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COVID-19 Employment: How will government's new schemes support the construction sector?

  • Market Insight 1 April 2020 1 April 2020
  • UK & Europe

  • Infrastructure

As the entire population of the UK is trying to process the fact that they should not leave their homes (aside from one of four approved reasons), similarly employers up and down the land are trying to understand how the government’s new job retention scheme is going to help them through the current world health crisis.

COVID-19 Employment: How will government's new schemes support the construction sector?

Job Retention Scheme

Earlier in March, the Chancellor announced the scheme which will support all UK employers by reimbursing 80% of the wage cost (up to a cap of £2,500 per month, per employee) of PAYE employees who would otherwise be "laid off" during the crisis. The government’s reference to "laid off" is being construed as meaning those who would either be made redundant or who would not be given either work or pay by virtue of statutory lay off (together described as “furloughed workers”).

The reimbursement can be backdated to 1 March 2020 and will be payable up to at least 31 May 2020. This means that any employees who have recently been made redundant can be rehired and put on paid furlough leave (so long as they were on the payroll on 28 February 2020).

Given that the scheme is very new, the precise mechanics remain to be confirmed. In practical terms, unless employers have a contractual right to place their employees on statutory lay off (not unheard of in the construction industry), they will need to get their staff to formally agree to being furloughed through a consultation process. Collective redundancy obligations may also be triggered depending on the number of employees being furloughed at any one site.

Clearly, given that individuals are now largely required to remain at home, any such consultation to change employees’ contractual terms would have to occur by telephone and by email, which creates its own logistical hurdles.

An employee can be furloughed for a minimum period of three weeks. This suggests that employers can rotate employees between work and furlough, so long as each furlough period is at least three weeks. This may be useful to keep in mind when dealing with different stages of construction projects, and potential unforeseen delays between each stage.

It is anticipated that the scheme will be up and running towards the end of April 2020.

Self-employment Income Support Scheme

While the introduction of the scheme for employees has been widely welcomed, it left self-employed workers crying out for support of their own. Acknowledging the need, the government has now announced support for self-employed workers, through the COVID-19 Self-employment Income Support Scheme. This will provide eligible self-employed workers with a taxable grant of up to 80% of their average monthly income, capped at £2,500 per month (much like the wages support scheme).

Unlike furlough leave, where employees cannot work, the self-employed can claim this grant and continue to do business. To qualify for the grant, the majority of the person's income must come from self-employment, and their trading profit cannot be more than £50k per year. They also must have submitted a tax return for 2019. Self-employed workers who have not submitted their tax return for the year 2018-19 have until 23 April 2020 to do so.  Unfortunately, it seems that this scheme is unlikely to be up and running before June, meaning that many self-employed workers will still face immediate concerns with cash flow.

Ongoing construction work must be "critical to the economy"

Michael Gove stated that only construction workers doing jobs “critical to the economy” should attend work. Given the risks of non-compliance, and not to mention the practical difficulties of enforcing social distancing on-site while balancing health and safety obligations, Persimmon, Taylor Wimpey and Barratt among many others, have significantly reduced or even completely stopped construction works as a result. There is therefore a significant possibility that many construction employees will need to be furloughed over the coming weeks and that self-employed contractors will also be out of work.

A version of this piece originally published on Building's website on 27 March here.

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