FAQs - The Government's Furlough Scheme and rural employers
We consider the application of the Coronavirus Job Retention Scheme to rural businesses and other Covid-19 related concerns affecting the sector.
As the latest details about the Government's Coronavirus Job Retention Scheme (the 'scheme') are studied and applied to various industries across the country, we consider what these mean for rural businesses.
Below, we have highlighted some common questions and issues. Separately, we have considered the impact of the scheme on employers more generally.
It is useful to think of the scheme as two agreements. The first is between the employer and the government where employers will apply to HMRC for a reimbursement of 80% of wages or £2,500 a month (whichever is the lower) for each worker who is eligible under the scheme.
Employers who successfully register their workers may also claim employer's National Insurance Contributions and employer's auto-enrolment pension contributions up to 3% on the wages covered by the scheme. If employers agree to top-up wages above those covered by the scheme (see below), they cannot recover the costs of the additional NICs and pensions contributions on that top-up. Tax must also be paid in the normal way via PAYE on the amounts paid to the worker. Employers can only claim for workers who were notified to HMRC as being on the payroll on 19 March 2020 or before.
The second agreement is between the employer and the worker in which the employer temporarily alters the worker's contract so they will do no work (not even emergency support or answering emails) for a minimum period of three weeks and will receive at least 80% of their wages (up to a maximum of £2,500 gross per month) during that time. It is up to the employer whether they agree to top the wages up to 100%. This means that if the worker agrees to be furloughed, for the period of time the employer accesses the scheme it will recover a percentage of employment costs associated with that worker.
HMRC will be running the scheme. The online registration portal went live in the early hours of 20 April 2020, with the first payments expected to be made on 30 April. Employers will need their Government Gateway ID and password to use the portal.
Businesses struggling with cash flow now may be able to access funds via the Coronavirus Business Interruption Loan Scheme. However some businesses have struggled with eligibility and the length of time it takes to arrange the loan so those with little reserves may have to lay off workers or dismiss them on grounds of redundancy in the meantime. Employers can claim payments under the scheme from the date on which the worker had no work or were laid off as far back as 1 March 2020. If employers made workers redundant, or they stopped working for an employer on or before19 March 2020, they can be re-employed and put on furlough and employers can claim for the lower of 80% of their wages or £2500 through the scheme.
The scheme has been introduced in the hope that this will help avoid mass redundancies and lay-offs and allow employers to survive the lockdown period in the short to medium term and resume operations when the current crisis has passed.
However, all employers are dealing with a level of uncertainty as to how long the lockdown will last and how long the scheme will continue to operate. Even when the current crisis passes, uncertainty over the health of the economy will continue. Ultimately, how long a business can continue to operate will depend on individual circumstances such as the nature of the business, its financial reserves and so on. Some rural employers are particularly at risk due to the seasonal nature of their work and the fact that the lockdown has struck during Spring/ Summer, for example some shoots have already postponed days this season.
At present, the scheme has been extended until the end of June, meaning employers can expect to recover the costs of employing staff until this time. It remains to be seen whether the scheme will continue into the Autumn, but this appears unlikely at this time. Employers will therefore need to keep their operations under revision and consider government announcements on their plans for the scheme as they develop.
As part of their role, many rural workers live in accommodation connected with the performance of their jobs. For rural workers this usually means there is a service occupancy or tenancy agreement in place. If there is a service occupancy, the right to occupy the property is treated as a licence to occupy that only continues for as long as the worker is in the job linked with the property. If there is a tenancy then the occupier's right to continue living in the property exists separately to the performance of the job.
Furloughing a worker operates to temporarily vary the employment contract and, whilst furloughed, a worker cannot work for their employer but the employment contract and its associated rights continue.
Employers will need to agree furlough with their workers. They must provide written notice of furlough leave, and should seek evidence of the worker's agreement, in writing and keep this information for five years, in case HMRC requests this evidence. Some terms of the contract can be varied for the period of furlough and most variations will focus on a reduction in pay and the change to the worker's obligation to undertake work.
Where contracts allow the employer to impose lay-off or short time working, consent should still be sought to place a worker on furlough leave although it is more likely that workers will agree to the option of furlough.
Because the employment relationship continues, furloughed workers who live in a property under a service occupancy agreement will retain their associated licence to reside there. If an employer seeks to alter any of the accommodation rights linked to the contract these changes must be agreed between the parties; there is no automatic right for an employer to vary these terms by themselves. Employers may also consider permitting rent payment holidays for accommodation.
Separately, employers who have workers occupying properties under an assured shorthold tenancy (AST) will need to bear in mind the effects of the Coronavirus Act 2020. Under the Act, landlords must give at least three months' notice to AST tenants before they are able to start possession proceedings. The government has provided some technical guidance on this point.
Owing to the current circumstances, rural employers may be considering redundancies. Ending the employment relationship will also terminate the service occupancy, meaning an employer can recover the property. However, for workers with a tenancy agreement, the loss of a job will not automatically bring the tenancy to an end.
Given the current circumstances employers considering terminating a worker's right to accommodation would be well advised to consider the knock-on effects including the impact on the employee and their family and the potential reputational damage this could cause. For example, if workers are made redundant can they find somewhere else to live? This will need to be balanced against an employer's ability to continue to run the accommodation provided to workers and the reduced opportunity to re-let in the short term, given the current restrictions on movement. As mentioned above, as part of the package of measures brought in to deal with the coronavirus crisis, the government has amended the law in relation to possession procedures so that landlords must give at least three months' notice if they want to get a property back. This applies to ASTs under which many rural workers occupy premises owned by their employers but does not apply to service occupants. Government guidance on these issues is available online.
Employers also need to consider the practical point that ending a service occupancy or tenancy is one thing, gaining repossession of a property is another. Whilst service occupancies are not protected from the new three months' notice rule, if a service occupant refuses to leave the property, or is unable to leave, employers are likely to struggle to obtain a possession order from the courts until at least June. This is due to current capacity issues and the logistics of moving when it is difficult to engage removal companies and there is a restriction on non-essential travel.
If workers on service occupancies are made redundant but allowed to stay in their accommodation, employers will need to make very clear the basis on which they are being provided with somewhere to live so as not to create additional rights of occupancy.
We advise any rural employers to take specialist property law advice if they are considering terminating their workers' right to reside in a property.
The government has provided sector-specific guidance on ways employers can amend their working practices to better protect their workforces at this time. However, some rural employers may find that they have staff who can no longer properly perform their role while observing social distancing. For instance, consider estate handymen whose jobs primarily consist of visiting inhabited estate properties to make repairs.
Unless the work is urgently required on a property, these workers should not be entering homes in accordance with the guidance (see above, and property guidance). This might mean that much of the work of handymen will stop and/or they won't be able to work safely with other workers, particularly if they cannot safely carry out their jobs whilst staying two metres apart from colleagues.
Employers have a few options to deal with this. The first is to see if working practices can be adapted to comply with the social distancing rules. The second is to see if these workers can be redirected to other parts of the business or estate where social distancing is not an issue (but with care as to the safety of lone workers who may be tempted to do jobs normally requiring 2 people). The third will be to see if it is possible to furlough these workers and recover a percentage of the employment costs via the scheme.
It might be sensible to keep someone in reserve to handle emergencies. However, doing so will mean that the worker(s) kept in reserve cannot be furloughed; they will either be kept on full pay or the employer will have to negotiate a reduction in pay and working hours of those kept on reserve. Alternatively employers will have to use outside contractors for emergencies. Whilst many agricultural workers will be involved in food production and thus key workers, there will be grey areas around what elements of this work are essential to the performance of the business and thus what travel is 'essential'. Employers need to consider whether all work-related travel and activity is necessary for the continuation of the business.
For those agricultural employers involved in managing livestock, gamekeeping and vermin control, thought will need to be given to what work must be carried out as opposed to what work would be preferable to carry out, to ensure that workers are only undertaking essential travel. To this extent, employers should bear in mind any specific requirements to keep, maintain and manage land.
Employers owe a general duty to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all their employees. Many employers are taking steps to keep in touch with staff who are isolated or who have otherwise been put on furlough and therefore have much reduced social interaction with others. Employers need to review and possibly amend lone worker policies and risk-assess new ways of working which comply with government guidance on self isolation.
The potential mental health impacts of the current situation on the workforce have been well documented and there are heightened concerns that these circumstances will put people at greater risk of depression.
Perhaps more so than the general working population, rural workers and business owners have been shown to experience high levels of stress and depression and it is possible that the added uncertainty of the coronavirus crisis, coupled with the already relatively isolated nature of rural work, could compound these issues for the rural workforce.
It is therefore worthwhile for rural employers to consider what can be done to try and reduce the effects of isolation. This might include encouraging remote communication and activity to help people through the current situation.
ACAS guidance on supporting mental health in the workplace may help employers think of simple ways to help with this. Mind, the mental health wellbeing charity, has also produced some useful guides that are designed to help employees and employers handle the additional stresses and strains of the situation.
Rural employers will need to be alive to the additional potential risks caused by the closure of schools and nurseries. Food production workers have been designated as key workers, meaning that if they have children they should still be able to send them to school. However, there will be many rural workers who do not meet the definition of 'key worker' or for various reasons choose not to continue to send their children to school and so they are likely to need to keep children with them at home.
For rural workers working in or near farms or estates, this may represent an increased health and safety risk. For this reason, employers need to be clear with workers and their families which areas are strictly out of bounds and all rural estate workers should be made aware of the increased risk of children being in or around farms and estates. The rules on children accompanying parents during their work or on the employer's property should be updated and clearly communicated. Updated risk assessments may also be required.
Employers engaged in the production of food and other essential supplies are faced with a difficult scenario. Just as crops and livestock are approaching yield, employers are faced with a country in lockdown. The National Farmers' Union has said that an 'army of people' will be needed to make up for the shortfall in foreign workers crop picking on farms. With many countries initiating a lockdown on similar terms to the UK, it remains to be seen who, if anyone, will be permitted to leave their country to come and work in the UK to help with food production.
On the positive side, government guidance has now clarified that workers can take up employment with another employer during furlough leave. As noted above, food production workers have been designated as key workers whilst the country is in lockdown. This means, in addition to the self employed and unemployed workers, there is a potential workforce among furloughed workers that can be freed up to harvest seasonal crops; with this in mind recruitment drives under the rallying banner of "Feed our Nation" are already underway.
The current circumstances present particular challenges for rural employers. In many rural workplaces the employer will comprise a relatively small group of people who have to perform many functions and roles within the business, including HR. These businesses may have relatively little in the way of specialist support and infrastructure to navigate the issues created by coronavirus.
Moving forward we would urge rural employers to listen to and watch out for guidance and information from their sector's leaders and read the government guidance and consider its practical effects on their own organisation and its staff. The situation is fluid and new or revised guidance should be expected, meaning rural employers need to be alert to the latest developments.
Where issues appear particularly complex or uncertain, or where there are difficulties in interpreting government guidance we recommend that employers seek specialist advice.
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The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.