Business owners: mitigating the impact of coronavirus

The UK Government estimates that when the coronavirus peaks, over 6 million people may contract it and be unable to work. All businesses are affected in some way as the Government introduces further restrictive measures in a bid to suppress the virus including, most recently, the closure of schools until further notice. Businesses operating in areas / countries in lockdown have been forced to suspend their operations or find alternative means of working. Also, some businesses have experienced major challenges and cashflow difficulties on account of, for example, deliveries being cancelled or delayed or customers in quarantined areas failing to pay. Those operating in the retail, leisure and hospitality sectors and in the tourism industry are particularly badly affected as people are being advised not to go to pubs, restaurants, theatres or cinemas and to avoid non-essential travel. This article looks at what a business may be able to do in order to mitigate against the disruption.

Check your contracts with customers and suppliers

A review of your contracts is strongly advised to see whether you are able to suspend or terminate the contract even though it has not been performed as a result of the coronavirus outbreak. For example, check whether the force majeure clause (assuming that your contract has one), enables you to be excused from performing the contract without incurring any liability in the above scenario. Where you are negotiating a new contract with another party ensure that the force majeure clause is fit for purpose, for example that it specifically mentions “COVID-19” as a force majeure event, or where it is not, that action taken by a government on account of an epidemic has made it no longer possible for your business to perform its obligations under the terms of the contract.

Consider renegotiating existing terms with your current suppliers and customers as they may prefer maintaining a business relationship in the long term rather than face the prospect of seeing your business and/or theirs fail.

Staff

Managing staff absences

Staff are entitled to statutory sick pay if they need to self- isolate (stay at home and avoid contact with other people) as a result of any of the following:

• they have the coronavirus;
• they have coronavirus symptoms (however mild), such as a high temperature or new continuous cough;
• someone in their household has coronavirus symptoms;
• they have been told to self-isolate by a doctor or NHS 111.

The period of self-isolation varies depending on their circumstances, for example:

• if they have coronavirus symptoms, the period of self-isolation is 7 days from the day that their symptoms first started;
• if a member of their household has coronavirus symptoms, they must stay at home for at least 14 days (starting from the day when the first person in their household became ill).

With effect from 13th March staff are entitled to statutory sick pay from the first day that they are off work in any of the above circumstances and employers with fewer than 250 employees will be refunded for the first 2 weeks’ statutory sick pay.

Staff with children whose schools are closed (being most schools from 20th March) or with elderly relatives who have caught the virus may need to take time off work to look after them, in which case they may be legally entitled to some unpaid leave. There is no statutory right to have paid leave but employers might offer paid leave depending on what their employment contract or workplace policy states. The amount of time off in this scenario must be reasonable (for example 2 days), after which they could claim it as part of their holiday entitlement if needed.

Office closures

We currently remain in the delay stage of the Government’s response to the coronavirus (being the second stage of four). The Government is advising people to work from home where they can. Some firms have decided to close down their offices, in which case staff may be entitled to full pay unless their employment contract states otherwise.

Remote working

You may want to facilitate working from home where possible and test that your IT system (including laptops) works effectively. The ability to conduct video conferences may become essential. Consider having a trial day where employees work from home to test that the software, video conferencing and microphones work properly.

Action points:

• Make sure you understand your employees’ contractual and statutory rights and review your employment contracts and workplace policies.
• Consider, in particular, how much your staff should be paid for being absent and for how long.
• Where work may be undertaken at home, for example where a member of staff has self-isolated but has no symptoms or is only mildly affected, check your firm’s remote working policy or, if you do not have one, put one in place.
• Clearly communicate with staff what steps your company is undertaking in relation to reducing the risk of exposure in the workplace and keep them updated.
• Highlight to staff the company’s sickness policy and remote working policy.
• Ensure that you have up to date contact details for staff in the event of an emergency.

Insurance

Check your company’s insurance policy for whether it is protected against lost income due to the outbreak. For example, Coronavirus (or COVID-19) has been designated as a “notifiable disease” and a pandemic; where the insurance policy does not include these you may have to pay an increased premium to be covered.

Cashflow

Those businesses who may face subdued demand and temporary cashflow issues may want to consider the following:

• Take advantage of the HMRC’s Time To Pay scheme – enabling you to pay tax in instalments, where you are concerned about failing to pay your tax bill on time.
• Invoice insurance to protect your business against a customer’s failure to pay for services / goods supplied so that you are paid regardless of a change in your customer’s circumstances.
• Invoice / asset finance.

The following measures have been introduced in response to the coronavirus:

• Banks are offering emergency loans to businesses.
• Only 6 days since the Budget, Rishi Sunak, the Chancellor, announced a substantially more generous financial support package in an attempt to stem the economic fallout from the outbreak, including the following:
  1. £330 billion of government-backed bank loans – For small and medium sized businesses, with effect from 23rd March, they can access business interruption loans of up to £5 million with no interest charged for the first 6 months (this has since increased to 12 months). The scheme is available through the British Business Bank.
  2. A 12 month business rates holiday will be available to all retail, hospitality and leisure businesses.
  3. Businesses in the retail, hospitality and leisure sectors with property with a rateable value between £15,000 and £51,000 are eligible for grants of £25,000.
  4. All businesses that currently benefit from small business rates relief or rural business relief will have access to grants of £10,000.
• With effect from 20th March, the following additional support is being made available by the Government:
  1. A VAT holiday will automatically apply to businesses for the period from 20th March 2020 to 30th June 2020, with businesses being given until the end of the 2020 to 2021 tax year to pay.
  2. An employee wage subsidy, enabling businesses to retain employees who would otherwise have been made redundant during the outbreak, whereby the Government is offering to refund 80% of the employees’ wage costs where they have been furloughed (ie sent home because there is no work to do but kept on the payroll). The subsidy is subject to a maximum of £2,500 per month and is initially for 3 months. The Coronavirus Job Retention Scheme involves applying to HMRC via an online portal (details of this are to be supplied by HMRC). Changing an employee’s status to “furloughed” is subject to existing employment law and the terms of their employment contract which will need to be checked.

Further information on support being given to employers and businesses can be viewed on the Government’s website which is regularly updated and may be accessed via this link.