Update on the furlough scheme
The Government has now issued further information on the Coronavirus Job Retention Scheme by means of a Treasury Direction. There are four key points:
- There must be a written agreement with furloughed employees if a claim is to be made by the employer;
- The cut-off date for eligible employees is now 19 March, not 28 February, so some recently recruited staff would qualify;
- The claims portal opens on Monday 20 April 2020; and
- The scheme will now run until (at least) the end of June 2020, rather than May 2020 as was originally announced so charities will continue to be able to claim until then.
Updated guidance produced by our employment team is available here.
Furlough scheme for charity employees
The Government has announced that under the Coronavirus Job Retention Scheme, employees on furlough will be able to volunteer, as long as this does not involve generating revenue or providing services to their employees.
Many in the charity sector have noted that this provision has a disproportionate negative effect as staff who have been furloughed from one part of a charity's operations, for example, its trading arm, will not be able to volunteer to provide services to assist with another part of the charity's work. There have been calls on the Government to relax this provision in relation to charities.
Impact of the furlough scheme on pensions
One point to note is the impact that a salary sacrifice scheme may have on the extent to which your liabilities are covered by the Coronavirus Job Retention Scheme. Many employers provide a salary sacrifice scheme through which pension contributions are paid. The effect of this is that in return for an employee contractually accepting a lower salary, the employer agrees to make additional contributions to the pension scheme. Where the statutory minimum auto-enrolment contributions are made, this would typically result in the 3% employer contribution plus 5% employee contribution becoming instead an 8% employer contribution. The employee's salary being reduced by the value of the 5% contribution.
Under the furlough scheme, an employer can claim up to 80% (max. £2,500) of an employee's 'reference salary'. For an employee to whom salary sacrifice applies, the reference salary is his or her post-salary sacrifice wages – i.e. his or her salary after it has been reduced to give effect to salary sacrifice. Further, employers can claim pension contributions equal to just 3% of the reference salary, despite retaining an obligation to make auto-enrolment contributions equal to 8% of the reference salary.
We highlight this point here so that employers in this situation are aware that monies received under the furlough scheme will not cover all employer pension costs; a top-up to the pension scheme will be required in order to continue to meet your statutory duties. When calculating the amount to which you are entitled under the furlough scheme, it will be necessary to separate out from your monthly pension cost those amounts representing the minimum statutory employer contribution (which can be claimed from the government), and additional amounts payable by the employer as a result of a salary sacrifice arrangement (which cannot be claimed from the government).
If we can be any assistance in this regard, please contact Estella Bogira or your usual Withers contact.
Fundraising Regulator publishes advice for coronavirus
The Fundraising Regulator has published advice for charities during the coronavirus outbreak, with the aim of providing clarity and reassurance for the sector. The advice covers person to person fundraising, direct marketing and fundraising events.
Given the restrictions in place, charities are unsurprisingly advised to stop all person to person fundraising activities. The advice notes that failure to comply with government restrictions by carrying out fundraising on the street or door to door may lead to fines for organisations or individuals in breach.
Charities may be carrying out direct marketing by telephone, email, text message or post and the advice reminds charities that they should be following the principles in the Code of Fundraising Practice, and be particularly cautious to not apply undue pressure at this time. It is also worth checking the wording and messages of campaigns to ensure they are still appropriate.
With regard to fundraising events, charities should be mindful of government guidance and those that involve people gathering now cannot be held. However there are still possibilities in terms of holding virtual activities. In particular, the following advice is given regarding fundraising events that can no longer be held:
- Refunds will depend on the condition under which the donation was made. For example, if money was donated on the condition that the fundraiser completes a marathon, the donor should be asked if they would like a refund. If no conditions were attached, a refund may not be necessary. Section 11 of the Code sets out further guidance on event cancellation the possibility of refunding donations.
- If donations have already been received by a charity, permission may be needed from the Charity Commission to issue a refund.
- Charities should review the terms and conditions of online fundraising platforms to establish the terms under which a donation was made and what the donor may expect.
Charities that have been working with third party fundraising organisations on activities or campaigns that have now been cancelled should review contracts and agreements to check their position.
The update also notes that staff at the Fundraising Regulator are now all working from home and encourages people to get in touch via online forms and email.
Serviced office agreements
Some charities will use serviced office space. Whilst the position in terms of charity leaseholders during the covid-19 outbreak is quite well publicised, charities should not overlook serviced office contracts. Our property team have examined the treatment of these contracts as a result of the 'lockdown' here and highlight the potential for there to be valuable cost savings.