Reductions in salary
An obvious cost cutting measure is to reduce salaries, either temporarily or permanently. If you are to seek a reduction in salaries, this should be done fairly – either across the board or by selecting teams/individuals based on objective business reasons.
Note that this cannot be imposed without significant risk. Without agreement, this would need fair selection and consultation.
Related FAQs
Most rent suspension clauses in commercial property leases are unlikely to come to the assistance of the tenant. These clauses normally apply only where the premises has suffered substantial physical damage and are, as a consequence, incapable of being occupied, used or accessed. The coronavirus pandemic does not involve any physical damage to a property, loss from the crisis will be purely financial. Such losses then will not be covered by the landlord’s buildings insurance policy in a way that will allow a tenant to claim rent suspension.
CEST stands for Check Employment Status for Tax and, although this should do exactly what is says on the tin, there has been criticism of its accuracy and effectiveness. The CEST tool does not test whether there is ‘mutuality of obligation’ in the relationship which is a key factor in determining status.
You are not obliged to use CEST if you are happy with your own assessment process. If you do use CEST keep a record of the certificate given at the end of the assessment and keep this on the contractor’s file. HMRC will stand by the outcome of a CEST assessment provided the information has been honest and accurate. However, you must have entered information honestly to rely on it – you can’t just say what you want to get the right answer, as HMRC may test what you have said. Also, many people are unhappy with the CEST tool and consider it leans too much towards employed status.
As part of the Coronavirus Bill there is some good news for tenants in so far as it included the following:
- All commercial tenants in England, Wales and Northern Ireland missing rent payments are to benefit from a government ban on forfeiture of their lease.
- Landlords then will be prevented from terminating leases and “evicting” commercial tenants.
- The above provisions rules will apply not only to principal rent, but to “any sum a tenant is required to pay”, leaving the burden of supplying services and insuring the premises on landlords. The bill will last until 30 June 2020, with an option for the government to extend this deadline.
Whist this is helpful to any Tenant planning not to pay rent or other payments due under their lease insofar as they will not suffer forfeiture and be evicted, it should be noted that the contractual obligation to continue paying rent and all other costs due under the lease remains and Landlords will still be able to take action to recover any payments due under the lease that are in arrears.
It has now changed. Instead of being 3 weeks, it is now technically any period. However, 7 days is the minimum claim period you can now make.
Be careful, there is now a cap on the number of employees you can have on furlough at one time.
The number of employees you can claim for in any claim period starting from 1 July cannot exceed the maximum number of employees you claimed for under any claim ending by 30 June 2020. So this cap is going to be specific to each employer.
It may catch out, in particular, employers who had been rotating employees on furlough.