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Confused about the Coronavirus Job Retention Scheme or what being on Furlough means?

By Kate Palmer, Associate Director of Advisory at Peninsula

@Kate1Palmer @peninsula_uk shares some advice on the #Coronavirus Job Retention Scheme and what being on #Furlough means.

Recently, Chancellor Rishi Sunak announced a package of support to help employers survive the coronavirus lockdown and continue to pay their staff. The Chancellor said any employer in the UK would be eligible for the coronavirus job retention scheme and that Government grants will cover 80% of the salary of furloughed workers up to a total of £2,500 a month.

But what does it mean to be furloughed? Kate Palmer, Associate Director of Advisory at global employment law consultancy, Peninsula, explains below.

What is the Coronavirus Job Retention Scheme?

The Government has announced its plans for financial assistance to help employers retain employees during the coronavirus outbreak, although offering no work, and avoid lay-offs. It is called the Job Retention Scheme. Under the scheme, employers place their employees on ‘furlough’ This isn’t a term we use in UK employment law, and it seems to originate in the USA. It essentially means putting employees on a temporary leave of absence where they do no work, but they are retained on company books to be brought back in when needed.

The guidance sets out that organisations will need to designate which of their workforce will be furloughed employees and then submit that information to HMRC, along with each employee’s earnings.

Information will be able to be submitted through an online portal. Employers who furlough staff will be able to obtain a grant from the Government to cover 80% of furloughed employees’ wages, to a maximum of £2,500 per employee per month. Chancellor Rishi Sunak has stated he hopes the first grants will be paid by the end of April 2020, and they will be backdated to 1 March 2020. The scheme is initially intended to run for three months but may be extended.

Who is covered by the Coronavirus Job Retention Scheme?

All businesses can access the scheme, whether the virus has severely impacted the company or not. This is true regardless of the size of the business and the sector it operates within. Workers must have been on the organisation’s PAYE from at least 28 February 2020 to benefit from the grant. However, all workers in this position are eligible, including those on zero-hour or temporary contracts.  Workers who were made redundant prior after 28 February can be re-employed and placed on furlough instead. The grant will still cover their wages for this period.

What is the process for furloughing?

The guidance states that the ability to furlough an employee depends on their contract. It is not likely that employee contracts will include a specific right to use furlough. However, contracts may contain a right to lay off employees on no pay already so are expected to make the discussions around furlough a little smoother.

In any case, even when there is a right to lay off, it is still advisable to gain the employee’s agreement to furlough to avoid any confusion in the future. When faced with potential redundancies, a period of leave with 80% pay may seem an attractive option to employees. If an employer has already taken the step to utilise lay off, they can get in touch with those employees and agree to change their current status from lay off to furlough. They still wouldn’t be provided with any work, but their pay arrangements would be changed from nothing, or the payment of statutory guarantee pay, to 80% wages.

Workers should not undertake any work for the organisation while on furlough that amounts to making money for it or providing services to it. If workers are asked to undertake training while on furlough, they should be paid in line with the national minimum wage even if this is above the 80%.

Can I force an employee to be furloughed?

Employers need to designate employees as furloughed, which means it is their choice. However, if businesses are not placing everyone on furlough, they should consider carefully who it should be and whose skills will continue to be in demand through this challenging period. While it may be assumed that the best thing to do is furlough those employees labelled as high risk by the Government, forcing them on to furlough without their input, and therefore forcing them on to 80% wages, may result in discrimination claims from those who allege they were made to do it because of their age, disability or pregnancy.

Where employees need to be selected for furlough, it may be best to ask for volunteers across the workforce. If any high-risk employees, who had previously been risk assessed as fine to still be in work, put themselves forward, it may well be appropriate to choose them first.  There does not appear to be a maximum or minimum number of employees who can be furloughed

Kate Palmer, Associate Director of Advisory at Peninsula

Supporting Financial Wellbeing During the Covid-19 Outbreak

Information, advice and guidance from the Money and Pensions Service below.

Many people in the UK face uncertainty as the coronavirus situation further develops, not least when it comes to their financial wellbeing.

Throughout this period, our focus will remain on delivering for our customers and helping everyone make the most of their money and pensions.

We’ve published guidance in English and Welsh on how to deal with financial effects that you, your employees and service users may be suffering from. 

Our guides include topics such as:
Step 1: Do an emergency budget
Step 2: Check your insurance policies
Step 3: Use your savings
Step 4: Talk to your creditors if you think you’re going to miss payments

IR35 to be Delayed for a Year

IR35 implementation in the private sector will be delayed for a year given the current Coronavirus pandemic, it was confirmed (17 March).

Chief secretary to the Treasury Steve Barclay said that this is a deferral, not a cancellation, and that the government is still committed to introducing the policy.

The new tax measures, planned to make organisations responsible for determining whether a contractor carrying out work for them should be treated as an employee for tax purposes, will now come into effect on 6 April 2021.

James Poyser, CEO of inniAccounts and founder of offpayroll.org.uk, said in a statement: “The Lords made it pretty clear… that the Treasury’s IR35 position was increasingly untenable, with the rising backdrop of Coronavirus.”

Poyser welcomes the pause and said it will mean that contractors can now switch gears and put all of their energy into the wider challenges the UK is going to be facing in the coming months.

“This [delay] will also give time for the Lords review to be published, and we hope that the Treasury and HMRC listen to their recommendations before attempting to re-table this legislation for April 2021,” added Poyser.

The House of Lords Economic Affairs Finance Bill Sub-Committee, led by Conservative peer Michael Forsyth, held an inquiry into the possible effects of implementing IR35 in the private sector in February. The Treasury also ran its own review at the same time to ensure implementation will run smoothly.

Forsyth asked the Treasury and HM Revenue & Customs in a Budget meeting on 16 March whether they had considered deferring the changes, which were timetabled for next month.

He said: “I wondered whether HMRC had considered, given the enormous financial impact that we are about to experience as a result of Coronavirus, whether it might not be sensible for you to defer introducing these changes at least for six months if not a year.

“What is being proposed in the Budget I think is generally acknowledged to be inadequate in terms of the scale of the crisis and it does seem rather perverse to add an additional burden of this kind on business which could easily be deferred for six or 12 months,” Forsyth added. 

Matthew Sharp, a senior associate in Fieldfisher’s dispute resolution group specialising in contentious tax matters, said: “The Treasury’s decision to delay IR35 reforms by a year shows that the government has listened to the concerns of businesses, which were already deeply worried about the new rules even before the Coronavirus outbreak.

“While the move is welcome it will come as little comfort to workers whose contractor relationships have already been terminated by companies too daunted by the changes to assess and adjust their contractor relationships.”Sharp also suggested that once the Coronavirus subsides the government should use the 12-month extension to significantly improve the quality of its communication on IR35 and address concerns with the efficacy of HMRC’s online tax assessment tool, which he said had proved to be unfit for purpose.

BBC News: Budget 2020 – What it Means for You?
A tax cut for millions

A tax break from the government regarding national insurance was promised in the Conservative manifesto.

The current threshold sees employees and the self-employed paying contributions once they earn £166 a week, equivalent to an annual salary of £8,632 a year. From April, you start paying when earning £9,500.

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That will mean 500,000 people will no longer have to pay this tax, according to independent economists at the Institute for Fiscal Studies (IFS). 

Those still paying will save up to £85 a year on average. The chancellor said it would be just over £100 a year, but that calculation may not include the self-employed.

The IFS says 8% of the gains go to the poorest 20% of working households, so it is those on a decent income who may benefit the most. However, those working in a number of low-paying part-time jobs could see their take-home pay increase significantly.

Another tax to be cut is VAT on digital books, newspapers and magazines.

What happens if coronavirus hits my finances?

Many of the measures aimed to tackle the impact of coronavirus benefit small businesses and so protect some jobs. This has been coordinated with the interest rate cut announced by the Bank of England.

Specific personal finance changes include the chancellor saying all of those advised to self-isolate, even if they do not show symptoms, are to receive statutory sick pay if eligible. 

UK employees have already started to get statutory sick pay from the first day off work, to help contain coronavirus. This is paid by the employer, but smaller businesses with fewer than 250 employees can reclaim the cost of paying sick pay for the 14 days of isolation.

Those who are not eligible for sick pay, particularly the self-employed, will be able to claim Employment and Support Allowance (ESA) from day one of “illness” rather than day eight.

ESA is paid to those who are too sick to work, provided they meet certain conditions. It is worth £73.10 a week, or £57.90 for the under-25s. The complexity of this benefit may mean this change is unlikely to affect a lot of people.

Councils will also have access to a hardship fund to help vulnerable people in their area.

Other big changes to your finances in April had already been set, including:

  • Many working-age benefits which had been frozen for four years. including Jobseeker’s Allowance, Employment and Support Allowance, some types of Housing Benefit, and Child Benefit. will rise in line with the rising cost of living, going up by 1.7%. So, for example, child benefit for the eldest child will go up from £20.70 to £21.05 per week
  • Those aged 25 and over will get the National Living Wage of £8.72 an hour, a rise of 6.2%, with younger workers also getting more. This is paid by employers.
  • The full, new state pension will go up by 3.9% from £168.60 a week to about £175.20 in April. However, most pensioners get the older basic state pension, which is also going up by 3.9%, from £129.20 to £134.25 per week. They may also get a Pension Credit top-up.
  • Many self-employed people face a higher tax bill from April, when the so-called IR35 rule is extended to the private sector. That could mean thousands of contractors and freelancers will pay more tax.

Read the Full Article Here

IR35 Reform To Go Ahead

The government has confirmed changes to off-payroll working rules (IR35) will go ahead on 6 April 2020 HRMagazine reports.

This included an analysis of the impacts on tax receipts and compliance that ensures someone working like an employee, but through a company, pays similar levels of tax to employees. 

report from the government earlier this week outlined the review process and how individuals and businesses have been engaged through a series of stakeholder roundtables. 

Between 13 and 23 January HMRC, HM Treasury and the financial secretary to the Treasury held seven roundtables with 66 stakeholders affected by the reform. 

The roundtable discussions focused on two broad themes: education and readiness and April 2020 implementation issues. 

According to the report, stakeholders cited mixed levels of readiness. While large businesses said preparations were underway for April 2020, medium-sized organisations said they were less prepared. 

Businesses also asked to see detailed guidance on the reform in the Employment Status Manual to help them prepare, and noted that the delays to its publication due to the general election had made it more difficult for stakeholders to make the necessary preparations. 

The government said while it values the ‘significant contribution of flexible workers to the UK economy’, it is fair that individuals who work in a similar way should pay broadly the same amount of tax. 

The report states: “Unfortunately, non-compliance with the off-payroll working rules is widespread and is forecast to cost the Exchequer more than £1.3 billion a year by 2023-24 if not addressed. This is not sustainable. 

“It denies the taxpayer significant revenue for essential public services and perpetuates an unfairness between two individuals working in the same way, but paying different levels of tax.” 

Dave Chaplin, founder and CEO of ContractorCalculator and director of the Stop The Off-Payroll Tax campaign, doesn’t believe the reform has gone far enough. 

“This is the typical tin-eared approach taken by the Treasury, which has continued to ignore the valid concerns of businesses that are already suffering considerably because of this unworkable legislation. 

“The art of taxation is supposed to be about plucking the goose with the minimum amount of squawking. You’re not supposed to kill the goose. Businesses that want to invest in the UK want to do so with tax certainty. 

“We’re already seeing work being moved offshore, making the UK an unattractive place to do business,” said Chaplin. 

However, not everyone is dissatisfied with the government’s review. 

Victoria Roythorne, head of compliance and operations at recruitment firm Outsource UK, said: “For such a complicated piece of legislation, the HMRC’s confirmation of a ‘light touch’ approach to IR35 is a welcome sight. Most businesses have been working tirelessly to prepare for the change and it is only right that they are not held ransom for genuine mistakes that are made in the assessment process. 

“It is a positive and respectful decision for businesses and contractors alike and reflects the HMRC’s understanding of the ongoing uncertainty, in part due to the delay in the Spring Budget and the lack of detailed information.” 

She warned organisations not to take a relaxed approach during this period of uncertainty though. 

“Businesses must not mistake this soft period as a get-out clause. HMRC has been clear that deliberate non-compliance will still be targeted under the ‘light touch’ approach and failure to prepare adequately could be self-sabotage,” Roythorne said. 

In the report’s conclusion, the government states it is right to extend the reform of off-payroll working rules to large and medium-sized organisations in all sectors from 6 April 2020. 

The government first announced it would be launching a review of the changes it would be making to IR35 in January 2020.

Download the report here

DBS Launches New Payment Option for Online Basic DBS Checks

The Disclosure and Barring Service (DBS) is introducing a new feature for applicants that apply for their basic check directly to DBS, using our online application route.

Graphic showing laptop, saying basic DBS checks, new payment feature.

From today, 20 February 2020, when an individual applies for their basic check directly to DBS, they will be able to select a ‘Someone else is paying’ option. They will receive an email that contains a payment link, which can then be forwarded to the person that is going to be paying for their check. The check can be paid for by debit or credit card, Apple Pay or Google Pay.

Research highlighted that employers wanted to be able to pay for their employees’ checks, but it was often inconvenient, costly and time-consuming, as payment previously needed to be taken during the application process.

Allan Robinson, Product Owner of the basic service, said,

Since we launched the service in January 2018, we have constantly looked for new ways to make the application process quicker, easier and more user-friendly. This new payment option is just one of the many features we’ve added since its launch. DBS recognises that people’s lifestyles and working patterns have changed, and so have their needs. Our focus is to develop great solutions that solve our customers’ problems. The ‘someone else is paying’ feature provides for a simpler way for employers and organisations to pay for basic DBS checks.

More information about basic DBS checks can be found here.

Tips For Returning to Study After an Extended Break

The term ‘mature aged student’ is quite broad. While it varies between institutions, the term usually applies to any students over 21. According to the Australian Bureau of Statistics, 90,000 students aged over 25 enrolled in university from 2011 to 2016.

For those who have had a significant time out in the workforce and/or managing family commitments, returning to study is a big decision.

If you’re worried about making that step, here are some tips to get into the swing of getting back into studying.

Get to know the environment

Enrolling in or going back to study as a mature-aged student can be an exciting experience, and it’s important to hit the ground running before classes start. You can start by learning the map of the campus or read up on what unit and subjects you need to take on. If you’re studying online, take the time to familiarise yourself with the online portal. It’s also a great idea to attend orientations to find out more about the faculty you’re in.

Set realistic expectations

If you’ve been out of the studying game a long time, you might need to brush up on academic skills like referencing, plagiarism and the general mindset that’s required for formal study. However, it’s important to go easy and know that you don’t have to nail it all from day one— having patience and adjusting your expectations is part of the transition into student life.

Prioritise well

Don’t wait until the very last minute to find out your assignments take up a lot of your time. Instead, set early deadlines to keep yourself on track to make sure that important tasks are done on time. For starters, you can focus on the objectives for each of your subjects. Examine your course outlines carefully and this way, you won’t lose motivation during your studies.

Develop a network

Being a student provides you with the opportunity to develop a network of friends and establish meaningful friendships. Attending orientation days and faculty welcomes are a great way to connect with other students and lecturers. Your time on campus is limited, so be sure you make the most out of it and maintain the friendships and connections you have made.

Are You Up to Date With UK Employment Law After Brexit?

BY: Emma Gross, Head of Employment at MCG Solicitors

Many working rights are derived from EU law, but these could be scrapped or changed after the UK leaves the Union.

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As an employment lawyer I am often asked for examples of laws and rights the UK has been compelled to adopt by its membership of the EU.

While the majority of our laws have been derived in parliament we are governed at the highest level by EU legislation. Our ‘supreme court’ is the European Court of Justice and the UK cannot currently adopt national laws that are incompatible with European law.

Parental leave is an obvious example of an EU-based right. It entitles employees to up to 18 weeks’ unpaid leave per child in addition to statutory maternity, paternity, adoption and shared parental leave. Given that parental leave is unpaid it is unlikely that this right will be repealed when we formally depart from the European Union.

Discrimination is another. While the UK recognised sex, race and disability as protected characteristics the EU extended this to include age, religion or philosophical belief and sexual orientation.

Although these new protected characteristics have been widely accepted, in the absence of EU control the UK may decide to introduce a cap on the level of compensation currently being awarded in discrimination claims.

Surprisingly, holidays and holiday pay are an EU-based right. The EU provides that worker holiday entitlement is a minimum of four weeks. The UK exceeds this by providing 5.6 weeks’ holiday, but it is the EU that insists that workers on maternity or long-term sick leave are able to carry over their annual leave entitlement to the following year. Moreover, the EU stipulates that holiday pay should now include overtime and commission payments.

The complexity that is TUPE is another EU-based right. The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply to a business transfer or a service provision change. TUPE introduced three concepts into UK employment law:

  1. The automatic transfer principle whereby employees transfer to the transferee who inherits all rights, liabilities and obligations in relation to them.
  2. Protection against dismissal relating to a TUPE transfer.
  3. The obligation to inform and consult with representatives of the affected employees.

While many believe the rules provide certainty, others argue that harmonising terms and conditions is difficult and that the level of due diligence and consultation is excessive.

Working time is an EU-based right requiring the UK to enforce a 48-hour limit on the average weekly working time. We did adopt the 48-hour limit but simultaneously introduced our infamous opt-out provisions enabling workers to agree in writing to opt out of the rules. This has been under review in Europe for several years.

The maximum limit on weekly working time may well be removed altogether following Brexit, along with the current provisions enabling travelling time to count towards working time.

Fixed-term employees have the right to be protected from less favourable treatment than permanent employees. Part-time workers are protected in the same way as full-time workers. These EU-based rights have been widely criticised for presenting yet another hurdle for employers.

Another EU-based right unpopular in the labour market relates to agency workers. EU law stipulated that following a 12-week period agency workers should be treated as permanent members of staff with serious ramifications for holiday entitlement and rates of pay.

Equally unpopular with our government is the EU rule that if an employer becomes insolvent, employees can claim monies from the secretary of state.

Probably the best-known EU-based right is May 2018’s General Data Protection Regulation (GDPR). When we leave Europe the GDPR will be replaced by an amended Data Protection Act with references to other member states and EU organisations removed. The information commissioner has stressed the importance of international consistency on data protection.

A key factor will be the need for UK businesses to receive personal data from the EU. The UK will have to demonstrate to the European Commission that it can continue to provide an ‘adequate’ level of protection for personal data processed in the UK.

Brexit is bound to cause upheaval for UK employment law but exactly what the future holds is anyone’s guess!

Don’t Leave Retiring Employees to Fend for Themselves

We’re working longer and face more complex choices on retirement. So it’s vital that employers play their part in planning the post-work future for employees.

It may be a natural human reaction, but we all tend to underestimate how long our lives will be. So we save for a future that we expect to be much shorter than it actually is. This ought to be a pleasant surprise, but instead, we find ourselves needing to fund an extra five, six, even 10 years – and from savings that may not have been enough in the first place.

We’ve now moved well away from the idea of the defined benefit scheme. The situation is more complex, but the employer still has responsibilities as the sponsor of the chosen pension plan – one that you’re contributing to alongside the employee. For both parties it’s vital to get this all-important investment right.

Why Employees Need to Act Now

The Office for National Statistics recently estimated that the number of over-65s in work has risen by 188% in just 20 years. That means the percentage of the workforce aged 65 or older has gone up from just 5% to 11% over that same time period. As well as the increase in the state pension age, this has been driven by the realisation for many that they cannot afford to retire yet and need to continue to add to their pension pots.

As well as working longer, we’re also far more likely to move jobs every few years. People entering the workforce in the 2020s can expect to have six, seven or more different employers during a career that may extend into their seventies. Not only might this create a patchwork of pension pots, but the job of managing that employee’s retirement will fall to their final employer. The responsibility of helping many people to make the transition from full-time employment, perhaps through part-time working, to a full retirement will be your responsibility.

This will also be made more complex still by the different levels of financial knowledge and the unique blend of objectives and financial resources of each employee. No two will be alike in their needs, with some having second homes and possibly inheritances, and others perhaps entirely reliant on their employer’s scheme and the state.

What Should Employers Be Doing to Help?

It may seem like a cop-out to say that there are few easy solutions to this conundrum. But doing nothing really isn’t one of them. Employees need help with navigating the new complexities of the pension world such as drawdown, and if you’re not part of that solution you should be asking yourself why not.

The most important thing you can give is access to an advisor able to assist your staff to make the right decisions for them. Partnering with a provider with the capability and resources to support you and your employees is vital.

The decisions faced by employees will not only affect what subsequently happens to them, but also how you are able to manage the departure of staff smoothly and efficiently.

Until human nature – and pension regulation – changes the onus is on employers to provide help to their employees and the necessary support to allow them to make informed choices about their future retirement needs. Helping workers avoid potential pitfalls such as cashing in their pension pot and facing big tax charges, or choosing poor value and inappropriate drawdown providers, is achievable.

It is surely not too much to expect employers to help their people find better places and means to get the information they need, be that about products or further advice and guidance – and from sources that are honest, reliable and independent.

The good news is that you’re not alone. There are organisations with the capability and resources to ensure that you can plan ahead and address the issues that you and your employees face in planning for retirement. And whatever your future might hold, it’s never too late to seek help.

ARTICLE BY: David Bird, Head of Proposition at LifeSight by Willis Towers Watson

Real Pay Growth Forecasted to Dip

UK workers are reportedly due an average pay rise of 3% in 2020, but higher than expected inflation will mean a real-terms increase of just 1%.

Research by Willis Tower Watson reports the predicted dip in real wage growth represents a fall in real wage growth in the UK compared to 2019, when salaries rose on average by 1.2%.

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Real wage growth in the UK over the next 12 months will also be lower when compared to the predicted European average of 1.1% for the same period, and lower than 13 other economies across the continent. 

Ireland (1.9%), Malta (1.9%), Luxembourg (1.7%), Romania (1.6%) and Denmark (1.6%) are set for the fastest growth in salary increases. By contrast, forecasts for Lithuania (0.5%), Slovenia (0.5%) and Belgium (0.6%) expect the slowest real wage growth in 2020. 

UK pay is still increasing in real terms, according to Keith Coull, director of global data services at Willis Towers Watson. However, he stated that this growth and the demand for new workers have both slowed down. Coull attributed this to “economic uncertainty surrounding the country as it steps into its non-EU future”. 

Coull also suggested the report showed low unemployment in the UK labour market has increased the “war on talent”, which will make it harder for organisations to find employees with the skills they need. 

“Companies will need to think carefully about how they develop pay and reward programmes if they are to attract and retain scarce talent in this competitive environment,” said Coull. 

Hazel Rees, rewards leader for Great Britain at Willis Towers Watson, told HR magazine employers will need to ensure their pay offerings are competitive. “While employers continue to face labour shortages, especially for high-performing employees, being prepared to move the needle slightly on wages will remain a key weapon to stay competitive in today’s talent market, especially within the digital space.” 

Willis Towers Watson’s Salary Budget Planning Report is a global study of how businesses expect to increase their overall salary budgets and was conducted in June and July 2019. 

Companies across Europe, the Middle East and Africa returned 9,000 responses covering 74 countries worldwide.