Government support for employers

Posted on 20 March 2020

The current crisis has created a hideous dilemma for employers. Worried about keeping their business afloat through the coming weeks, they know that it will be difficult to continue to meet large wage bills with little or no income.  Some are trying temporarily to lay off employees and agree a reduction in salary; others have taken the more drastic step of dismissing their staff by reason of redundancy.  The mental health of employees is being affected by the uncertainty and the anxiety of trying to make ends meet, and the Prime Minister has urged businesses to "stand by your employees because we're going to stand by you and we're going to stand by the workers of this country".   Businesses have already come under fire for dismissing staff as a knee jerk response to the current crisis, and commentators have noted that an employer's reputation could be significantly and permanently affected by the decisions it makes now. 

Self employed workers have also been put into an invidious position.  If they fall ill, they will lose their income.  There is a fear that they are being forced to continue to work in order to pay their rent and put food on their table – and in doing so, are spreading the virus.

With businesses being forced to shut their doors, calls have been increasing for the government to step in to provide proper assistance to employers and the self employed, and the Chancellor of the Exchequer Rishi Sunak has today unveiled an ambitious plan.  It is designed to assist employers meet the commitments they have to their employees and give comfort to the self employed. 

The government has committed to help to pay people's wages.  Any employer in the country, whatever size, will be able to apply to HMRC for a grant to maintain 80% of salary of employed earners (workers and employees who are on the PAYE scheme) up to £2,500 per month if they are furloughed due to the virus.  The grant will be backdated to 1 March and will be in place for the next three months, reflecting the period that the Prime Minister said yesterday would be needed to 'turn the tide', but this may be extended.  It is anticipated that the first grants will be payable within weeks, and in any event by the end of April.  

In addition, benefits will be increased, the interest free loans to assist with the crisis have been extended from six months to twelve months, and the minimum income floor for self employed earners will be removed.  This means that self employed workers will be able to claim Universal Credit up to the equivalent of Statutory Sick Pay.  Self assessment payments will also be deferred, and the next quarter's VAT liability will be deferred until the next quarter in order to assist with cashflow.

This provides a valuable lifeline for employers, and allows them time to consider how best to face the coming storm.  It mirrors and goes further than the approach taken in Denmark, where the government has underwritten 75% of salaries.  Whether the Chancellor's proposals will be enough remains to be seen, but they are unprecedented. 

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