Q&A: UK Government Relief Program
Vessela Ignatova (Lab Manager, London) hosts a Q&A with Humphrey's Law, Moore Kingston Smith and Oury Clark where they respond to member questions regarding the UK Government Relief Program.
Rishi Sunak (Chancellor of the Exchequer) announced financial measures worth £350 billion to support businesses affected by the novel coronavirus COVID-19. The Chancellor has also committed to “do whatever it takes” to support UK businesses, including expanding these measures further, should that be necessary.
Summary of the Q&A
(1) Startup founders that pay themselves in dividends are not eligible for any relief. The relief is intended to protect people who are no longer employed. There may be additional versions in the future to cover the self-employed, but currently the scope is very narrow.
- R&D grants may be a good solution, a business can receive 3-6 months of the grant upfront from lenders (rather than wait for the paperwork to process). You need to qualify for this grant, there are multiple criteria and one of them is to prove the business will be a going concern in the foreseeable future.
- On this note, if a pre-revenue startup founder is running out of money, it's ok to go after the universal credit. There are no negative impacts from doing this.
(2) Employers may need to make difficult decisions regarding their work force. The commercial business approach to this is to bucket employees that have been with the company under 2 years and over 2 years. Then identify the under performers, high performers, unique roles, redundant roles etc. Based on that categorization, employers can then think about the different options. There are different options such as:
- Reducing hours or cutting overtime: You need to make sure to pay employees the national minimum wage.
- Reducing salary: Employee needs to agree to this and there needs to be a permanent change to the employee contract
- Unpaid leave
- Request employees take additional PTO upfront now and pro-rata their salary
- Furlough is an option but keep in mind the following;
(i) Employee will receive 80% of their salary (up to £2,500), the employer will get that reimbursement from the government. The employer will file for this at the end of April and get the reimbursement in May.
(ii) The employee cannot be working during this time, there may be clawbacks of the reimbursement if the government is able to prove the employee was working while furloughed.
(iii) Employees on a fixed term contract qualify for furlough.
(iv) Founders who pay themselves should avoid increasing their salary and then going furlough to take advantage of a higher reimbursement. There may be additional rules that will restrict/flag these cases and prevent them from happening.
UK Government Relief Program: Key Slides From Presentation