Too many people are fretting over the fine print but there’s no time for that now. Everyone needs to balance what is best for their business and for their people, and some very difficult decisions will be made. I said yesterday that there are too many people complaining about the colour of the lifeboat that has just arrived to rescue us. It’s too late for that, we just need to GET IN THE BOAT.
With very few exceptions, everyone should be putting almost everyone on to furlough and there should be no redundancies. Anyone who has been made redundant this month, should be re-instated and furloughed.
There are some considerable cost and cashflow consequences for employers to consider but I believe I have the answers to these and they are no longer a significant issue (although see my caveat on the details and Guidance).
There are currently four unclear issues that I have been focusing on. From my previous dealings with Government, I can say with some certainty, and in some cases, what the likely answers are.
There are far too many owners, CEOs and senior operators who are resisting/refusing to furlough huge numbers of their people. Because either they don’t understand how the Job Retention Scheme (JRS) works (who does?) and/or they think it will cost them too much and so they can’t risk it. We need some urgent clarification.
The Big Four key points for employers that are now deciding whether to put staff on furlough are as follows:
1. Employers NI Contribution. Does this apply to furloughed payments? Employers NI is 13.8%. If you’re monthly payroll is £2m, that’s a hard cost of around £275k. Too much to commit to when we all have no cash. MY ANSWER: WE WON’T NEED TO PAY THIS OR, IF WE DO, IT WILL BE REIMBURSED.
2. Employers Pension Contribution. Does this apply to furloughed payments? This is only 3% but that’s another £60,000 if your monthly payroll is £2m. MY ANSWER: WE WON’T NEED TO PAY THIS OR, IF WE DO, IT WILL BE REIMBURSED.
3. Holiday Pay. Does this accrue whilst on furlough? The obvious answer is ‘No it doesn’t.’ You shouldn’t be accruing holiday while you’re on holiday! But as a matter of employment law, it does technically accrue. This is likely to represent around a further 10% cost to an employer. MY ANSWER: ALTHOUGH THIS IS STRICTLY A STATUTORY ENTITLEMENT, WE ARE ALL GOING TO HAVE TO AGREE WITH OUR EMPLOYEES THAT (i) THERE IS NO ACCRUAL OF HOLIDAY PAY and (ii) DURING FURLOUGH, YOUR HOLIDAY ENTITLEMENT WILL REDUCE TO ZERO (BECAUSE EVERYONE IS EFFECTIVELY ON PAID HOLIDAY). YOU SHOULD AGREE WITH YOUR EMPLOYEES THAT THEY ARE GOING ON TO FURLOUGH ON THIS BASIS.
4. Effective Date. Which employees can you furlough? My view has always been that anyone employed on or before 20 March (date of the Chancellor’s announcement of the JRS) is eligible to be furloughed. However, there are many who say the JRS only applies to those employed on or before 28/29 February, but that cannot be what was intended. In announcing the JRS, and back-dating it to 01 March, the Chancellor was trying to save the jobs of the millions who had lost them in the previous week or two (as well as the millions that were about to be lost). We estimate that over one million jobs were lost in Hospitality alone between 10-20 March. MY ANSWER: DESPITE THE CLEAR INTENTION OF THE SCHEME, IT SEEMS THAT FEARS OVER ABUSE OF THE SYSTEM WILL MEAN THAT ONLY THOSE PEOPLE WHO WERE EMPLOYED ON OR BEFORE 28 FEB WILL QUALIFY FOR FURLOUGH. THAT MEANS ANYONE WHO JOINED IN MARCH, WILL GET NOTHING. STILL WAITING FOR FURTHER CONFIRMATION ON THIS.
My feeling is that we should be trying to get as many as three million hospitality people on furlough this week. We may not be able to do this for the March joiners, but we should be able to do it for everyone else. We all need to wait until we get the details though, and the guidance on this should be out today (26 March). Before then, you can work through what the likely cost of all this might be for your business and who might qualify.
From a short but representative survey of some of the big and small owners and operators in our industry, it is clear that only 5-10% (at best) of our people will remain in active employment. This means 90-95% could/should be on furlough, being paid something by the Government for three months at least. From now and for the next few days, this is a #3MillionMission to save these jobs and protect these livelihoods, for a short while at least.
The time for procrastination is over: everyone must GET IN THE BOAT.