Martin Lewis: Nine things the Chancellor could tweak to help people through this: furlough, the vulnerable, childcare, self-employed, umbrella workers, limited companies & more
Update Wed 15 Apr: I wrote this a couple of weeks ago, just before I posed some of these as questions to the Chancellor via his #AskRishi Twitter session (I pushed my luck asking five; it was meant to be one). He answered some directly, and promised his Treasury team would reply to the rest – which they have done. I have added these, good or bad, as boxed updates, plus have added further updates where the situation has changed.
The Chancellor has rewritten decades' worth of state-support policies in days. These are important schemes that will provide crucial, much-needed support for millions. Yet understandably, as he had to innovate and implement at breakneck speed, there are some unintended holes.
Over the last couple of weeks, via MSE, my Twitter and Facebook, plus my TV shows, I've had I suspect around 50,000 questions from members of the public worried about their desperate and perilous finances.
Clearly, it's been impossible to read all of them. But the same major themes crop up again and again. Some of those issues stem from deliberate, intended policy decisions – whether that's not covering small limited companies' dividends, or the cliff-edge £50,000 profits cut-off for the self-employed.
Those are important and impact people's lives, but they're also well known and premeditated, which means there's less chance of change.
However, there are sizeable areas where I suspect the result wasn't intended – where there are gaps that could be filled, without too much impact. So below I've bashed out the main holes in the system I hear of and my suggestions to tweak them.
1. Employers who refuse to furlough staff. The Coronavirus Job Retention Scheme makes employers gatekeepers to crucial state support. It allows firms to choose to put employees who were on the payroll on 28 February 2020 – and now don't have work to do – on 'furlough' (a bit like a standby mode).
Then the state finances 80% of their salary up to £2,500/month, plus the employer's national insurance and pension costs. Employers can top this up to 100%, but aren't required to.
Yet whether it's nannies or office workers, I regularly hear of employers that refuse to furlough staff when they can, and instead stick to redundancy/unpaid leave.
This may be out of ignorance, or a lack of care, but also I suspect some do it because they believe like the pre-Covid days, the goal is to reduce reliance on state support. However, the Government has stated furloughing was put in place to fulfil two specific roles:
- To provide financial support to the victims of the coronavirus economic cataclysm.
- To ensure that the economy can be restarted at speed when this all ends.
So we need the Government to come out and loudly say – or better still advertise – that firms should "furlough if they can". And if employers still won't play ball, look at changing the system to make it mandatory (and help them with any short-term cash-flow gaps to do it).
A reply from the Treasury…
My question: The furlough scheme makes employers gatekeepers to this crucial state support. Yet from nannies to officer workers, some employers refuse to do it and stick to redundancy/unpaid leave. Will you please tell them you want them to furlough if you can? And if they won’t, would you consider making it mandatory?
Chancellor's answer via Treasury: "The decisions are for businesses as the purpose is to keep people attached to their employer as well as to support them. But yes – where Covid has impacted businesses and the alternative is redundancy we would encourage people to take up the support we have made available – and we've been clarifying guidance to make that clear as you've seen. As the Chancellor said when launching the scheme on 20 March:
'"Let me speak directly to businesses. I know it's tough out there. We in Government are doing everything we can to support you. We're paying people's wages up to 80% so someone can be furloughed rather than laid off to protect their jobs. We're deferring £30 billion of taxes until the end of the financial year. We're lending unlimited sums of money interest-free for 12 months. We're abolishing business rates altogether this year if you are in hospitality, retail and leisure. We're providing cash grants of £25,000 for small business properties. The Government is doing its best to stand behind you – and I am asking you to do your best, to stand behind our workers.'"
2. Confusion over furloughing the vulnerable and those with childcare needs. There is nothing in the guidance preventing employees who are vulnerable and who must self-isolate for 12 weeks, or those who can't work as they need to look after children, from asking their employer to furlough them. And I've had it confirmed that firms do have the discretion to do this.
Yet the fact it isn't explicitly permitted means even employers that are willing to do it, won't. A simple change to put this explicitly in the official guidance would help.
A reply from the Treasury…
My question: Can you please clarify that furloughing the vulnerable who must self-isolate for 12 weeks or those who can't work as they have to look after children doesn't breach furlough rules?
Chancellor's answer via Treasury: "If your employee is on statutory sick pay: Employees on sick leave or self-isolating should get statutory sick pay, but can be furloughed after this. Employees who are shielding in line with public health guidance can be placed on furlough.
"Childcare: Yes, if because of coronavirus closing schools you are unable to work and at risk of redundancy, your employer can furlough you."
3. Move the furlough cut-off date for new starters. Only those on a payroll on 28 February are eligible to be furloughed. But our fast-moving job market means many who started at a new employer since then are left in the lurch. Employers are cancelling offers, or making new staff redundant as they can't be furloughed.
But the new furlough payment system hasn't actually been set up yet; employers haven't claimed any money. So there is time to change the cut-off date, or put in provisions for new starters so new employers can furlough them – enabling that much needed restart of the economy to happen when it does.
Update Wed 15 April: The Treasury's just announced it's moved the furlough cut-off date, as I explain below...
Furlough date cutoff has been moved...
While a 20-day deadline shift doesn’t sound much, the Treasury’s extension of the furloughing cut-off date will see 200,000 more people eligible for support from the Coronavirus Job Retention Scheme. Furloughing is where the state covers 80% of employees salaries, up to a maximum of £2,500/mth – for those with no work, or who can’t work due to Coronavirus.
First announced on 20 March, it only applied to those on payrolls on 28 Feb. That left those who’d shifted jobs in between times, taking advantage of our flexible labour market, left out, with no support, simply by a misfortune of timing. The new cut-off date is for those employed and on the PAYE payroll by 19 March 2020.
To count the employee must’ve been notified to HMRC through an RTI submission, this can be done at any time between paydays, but typically up to a week before the payroll date. That means those who’d started work and been paid by 19 March are definitely eligible, for those who hadn’t it’s in the balance.
This is the second change impacting the same group of people. Two weeks ago, I got the government to change guidance to explicitly permit those who’d left jobs to work elsewhere after the cut-off to be rehired and furloughed by their former employers.
As expected, some former employers have generously agreed to do this, while most haven’t. Now, thanks to a pressure from the very vocal ‘new starter furlough’ group of those affected, we see this much bigger change meaning more many people are eligible to be furloughed by their new employers.
Though it isn’t a panacea. Some saw their new jobs fall through before starting. Others were due to start after that date, or will’ve been on the payroll too late. And as furlough is absolutely at employer’s discretion, there will be many who have no work and are eligible who aren’t helped.
However, the Treasury should be applauded for breaking with its initial stance, and showing a real flexibility. Sources there had been firm that it was very unlikely to change any of its initial announcements, only tweak guidance.
My suspicion is the dire economic forecasts by the Official for Budget Reponsibility on 14 March meant they had to take another look to close some of the gaps in the system. This move should probably light a dim flame of hope in others who feel unjustly unsupported, such as limited-company directors and the recently self-employed.
A reply from the Treasury…
My question: Now time has moved on, will you move the 28 Feb furlough cut-off date to help new starters stuck with no support?
In this case the Chancellor answered a similar question by someone else, his video-tweeted response is below, though sadly those impacted will be disappointed.
4. Commission is excluded from salespeople's furloughed salaries. Income for the furlough scheme is based on salary and overtime, but not bonuses and commissions. Those who work in sales often have income dominated by commission, and for them the furloughing system is broken.
To prevent many feeling the need to still drive up and down the country to earn more, the guidance could be changed to allow those with incomes dominated by commission to have it counted – subject of course to the usual £2,500/mth cap.
Update Tue 14 Apr: Possible good news – salespeople's commission may well be included in the furlough payment. The definition of salary is now filled out to 'regular, contractual pay' which includes basic wages, compulsory commission and past overtime. Yet it excludes discretionary commission (eg, tips), 'tronc' (a type of pay arrangement), bonuses and benefits in kind.
So we're now hopeful that as most salespeople's commission is contractual, eg, that you get 10% of each sale, it's covered – though we're waiting for official confirmation. As for how much overtime/commission you get, again that's TBC, but normal furlough rules for variable income say it's the higher of the same month the prior year (eg, March to March) or the average over the 2018/19 tax year. Update and confirmation will go in How is furlough pay calculated?
5. Supply teachers, agency and umbrella workers need clarification. The guidance shows if they were on PAYE on 28 February they can be furloughed (the 80% for those with irregular income or salaries is based on the higher of the same month the prior year or their average monthly income over the 2019/20 tax year).
But this is a difficult area, as agencies think it's the underlying employer that pays, employers that it's the agency. We need more work done to clear this up and make it easier – even allowing a combination of records over a number of different employers to form a salary base.
A reply from the Treasury...
My question: What would you say to agency workers, umbrella workers, supply teachers who are being told they can't be furloughed?
Chancellor's answer via Treasury: "Absolutely they can be furloughed as you say and the guidance is clear – if you were on payroll you can be furloughed even if you work for an agency, umbrella company or are a supply teacher."
NB: The guidance for employees of umbrella groups changed over the weekend just gone. It's on our list to go through and add to the main Coronavirus Employment guide.
6. Those on fixed-term contracts are left out in the cold. Many employees work based on fixed-term contracts, eg, six months' worth, which are regularly renewed, or the employees at least move to regular employment elsewhere. Therefore they are by definition economic victims of coronavirus.
However, many whose contracts are due to end during the furlough period are being told they can't be furloughed due to that, even though in the normal run of business they'd have contracts extended.
We need a system to support those for whom the job market is fluid, an explicit recommendation that it is OK for an existing employer to furlough someone beyond their original contract date.
7. Few who started self-employment in the last 18 months qualify for help. Under the Self-Employment Income Support Scheme, the state will pay 80% of average profits up to £2,500/mth (provided total annual profits are under £50,000). Unlike employees the self-employed can get this and continue to work.
Yet the average profit is based on earnings in the three tax years up to 5 April 2019. This leaves those who started a business after that in the lurch. In fact, even those who started part way through the year before that may fall foul as to qualify over 50% of annual income needs to be from self-employment.
The payout for this scheme will be a lump sum in June. So to help those missing out, as the tax year ends on Monday, the guidance could be changed to allow those who submit their provisional tax returns for the year ending 5 April 2020, by say, 5 May, to receive support.
A reply from the Treasury...
My question: On Monday it's a new tax year. Will you change the guidance to allow 2019/20 to be used as a basis for the Self-Employment Income Support Scheme?
In this case the Chancellor answered to me directly via the Twitter video below, though his answer won't lift the hearts of those affected I'm afraid…
8. Allow limited company directors to do basic work while furloughed. One (wo)man bands who work via small limited companies (often something required by those who employ them) are some of the hardest hit of this crisis. Standard practice has been that they pay themselves the bulk of their income in dividends and a small amount of PAYE.
It's been made very clear the state won't be supporting their dividend income. But limited company directors can furlough their PAYE element as employees. However, unlike the self-employed (who spiritually this category is much closer to), as they're employees they're not allowed to work while furloughed (though they can fulfil their minimum statutory reporting requirements as directors).
A tweak to the guidance could at least allow them to continue to communicate with clients, and get work ready for when the furlough ends – so they can restart at speed.
PS: Though a tip from me to those in this situation, there doesn't seem to be anything in the rules preventing you from furloughing yourself for your own firm, but then freelancing for others. I'm trying to get further clarification on this option. It's also worth remembering furlough can be for as short as a few weeks. So if a project is coming up you could temporarily furlough, then work, then re-furlough.
9. FIXED: Allow firms to rehire and furlough staff who left after 28 Feb. A success story to finish. The original furloughing guidance said companies could rehire and furlough those they’d made redundant after 28 February.
However, there was no guidance, either way, for those who'd left to start a new job, which then fell through due to coronavirus (ie, they didn't start or the new firm made them redundant). I got it confirmed that this was allowed.
But that wasn't enough. Of course, some firms were simply unwilling to help, and sadly the rules gave them full discretion, leaving the staff in the lurch. Yet others report asking their old employer that they have good relations with and being told "we would if we could but the guidance doesn't allow it".
So on Thursday, after discussions with HM Revenue & Customs and the Treasury (thanks to them), the Government agreed to change the guidance to make this explicit – now hopefully the firms that said they would, will. The formal statement is in the You can be rehired MSE News story.
Your thoughts on these and more suggestions are welcome below…