It’s been nearly two months since lockdown was imposed on us. It feels like years. Remember when you didn’t have to queue to go to the shop and a cough wasn’t a dangerous weapon?
On Sunday night the Prime Minister made the first tentative steps to move the country back to normality. Along with a new five tier measure of progress, we’re currently somewhere between 3 and 4, he encouraged those who couldn’t work from home, like manufacturing and construction to go back to work this week. He also talked about schools possibly re-opening from the 1st June at the earliest, assuming that we can keep that ‘R’ number down. And restaurants and pubs possibly from the beginning of July. To support the economy, The Chancellor has extended the Furlough scheme until October, which is a serious lifeline for 7.5 million workers. But the cost is spiralling. The Institute for Fiscal Studies estimate the cost could come to £80Bn, more than we spend on education in an entire year. The focus is slowly, carefully, shifting towards recovery.
There are many unknowns and it all depends on whether we can control the spread of this horrible virus and businesses can still function under social distancing. With so many thousands of people tragically dead and a monstrous recession on the cards, there is a small glimmer of light at the end of the tunnel.
But now that we can at least start to think about how we get back to work, it’s a good time to reflect on the last couple of months in our industry. We ask ourselves, have Umbrellas damaged themselves in the long-term to survive the short-term?
In particular, what will be the impact of the confusion over Umbrellas paying contractors? Teaching in particular has been badly hit. Many supply teachers haven’t been paid by their payroll provider since the Lockdown began. That’s nearly two months of financial worry and stress on top of having to live through a pandemic. Now that the Furlough scheme has been extended, what about the uncertainty for contractors?
This has been a daily reality for hundreds of thousands of contractors. And it was brought to national attention just a couple of weeks ago on BBC R4’s MoneyBox programme featuring People Group’s CEO, Terry Hillier, and Julia Kermode from the FCSA.
As payroll providers, our job is simply to pay people. Large parts of our industry have let down contractors, recruiters and end-client hirers. And it’s all because of the discretionary bonus. Until recently, even industry insiders didn’t understand the implications of payments structured as NMW + discretionary bonus. Umbrellas are blaming the Government for not giving clarification, but what was it doing in contracts in the first place? The discretionary bonus clause became obsolete in 2016 with the removal of travel and subsistence. It’s a relic from yesteryear. In our opinion it’s less about HMRC and more about apathy and a lack of innovation on the part of Umbrellas.
Finally, it looks like some Umbrellas will pay, but for many people it’s likely to only be 80% of the National Minimum Wage, which is a big drop in income.
When furlough was announced, People Group moved fast to make sure everyone was paid. Not only did we pay in the first week, but we paid at 80% of the calculated average taxable earnings. So far we’ve made 12,000 payments coming to £2.5 million. Our Umbrella contracts had long since removed the ‘discretionary bonus’ element and expressed it as a guaranteed payment as part of normal pay. Terry summed it up “We did this because it was the right thing to do. The Government put this in place to do exactly what we’ve done – to pay people who would otherwise have been laid off. We wanted to pay as many people as are eligible. The key to me and the team was that we had to make sure our contractors were looked after.”
We’ve been inundated with messages of support and thanks from contractors who have been paid [www.peoplegroupservices.com/what-do-our-clients-think/]. Plus, our recruitment clients are happy that this is one less headache that they have to deal with.
It was absolutely the right thing to do from a moral standpoint. But we believe it was also commercially smart. While contractors are trying to put food on the table, recruiters are also trying to keep their businesses afloat. Our industry is a delicate ecosystem where we all rely on each other. If one part suffers, we all suffer. By supporting contractors, we support the whole industry.
Katy Rees Founder & MD of Smile Education says “For us, the furloughing process has been relatively easy, for our temps, because it was all taken out of our hands. There’s been a lot of legislation we haven’t had to navigate, it’s been a headache we haven’t had to have because People Group did it so efficiently.”