The advice given in this article is correct as of 14th April 2020. The situation with Coronavirus is developing rapidly, so please do check our COVID-19 Insights Hub for the latest updates.
The Coronavirus Job Retention Scheme (CJRS) still has a number of unknowns but what we do know is contained within our article which can be found here.
There are several issues which arise out of the current crisis and the CJRS which are having a particular impact on charities. Charities play a vital role in combatting the pressures faced by individuals within society and now more than ever they need to be able to function to achieve their charitable aims. We take a look at some of the challenges facing charities and what steps they can take to continue to deliver their valuable work.
It is important to note that the HMRC guidance on the CJRS is just guidance and does not change existing law. So, this article sets out our understanding of what HMRC means and the approach we currently advise should be taken. There are various points that are yet to be clarified and may become clearer as the CJRS starts to operate. HMRC has currently estimated this will be at the end of April.
Can furloughed employees volunteer for you?
A furloughed employee can take part in volunteer work, but not where this would mean they are providing services to or generating revenue for your organisation, or a linked or associated organisation. Your organisation can try to find furloughed employees new work or volunteering opportunities during furlough, provided this is in line with public health guidance. But, you should not require furloughed employees to volunteer elsewhere. This would therefore appear effectively to prohibit individuals from volunteering for their existing employer (or a linked or associated employer).
This is a frustrating situation for many charities who had hoped to furlough their employees and then invite them back to continue to provide vital work as volunteers.
The light at the end of the tunnel however is that other companies’ and charities’ employees can volunteer for you (subject to any contractual restrictions their employer may impose) and there is a massive amount of goodwill in the community at this time with many people volunteering to help where they can. You can therefore advertise for volunteers outside of your existing employee group and your employees could explore volunteering opportunities at other local charities.
Do note HMRC has also stated that for any employer that takes on a new employee, the new employer should ensure they complete the starter checklist form correctly. If the employee is furloughed from another employer, they should complete Statement C.
Can you top up your employees’ wages above the 80% paid by the CJRS grant?
The CJRS permits employers to claim a grant from Government to cover 80% of an employee’s wage costs (up to a maximum of £2,500 per month). There is no requirement for an employer to pay the balance of an employee’s wages but the shortfall has led many organisations to consider whether they could or should do so.
The Charity Commission has said that they are aware that charities are faced with making difficult and time pressured decisions but at this time the regulatory framework remains the same. With that in mind charities need to give careful regard to:
- their obligations to spend charity funds only to further the objectives of the charity;
- acting in the best interests of the charity; and
- ensuring that the charity remains resilient.
There are at least two high profile charities (Barnardos and Oxfam) who have declared that they are going to be topping up payments either for the 20% or to ensure that each employee is still receiving the Living Wage Foundation level of pay.
If paying the top up is in the charity’s best interests and the charity has the resources to do so (whilst remaining resilient) then our current view is that the payment of a top up is unlikely to raise regulatory concerns in light of the current circumstances however, we will continue to monitor this position as further guidance is issued.
The option of topping up to the Living Wage Foundation level of pay might offer some charities a practical alternative as it potentially avoids the charity making potentially significant additional payments that it will be unable to reclaim under CJRS.
If you do decide to top up wages we recommend that you clearly state that this is on a discretionary basis and for a fixed period with an ability to review the position and potentially extend it if you are in a position to do so. This will help to safeguard the charity from committing to payments which might later be unaffordable and put the charity at financial risk
We recommend that you keep a clear record of all decisions in relation to staff furlough and the payment arrangements including:
- why you think it is in the charity’s best interests (which may include, for example, considerations around reputation, retention of staff, supporting employees on low wages and so on);
- the regard you have given to the charity’s current levels of resources and financial resilience; and
- forecasts with regard to likely future income.
Are “workers” eligible under the CJRS?
It was initially unclear whether “workers” were covered by the CJRS scheme however HMRC guidance has confirmed that “limb (b) workers” are covered.
A “limb (b) worker” is someone who works under any other contract (i.e. not a contract of employment), whether express or implied, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual.
Our view is that casual and bank workers would qualify for the furlough scheme. This is provided that such workers were hired by the relevant organisation before 28 February 2020 (or otherwise qualify under the scheme) and are paid through PAYE.
Where limb (b) workers are not paid via PAYE and instead pay tax via self-assessment, they may be eligible for support under the separate scheme for the self-employed.
What do you need to do if there is a drop in funding coming into the charity?
Hopefully the country will pull together and now, more than ever, support charities and the vital services they provide. However, charities have been affected substantially with charity shops closed and funding events being cancelled. Charities can already access many of the measures the Chancellor previously announced for businesses. But, the government has confirmed further support.
Following pressure from charity leaders and politicians, the Chancellor announced a £750 million bailout package for the charity sector on 8 April. The Chancellor recognised that the furlough scheme is not always suited to charities, which cannot consider “shutting up shop” at a time when so many people need help.
This has been received as a good start by the sector. But, charitable organisations have asked the Treasury to keep this under review and warned that some charities will struggle. Mr Sunak confirmed in his support package statement that the government cannot save “every single charity”.
If you are seeing a drastic decrease in funds coming into the charity, it is likely that this would be a serious incident which would need to be reported to the Charity Commission and we can assist you with the process of making a serious incident report if you require assistance in doing so. We can also advise on other steps you might need to take to manage the situation, including in respect of your staff.
Can we furlough people if we receive public funding?
Charities are covered by the furlough scheme. But, do be aware organisations which are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff. Furthermore, if you are a non-public sector employer receiving public funding for staff costs, and that funding is continuing, the government expects employers to use that money to continue to pay staff as usual rather than put them on furlough leave.
In a small number of cases where an employer is receiving public funding, for example where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the government’s coronavirus response, the furlough scheme may be appropriate. This would be where staff would otherwise be made redundant or laid off. We strongly recommend that such organisations should in the first instance contact their funding body and consult with them before taking action.