Furlough extended

As we wrote in our post on 22 October 2020, the Coronavirus Job Retention Scheme (“CJRS”), known as the furlough scheme, was due to end on 31 October 2020.  Its replacement – the Job Retention Scheme (“JSS”) – was due to come into effect on 1 November 2020.  However, on the day it was due to close, the UK Government announced that the furlough scheme would be extended.  The objective of the extension being to provide support to businesses and employees during the new national lockdown which began on 5 November 2020. The furlough scheme therefore remains available to businesses and is currently set to be open until December.

Level of support and other key points under extended furlough

The level of support available under the extended scheme mirrors that available under the CJRS in August, with the Government paying 80% of wages up to a cap of £2,500.  Employers must continue to pay employer National Insurance Contributions and pension contributions (which, for the average claim, amounts to 5% of total employment costs),  In addition, employers are still able to top up employee wages at their own expense if they wish.

It is worth noting that flexible furloughing is now allowed under the extended CJRS, as well as full-time furloughing,.  Employers therefore have greater freedom to make the CJRS work for their business needs during lockdown.  Employers need not have used the CJRS before now, and the scheme is open to all employers with a PAYE scheme and a UK bank account.  To be eligible for being furloughed under the extended furlough scheme, employees must have been on their employer’s PAYE payroll by 23:59 on 30 October 2020.  The employer must also have made a real time information submission to HMRC on or before 30 October 2020 in relation to the relevant employee(s).

Further details on the extended CJRS are expected shortly, so do watch this space for further updates.  Given the unpredictable nature of COVID-19, we believe that that the extension will be a welcome move for businesses in England impacted by the pandemic, in particular, the ability for furloughed staff to work on a part time basis.

What does this mean for employers?

However, the extension of furlough may have come too late to stave off job losses in some sectors.  A number of organisations will have implemented redundancies already, given the planned ending of furlough and the proposed introduction of JSS (which offers more limited support and is somewhat more complex). The Office for National Statistics recently reported that the number of redundancies and rate of unemployment are increasing, with the latter reported at 4.5% for those aged 16 and over.

Where redundancies are seen as the only solution, employers will clearly need to bear in mind their legal obligations, but should also take note of the principles set out in the joint statement from ACAS, CBI and TUC, in particular, with a view to conducting redundancy processes “openly; thoroughly; genuinely; fairly; and with dignity” [https://www.acas.org.uk/joint-statement-acas-cbi-tuc].  As businesses and employees look towards a potentially bleak winter it is important to remember there are alternatives to redundancies, including the use of the CJRS and, eventually, the JSS.  Employers may also want to consider other cost-saving measures available to them, such as changes to working patterns, and even pay.  In the current climate, being open and frank with employees about the challenges ahead and seeking their views could help in finding a way forward.

During the COVID-19 pandemic, data privacy – and, in particular, employee data privacy – has been at the forefront of employers’ minds. In the last six months, employers across the globe have been required to give careful thought to a whole host of potential issues, from contact tracing apps to temperature and other health checks in the workplace, as well as processing an increasing volume of health data of its staff.  Whilst not COVID-19 related, a recent decision from the Hamburg Commissioner for Data Protection and Freedom of Information in Germany (the “Commissioner“) is an important reminder of the very significant financial and reputational sanctions an employer may face if it does not appropriately collect, retain and protect employee personal data in line with GDPR.

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For more information about the topics raised in this Legal Update, please contact Oliver Yaros on +44 20 3130 3698, Miriam Bruce on +44 20 3130 3695, Francesca Ingham on +44 20 3130 3439, Vanessa Klesy on +49 69 7941 1283, or Ana Hadnes Bruder on +49 69 7941 1778. 

Learn more about our Cybersecurity & Data Privacy and Employment & Benefits practices.

A Legal and Practical Checklist for UK Employers whose staff wish to work from outside the UK

Since the Covid-19 pandemic began to impact working life in the UK in March 2020, the workplace has changed beyond recognition. In the UK, 60% of employees are now working from home (“WFH”) on a semi-permanent basis. Without the usual constraints of office working which WFH has brought with it, employers are being asked by employees (often those with family ties or homes abroad) whether they can work remotely from outside their usual “base jurisdiction”.

These requests can be costly for both employer and employee, with hidden pitfalls, especially in terms of tax that will be due. Understanding the requirements of the overseas jurisdiction will help you to decide whether to grant permission for the employee to work there and, if so, for how long and under what circumstances.

Before agreeing to such requests to work in an “overseas jurisdiction”, you should therefore consider the following main legal and practical issues.

Legal issues

  • Is the employee creating a legal presence in their overseas jurisdiction?

Check whether the individual would create a legal presence or permanent establishment in their overseas jurisdiction by choosing to base themselves there whilst working. What are the thresholds the employer needs to be aware of before triggering requirements to register a business and/or report or be liable for tax in the overseas jurisdiction?

  • Does the employee create a personal tax liability in the overseas jurisdiction?

In some overseas jurisdictions, you will need to deduct taxes from an employee’s wages (e.g. under a Pay As You Go or Pay As You Earn requirement). You will need to be aware of any obligations to deduct taxes from wages and how that arrangement may be implemented in any country where an employee chooses to base themselves. Whilst the employer might take the view that a personal tax problem is not their problem, most will want to avoid an employee getting themselves into difficulty, and the employer is likely to be better placed to identify any tax snags. Accordingly, it is important to check any thresholds for triggering the application of the tax regime in the overseas jurisdiction. For example, in some overseas jurisdictions, personal tax liability is triggered if the employee has been in the jurisdiction for more than 183 days. In working out this threshold, account for any periods of personal or holiday time the employee may have spent in the overseas jurisdiction in addition to working time.

  • Will mandatory employment protections apply?

Check the threshold for when an employee working in an overseas jurisdiction starts to benefit from the applicable local mandatory employment protections. These could include minimum rates of pay, paid annual holidays, anti-discrimination rights and protections on termination. This could materially alter the terms of the employment contract. For example, it is very likely that restrictive covenants which are valid in one country could be hopeless if left unchanged for an employee basing themselves in a different country.

  • Will the employer need to comply with regulatory and compliance obligations in the overseas jurisdiction?

For regulated sector companies (e.g. financial institutions), consider whether the individual will be performing any regulated activities in the overseas jurisdiction for which you (and possibly the employee) will need to comply with local regulatory and compliance requirements. Check whether you need to obtain licensing or approval for both the employer and the employee from the local regulators.

  • Which workplace Health & Safety rules apply?

The duty on UK employers to protect employees’ health, safety and welfare includes providing a safe working environment when staff are working from home. For individuals working in an overseas jurisdiction, check for any additional local health and safety requirements.

Remember that employees will also need to comply with applicable public health guidance (such as quarantine periods) both in the overseas jurisdiction and on their return to the base jurisdiction.

Practical issues

  • Will time differences disrupt efficient running of the business?

This may seem an obvious point, but check whether the time zones will interfere with the efficient running of the team and business. Is the individual part of a team that works closely with clients in another time zone? If so, communicate clearly with the employee what the expectations are in terms of their hours.

  • Do you need to document agreed changes and/or amend the contract of employment?

As mentioned in the above point, clear communication is crucial. It will be important to manage the individual’s expectations to reduce the chance of a subsequent dispute and also to maintain good employee relations. Depending on the circumstances and the arrangement reached with the employee, consider whether you should document any amendment to the contract of employment in writing.

If there are parameters that the employee needs to abide by (e.g. not staying longer than a certain period or not engaging in any particular activities whilst in the overseas jurisdiction), these should be documented.

  • Is the job really one where the employee is never required to come into the office?

In practice, we think it is important for the employer to distinguish between two situations. First, there could be a short-term move to another country during the pandemic for family reasons, but where the employee is intending to come back to the base country again when the pandemic is over. Here, the parties should document the shared understanding and a time period for the revised operation to run. It may also be necessary to consider whether the individual will necessarily be allowed to return to the base country, if they originally had to rely on a visa or work permit. The second situation would be a permanent move to another country with no anticipated end in sight. Here, the parties need to be clear about what will happen if the arrangement is found not to be working. Is the job in question one which never requires attendance in the base country offices for meetings or training or collaborative meetings? If the employee attends the base country irregularly at the request of the employer, who pays for that travel? Will the employer be happy paying salary at the same level if the employee has moved to a much less expensive part of the world? All of these issues need to be sorted out well in advance of any move happening.

  • Make sure staff do not take matters into their own hands.

It is extremely important that employers make clear to staff that they are not authorised to work outside their base country without prior authorisation for anything more than a week or two. We have heard of a number of cases where employees have moved countries, often to be with family during lockdown, without telling the employer or seeking permission. In view of the significant issues for both employer and employee, this is dangerous practice, and it is likely that both employer and employee are going to pay a penalty, one way or another.

(Article on this topic for Hong Kong employers: https://www.mayerbrown.com/en/perspectives-events/publications/2020/09/what-a-hong-kong-employer-should-consider-before-agreeing-to-an-employee-working-remotely-from-overseas)

HM Treasury has just announced a change to the Job Support Scheme which comes into force from 1 November for the whole of the UK. Previously, employees had to be working 33% of their hours to qualify, with the employer then picking up 33% of the cost of the unworked hours, and the Government paying the remaining 33%.

Now, employees can qualify for the scheme if they work only 20% of their normal hours.  For unworked hours, employers will now only need to contribute 5%, and the government will pick up the remaining 61.67% of the cost.   That means that if someone was being paid £587 for their unworked hours, the government would be contributing £543 of the cost and their employer only £44.

Employers using the scheme will also be able to claim the Job Retention Bonus (£1,000 per employee) for each employee meeting the eligibility requirements of that scheme.

With a second wave of the COVID-19 pandemic seemingly well underway and restrictions tightening across the country, it is without doubt that remote working will continue to be the norm for many employees for the foreseeable future. The potential issues this raises for employers in relation to data security and the protection of confidential information were brought into focus last week, with the Financial Conduct Authority’s Director of Market Oversight, Julia Hoggett, warning banks that their security arrangements for staff privy to insider information should be the same whether those staff are working remotely or from the office, highlighting the difficulties in ensuring insider information is kept from partners or flatmates, and the risk of use of privately owned devices where employees’ activities cannot be recorded.

While Ms Hoggett’s comments related to the increased risks of insider trading posed by remote working, they act as a reminder to employers of the increased risks posed by the current situation in relation to protecting confidential and/or sensitive information generally. Employers should consider updating their policies regarding the protection of confidential information to ensure that they are appropriate in the current climate, and ensure that staff are: (i) aware of them; and (ii) have received appropriate training on the increased risks to confidential information when working from home.

You can read Ms Hoggett’s speech at the City Financial Global event in full at https://www.fca.org.uk/news/speeches/market-abuse-coronavirus.

 

Our UK Pensions group are delighted to share details of this year’s annual forum. Usually a half-day event, this year we are trying a different format and running the in-person conference as a virtual series of weekly webinars taking place through the autumn.

If you and your colleagues are free, we’d be delighted if you’d join us as we explore current and upcoming pensions related matters that we anticipate will be at the forefront of trustees’ minds. Speakers include leading Mayer Brown lawyers, and guest speakers: Erik Davey, Director at SECOR Asset Management; Richard Farr, Managing Director at Lincoln Pensions; and Rory Murphy, Trustee Chair.

Webinars will take place at the same time each week, 10:00 a.m. BST/GMT on Thursday’s, from 15 October through to 26 November. Further details on each topic are available through the links provided:

To attend any or all of these webinars, please register here.

If you have any questions related to the series, we invite you to share these with us in advance so that we can address these during the webinars. Please send your questions to: LON-Events@mayerbrown.com.

The Pensions Regulator issued a suite of COVID-19 guidance for trustees and employers at the end of March. As part of that guidance, the Regulator announced that it would be taking a more flexible approach to regulation and enforcement in certain areas for a limited period. Over the intervening months, this flexibility has largely been removed now that schemes have come through the initial disruption and adjusted to new ways of working. Many employers, however, are still experiencing difficult times.

Continue Reading The Pensions Regulator’s COVID-19 guidance – where are we now?

If you or your colleagues cover US benefits and/or executive compensation, please join Mayer Brown’s Benefits & Compensation University.

By popular demand, we are expanding our annual US Executive Compensation University to include health, welfare and qualified plan issues. During this series of webinars, we will explore benefit and compensation issues in depth and hear from leading Mayer Brown lawyers about the changing regulatory landscape as they provide practical, business-focused guidance on dealing with these challenges.

The series will take place on the following Wednesdays in October:

  • Executive compensation: October 7, 2020
  • Qualified plans: October 14, 2020
  • Health and welfare plans: October 21, 2020

Further detail is available here and for additional information, please contact Franceska Anderson-Vargas at fanderson-vargas@mayerbrown.com or +1 312 701 7795.

As a result of the COVID-19 pandemic, the UK Government made the decision to delay the implementation of IR35 reforms to the private sector from April 2020 until April 2021 (see our previous blog post on this here). As a reminder, the IR35 reforms (commonly referred to as the “off-payroll working rules”) are intended to apply to any individual who, but for the supply of their services through an intermediary, would otherwise be an employee of the end-user client receiving the service. These rules will impact medium and large businesses in their role as the end-user client. From 6 April 2021, private sector businesses will become responsible for determining the employment status of contractors, regardless of whether they supply their services through a personal service company directly to the end-user or via an agency. The new rules will effectively see a shift in current responsibility on status determination, from the contractor to the end-user client. The changes will not apply to small businesses that engage contractors through an intermediary.

Continue Reading IR35 reforms update: Make sure you are ready for 6 April 2021

The Job Security Scheme – announced 24 September 2020

The Chancellor has announced his “Furlough 2.0” – a wage subsidy programme called the Job Support Scheme (“JSS”). The aim, of course, is to help UK employers weather the continuing COVID-19 storm, with the hope of saving jobs or at least staving off mass redundancies when the current furlough scheme comes to an end on 31 October. Helpfully, employers who have not previously used furlough can benefit from JSS and employers who retain staff under JSS can also claim the £1,000 job retention bonus. However, unlike the blanket approach of the Coronavirus Job Retention Scheme, JSS has a more nuanced and focused approach. First, it appears to target small and medium sized businesses (“SMEs”), with larger companies only able to benefit in certain circumstances. Secondly, the JSS will only be available for employees who are working a proportion of their time, and will not benefit those laid off entirely. Importantly, employees on JSS can’t be made redundant/put on notice by the employer during a period when the employer intends to claim. In addition, Government support is now set at a maximum of up to 22% of an employee’s capped wages, as opposed to 80% at the start of furlough.

The scheme will run for six months from 1 November 2020 and is available to employees whose hours have been reduced due to decreased demand, provided they are working at least a third of their normal working time. The employer will pay the portion that is worked and for the hours not worked, the employer and the government will pay a third each, with the Government portion based on salary capped at £697.92 per month. All SMEs will be eligible to participate in the Scheme, however large companies will only be eligible if their turnover has fallen due to COVID-19. We await further detail on the level at which the turnover threshold is going to be set. Further information can be found on the Job Support Scheme factsheet, which can be found here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/921389/Job_Support_Scheme_Factsheet.pdf

The Scheme has parallels with similar concepts already up and running successfully in other countries, including Germany’s “short time work” scheme (which provides workers whose hours have been reduced with a top-up from the German government) and France’s “unemployment scheme” (in which the French Government has agreed to pay 93 percent of an employee’s net salary regardless of whether they are working full time). Given there are currently over two million UK employees still on furlough and with the R number on the rise, this announcement is a timely one for UK SMEs.

Much remains unclear as regards the JSS and, as we saw with the furlough scheme, the devil is often in the detail and the resulting legislation can often differ in important respects to what appears to be the case from the Government announcements. Whether the JSS will be enough to stave off the wave of redundancies that has been predicted remains to be seen. It is clearly less generous for employers than the furlough scheme as they will need to meet the lion’s share of their employees’ pay for reduced work and offers no assistance to employees for whom there is no significant work available. As such, a reduction in the scale of redundancies seems more likely than avoiding them entirely.

Support for self-employed individuals

The Chancellor has also unveiled new support measures for self-employed individuals.

Firstly, self-employed individuals and other tax payers who require extra time to pay taxes that are due, can now extend the date for payment of their outstanding tax bill for 12 months from January 2021. This builds on the existing Self-Assessment deferral provided by the UK Government in July 2020 and will allow taxpayers who have up to £30,000 of Self-Assessment liabilities due to use HMRC’s self-service “Time to Pay” facility.

Secondly, the grant available through the Self-Employed Income Support Scheme (“SEISS”) has been extended and will run from 1 November 2020 to 30 April 2021. The grant will be available to self-employed individuals who are currently eligible for SEISS and are continuing their trade but face a decreased demand due to Covid-19. From 1 November 2020 to 31 January 2021, the UK Government will cover 20% of average monthly trading profits in the form of a grant. From 1 February 2021 to 30 April 2021, the UK Government will provide a grant, although the level of this is yet to be determined.

VAT reductions

On 8 July 2020, the UK Government announced that registered businesses were permitted to apply a temporary 5% reduced rate of VAT to certain supplies relating to i) hospitality, ii) hotel and holiday accommodation and iii) admissions to certain attractions. The Chancellor has announced that the temporary reduction of VAT rates would be extended until 31 March 2021 for the tourism and hospitality sectors. This further measure has been implemented by the Government with a view to protect around 2.4 million jobs and ease the significant financial burden on UK businesses in these sectors.

If you would like to discuss the changes announced by the Government and how they might affect your business, please get in touch with your usual Employment Department contact.