workplace due to insufficient employees being able to work. Short-time working may need to be considered where there is a downturn in work due to the effect of Covid-19 on suppliers and customers meaning that the business does not need all employees to work their contracted hours. Employees who are already unable to work, for example due to sickness or medically advised self-isolation, cannot be laid-off.
  • Seek volunteers to take unpaid leave.
  • Give notice to workers to take holiday. Employers are entitled to give notice to workers to take statutory annual leave, provided there is no contrary contractual right.

Are there any governmental programs if a company needs to close totally or partially for a certain time period?

The UK government has announced several measures to help employers who are struggling with the economic consequences of Covid-19 including:

a Coronavirus Job Retention Scheme (CJRS) where all employers, regardless of size or sector, can claim a grant from HMRC to cover 80% of the wages of employees who are not working but kept on the payroll, up to £2,500 a calendar month for each employee plus any employer national insurance and pension contributions. From 1 August 2020 the scheme will be amended to cover part-time working but the grant will be tapered and employers will be asked to cover a percentage of the costs. The scheme will close at the end of October 2020;

deferring VAT payments;

a Statutory Sick Pay relief package for small and medium sized businesses (SMEs);

business rates holiday for all retail, hospitality, leisure and nursery 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;

a Bounce Back Loan Scheme to help small and medium sized businesses to borrow between £2,000 and £50,000;

the Coronavirus Business Interruption Loan Scheme (CBILS) offering loans of up to £5 million for SMEs through the British Business Bank;

the Coronavirus Large Business Interruption Loan Scheme (CLBILS) offering loans of up to £200 million for companies with turnover of over £45 million;

Covid-19 Corporate Financing Facility (CCFF) to help support liquidity among larger firms, helping them bridge Covid-19 disruption to their cash flows through loans;

the HMRC Time To Pay Scheme.

If state aid and/or other extra-ordinary governmental support is available, please describe the necessary prerequisites to qualify for such state aid.

The necessary prerequisites are:

The CJRS is open to all UK employers that had created and started a PAYE payroll scheme on 19 March 2020. The CJRS will be closed to new entrants from 30 June 2020;

All UK VAT registered businesses that have a VAT payment due between 20 March 2020 and 30 June 2020 have the option to

  • defer the payment until a later date; or
  • pay the VAT due as normal.

The statutory sick pay relief is available to UK based employers with fewer than 250 employees as at 28 February 2020;

The business rates holiday is available to businesses in England in the retail, hospitality and/or leisure sector. Properties that will benefit from the relief will be occupied properties that are wholly or mainly being used

  • as shops, restaurants, cafes, drinking establishments, cinemas and live music venues;
  • for assembly and leisure; or
  • for hospitality, as hotels, guest & boarding premises or self-catering accommodation;

The eligibility criteria for the cash grants for the retail, hospitality and leisure sectors are the same as for the rates holiday but the business also has to have a rateable value of under £51,000;

The eligibility criteria for nurseries for the business rates holiday are:

  • the business is based in England;
  • The properties that will benefit from the relief will be hereditaments occupied by providers on Ofsted’s Early Years Register or wholly or mainly used for the provision of the Early Years Foundation Stage;

To qualify for the small business grant funding the business must be based in England, occupy property and be receiving small business rate relief or rural rate relief as of 11 March 2020;To be eligible for the Bounce Back Loan Scheme must be UK based and established by 1 March 2020, adversely impacted by Covid-19 and not using other government loan schemes;

To be eligible for the CBILS the business must be

  • UK-based in its business activity;
  • have an annual turnover of no more than £45 million;
  • have a borrowing proposal which the lender would consider viable, were it not for the current pandemic; and
  • self-certify that it has been adversely impacted by Covid-19;

The eligibility criteria for the CLBILS is largely the same as the CBILS;The CCFF is available to companies who make a "material contribution to the UK economy" and meet the criteria set out on the Bank of England’s website;

The Time to Pay scheme is available to all businesses that have outstanding tax liabilities.

If state aid and/or other extra-ordinary governmental support is available, please describe the application procedure for such state aid (e.g. how and when is the application filed with the government etcetera; what shall such application include).

The application procedure varies depending on the support that is being sought. To obtain a grant under the CJRS an employer will have to submit information to HMRC about furloughed employees and their earnings, through an online portal. Employers have until 31 July 2020 to make a claim in respect of the period to 30 June 2020. To make a claim, employers will need:

its UK bank account number and sort code;

its employer PAYE scheme reference number;

the number of employees being furloughed;

each employee’s National Insurance number;

each employee’s payroll or employee number (optional);

the start date and end date of the claim;

the full amount to be claimed including employer National Insurance contributions and employer minimum pension contributions;

its phone number;

a contact name.

Employers also need to provide either:its name (or the employer’s name if an agent is applying on the employer's behalf);

its Corporation Tax unique taxpayer reference;

its company registration number.

Please note that the COVID-19 scenario is constantly changing and that this information is current as of 12 June 2020. This publication should not be regarded as offering a complete explanation of the legal matters referred to and is subject to changes in the law and other applicable rules.