Will the job retention scheme be available for agency workers? How we will support staffing, consultancies and other workforce solutions businesses on this and other issues

Written on 23 Mar 2020

Osborne Clarke is well known for having many clients and contacts in the staffing, consultancy and recruitment sector and we are busy helping many of you through the unprecedented challenges many are now facing. If you need support or advice at any time, please do contact your usual contact. We are ready to help. All our people have been geared up to work from home for some time and our systems are working well.

These are some of the things we are seeing businesses do now – and we are actively helping in all these areas:

  1. How will the UK's job retention scheme work for your own staff? Will staffing and consultancy companies be able to use the scheme to pay agency workers and consultants? Will there be changes you can make to your business to help agency workers and contractors qualify for this government support? See the end of this briefing for more news on this.
  2. Setting up a good system for collecting debt as quickly as possible – what are the traps to avoid to minimise unnecessary delays?
  3. Using government loan schemes - how might that work for you and your clients? Who will be able to access loans and be good credit risk in this new world?
  4. Dealing with own staff including home-working, new sick pay rules, volunteering, lay-offs, redundancy, and dealing with people who are carers? Which agency and contract workers qualify for SSP and what are your legal obligations to pay SSP under the new rules? Can you get any of this reimbursed by the government?
  5. Building public sector practices for when (as seems inevitable) governments try to kick start growth with major infrastructure projects. Are there ways to get onto frameworks quickly?
  6. Moving online – can your contract staff be helped to provide their services remotely?
  7. Directors duties of companies facing difficulties - many companies will need to restructure: what personal liabilities do you need to avoid when trying to protect assets by moving them out of businesses you may need to close?
  8. Saving/buying/selling distressed businesses – what are the top tips if you want to help save your business or another business and preserve the value of a failing business?
  9. What does the law says about your duties to employees and contract staff where they may be exposed to COVID?
  10. How force majeure clauses might work in a staffing and recruitment context - can you or your clients squeeze out of liabilities?
  11. IR35 hokey cokey – what are the problems with the delay? How must you avoid criminal risk under the CFA. Why you can't just carry on as before for many contractors to whom "inside" determinations have already been issued? Why are recent announcements about the non-effect of the determinations not reassuring to many suppliers and many end users)

We have built a robust remote infrastructure over the years to ensure we can continue to support our clients and help our employees work flexibly. Our people are familiar with working as teams across different locations away from the office, and with using a range of online meeting and communication tools.

We have produced a number of more detailed articles for businesses responding to the Coronavirus, which may be useful to you or your colleagues. Those articles are collected on our Coronavirus COVID-19 key topic page.

And for those interested in the likely application of the job retention scheme to their employees and contractors read on...

Coronavirus Job Retention Scheme: What is it and what does it mean for UK employers?

The Chancellor has announced a new scheme – the Coronavirus Job Retention Scheme - to protect jobs amidst the growing COVID-19 emergency.

The scheme is available to all UK employers in all sectors – there is no restriction on size (as with the recoupment of SSP which is limited to employers with less than 250 employees). Short guidance has now been issued for businesses and employees but more is expected shortly.

Government to pay 'at least 80% of salary' for employees who would otherwise be 'laid off'

Under the scheme, employers will be able to access support to continue paying part of their employees' salary for 'those employees that would otherwise have been laid off during this crisis'. Whilst lay off is a specific statutory concept in employment law, the Chancellor's statement and the government guidance strongly suggests that the government is not just capturing employees who may be laid off under the statutory rules, but all employees at risk of redundancy due to COVID-19. The Chancellor also referred to the scheme as supporting all those on payroll and therefore may include workers on the PAYE system, not just those who meet the statutory definition for employment.

It is not yet clear to what extent various types of contingent worker will qualify under this scheme – as well as classic agency workers paid under ss44-47 Income Tax (Earnings and Pensions) Act what about umbrella workers, personal service companies and workers paid under CIS? What about PSC contractors in the public sector paid after deduction of PAYE under IR35?

The scheme will pay 80% of salary per affected worker up to £2,500 a month. It is assumed that this is gross pay but we await further clarification. Further, employers will need to know what salary is in this context – for example does it include pension contributions and benefits or additional payments such as overtime etc. and which may substantially increase an individual's pay packet. The employee guidance states that an employer can choose whether they wish to top up a payment made to an individual who remains employed under the scheme but 'they do not have to'.

The BBC has reported that the Treasury has stated that the scheme will apply to workers who have already been laid off, 'so long as they are brought back into the workforce and instead granted a leave of absence'. Again, more detail is needed.

How can employers access the scheme?

Employers who wish to benefit from the scheme will need to:

  • Identify their affected employees who should be designated as furloughed workers. At present, the term 'furloughed worker' is not defined in UK employment legislation. It is though a concept used in other jurisdictions, such as the US to refer to an employee who are essentially put on unpaid leave i.e. they do not work and they are not paid but they remain an employee.
  • The government's guidance for businesses acknowledges that for an existing employee to become a furloughed worker will require a change in their employment status and which remains 'subject to existing employment law' and that 'depending on the employment contract this may be subject to negotiation' – this suggests that employee consent will need to be obtained unless the employment contract provides for this situation. In most cases it is likely that consent to the terms of furlough will be needed. Depending on what payments are covered by the new scheme, employers may also need to factor to these negotiations what benefits and payments an individual will not receive during furlough leave.
  • A furloughed worker will need to be notified of their change in employment status.
    The employer must then submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will be setting out further details on the information that is required and are working 'urgently to set up a system for reimbursement'.

'You must not undertake work for your employer'

The employee guidance confirms that 'to qualify for the scheme you should not undertake work for your employer'. This would seem to exclude from the scheme anyone who is on reduced hours arrangements. It is not uncommon for employees to have more than one employment and employees looking to support themselves financially may now pick up new work in sectors, such as transport and food retail, where more workers are needed to manage demand. Whether or not this would exclude them from the scheme remains to be seen.

'Stand behind workers' and 'think carefully before laying people off'

The scheme was launched with a message for employers to 'stand behind workers' and to 'think carefully before laying people off'. The sentiment will not be lost on organisations who will be facing difficult conversations with employees at risk of redundancy at this very difficult time and the complex procedures for collective redundancies in the UK. To be able to focus time on the business will give some welcome breathing space. However, how long the scheme will serve to protect employees in the longer term remains very much to be seen. The Chancellor announced that the scheme will be back-dated to 1 March and will continue for 3 months. Whilst he indicated it may be extended, with productivity, consumer spending and supply chains impacted by COVID-19 globally, the crisis is not one that businesses are likely to spring back quickly from.

Employers are now likely to face some difficult questions from employees, particularly where negotiations are already taking place on pay-cuts, reduced hours, unpaid leave and potential redundancies. Employers exploring the existing statutory provisions on 'lay-off' to avoid immediate redundancies, should note that this new scheme provides more generous pay; it also avoids an employee triggering their own redundancy.

And for employees still working, the prospect of seeing colleagues sent home on 80% of salary guaranteed for 3 months (with the possibility of the employer topping this up) may not sit easily, particularly where their work may put them at greater risk of COVID-19 but without any greater long term job security.

With the Chancellor announcing that he expects the first grants under the scheme to be paid before 1 April, more detail is expected soon. This is just one of a number of measures that the Chancellor has announced to support businesses.

Wishing all readers the best in these very difficult times.